Stocks and Funds
Europe’s new issues market is healthy for the first time in years. Investors have spare cash, the economic gloom is lifting and recent deals have traded up. That bodes well. But quality control is becoming paramount. A few shoddy or over-priced debuts could change everything.
Spain’s largest media group has won breathing space from creditors in a complex, yet promising deal. The snag is that the plan inflicts dilution and relies on two assumptions: that the Spanish economy will pull through, and that assets will fetch good prices. Neither is certain.
New boss Mary Barra has a reputation for both good design and keeping a firm handle on costs. That’s what the automaker, freshly liberated from the U.S. government, needs as it chases more profitable rivals. GM also appointed an independent chairman for good governance measure.
As the chances of new firearms legislation dissipate a year after the Sandy Hook school shooting, so too should the anxieties that propelled gun sales and the stocks of Smith & Wesson and Sturm, Ruger. Short sellers already have their sights set on a downturn.
Bids and Buyouts
AB InBev could pay $4.1 billion to buy back the subsidiary it sold to KKR in 2009. On a back-of-the-beermat calculation OB’s private equity backers could see a 34 percent annualized return. Even if the Belgium brewer abstains, local markets may support a similar valuation.
The hedge fund has amassed enough votes to block McKesson’s $8 bln takeover bid. The U.S. offer for the German drug wholesaler does look a bit stingy. But Elliott will suffer if the deal fails - so McKesson can probably hold firm. Elliott has other ways to make money here.
Being bought by smaller rival Charter would create a debt-laden $100 bln cable giant. Turning the tables would require less borrowing and keep the cost savings. If nothing else, according to a Breakingviews calculator, the idea could point to a higher price for Time Warner Cable.
The Sears boss and hedge fund manager is shedding Lands’ End, 11 years after the retailer bought the clothing brand for $1.9 bln. Leaving the division trapped inside Sears was bad portfolio management. Shareholders will be lucky if a spun-off Lands’ End is worth half that.
Money and Markets
It bans U.S. banks from outright prop trading and from London Whale-style hedging. But banks have plenty of room to mint coin, including being allowed to bet on government bonds. Wall Street might still complain. But the onus is on regulators to prove if banks step over the line.
The opposition politician is the favourite to become prime minister in next year’s polls. His victory would give Indian assets a big boost and signal revived growth, just like it did for his Japanese counterpart. Structural reforms, though, will remain difficult for both leaders.
As world leaders remember a great statesman, they may ponder South Africa’s middle-income trap. Compared with other post-colonial economies, even stagnation would be a tribute to Mandela’s peace-making. It’s up to those who followed him to buck recent trends and escape the trap.
Investing in white-goods maker Haier is a new direction for the e-commerce group, whose high margins come partly from eschewing hard assets like unsold goods, trucks and warehouses. But e-commerce hinges on timely delivery – which explains Alibaba stepping down from its pedestal.