Stocks and Funds
The German bank is offering to buy back 5 billion euros of bonds. A big take-up means more capital for Deutsche, but could also imply a lack of confidence in the bank’s solvency. Given the potential for bond prices to snap back, it may be better for investors to sit it out.
The German lender has restored its dividend, which was expected, and strongly improved its capital, which was not. Commerz is now better placed to withstand current volatility. The downside: its costs are too high and its returns remain lamentable.
The micro-blogging service lost $521 mln in 2015 yet “earned” a profit of $277 mln after various adjustments. Regulators occasionally squawk about unofficial metrics, but departures from accounting convention that lead to more flattering figures are worth watching like a hawk.
The French carmaker’s operating profit rose 44 pct in 2015 and should be helped by new models, Europe’s recovery and the re-opening of Iran. Yet strip out the company’s massive holding in Japan’s Nissan, and its own business looks undervalued by as much as a third.
Bids and Buyouts
The internet-radio service is reportedly up for sale. Q4 results show revenue growth slowing, however, suggesting potential matches are few and far between. Add stiff competition from Apple and Spotify and limited access to music, and the company seems destined to remain alone.
Three months after rival Perrigo refused its $26 bln offer, the drugmaker has agreed to buy Sweden’s Meda AB. Though the $7.2 bln transaction makes strategic sense, the 92 pct premium is hard to justify. Mylan might have been better served by trying to sell, rather than buy.
France’s Natixis is buying control of Peter J. Solomon, a specialty corporate consigliere. The U.S. boutique wants to roll up fellow advisory shops. Veteran dealmakers can recall the fates of Robertson Stephens and Wasserstein Perella, and wonder if history will repeat itself.
A consortium including search specialist Qihoo and gaming firm Kunlun are bidding $1.2 bln for Norway’s Opera Software. Despite a fat premium, the offer is not overly pricey. Plus, Opera could help the buyers move into lucrative niches not yet taken by Baidu, Alibaba or Tencent.
Money and Markets
The conservative justice leaves behind a Supreme Court vacancy amid a nasty presidential election campaign. There’s already Republican talk of blocking any Obama nominee to replace Scalia. A governance stalemate threatens to rattle already shaky global investors and economies.
Bank shares have slumped and bank bond yields are up. ECB chief Mario Draghi can stop the rout from damaging the economy by buying lenders’ debt. The moral hazard concerns are big, but manageable. Breakingviews imagines a memo from a bank CEO.
The latest weapon brandished by central banks is supposed to boost economic growth and ward off deflation by punishing cash hoarders. In practice, this radical policy damages credit creation, fuels bubbles, threatens civic freedoms and spooks the living hell out of markets.
A weak yen and buoyant stocks were key to Japanese Prime Minister Shinzo Abe’s fight against deflation. A flight from risk has reversed those gains and overwhelmed the Bank of Japan’s surprise shift to negative interest rates. The turmoil threatens Abe’s whole economic project.