CITIC’s $41 bln mega-merger needs fancy footwork 27 Mar 2014 The Chinese state conglomerate wants to reverse into its Hong Kong-listed subsidiary, for a premium. There’s something for both sides, but it will require some creativity to ensure the deal looks good financially for the government as well as public shareholders.
China’s irrational bank run shows fragile trust 27 Mar 2014 The government stands behind all deposits, which makes savers’ scramble to pull cash from a small rural lender all the more curious. Problems with unofficial shadow lenders may have knocked confidence. The solution is to draw a clear line between what’s protected and what’s not.
Citi’s latest fail should stress Mike O’Neill 27 Mar 2014 The Fed’s rejection of the mega-bank’s buyback and dividend plan is bad news for CEO Mike Corbat. The chairman, however, is more exposed. A similar flub two years ago helped convince him to oust then-boss Vikram Pandit. O’Neill may have to consider more radical action.
Candy Crush IPO a dose of reality for gaming saga 26 Mar 2014 King Digital, maker of the hit product, fell as much as 15 pct on its market debut. At least investors have a bit of healthy skepticism. But there’s no way to value a hit-driven business dependent on one game. Rivals may still manage to go public, but not at such lofty multiples.
Fed offers too little, too late on too big to fail 26 Mar 2014 The watchdog’s researchers reckon big banks benefit from a cheaper cost of funds than smaller rivals thanks to an implicit government backstop. That’s often true, especially during crises. But the Fed ignores more recent data. The behemoths’ advantage is actually shrinking.
Murdoch brings Shakespeare to a bureaucratic world 26 Mar 2014 In the latest chapter of a family saga worthy of the bard, the ageing media tycoon’s eldest son has returned to favour. Such hereditary shenanigans are unusual in meritocratic corporations, even when voting rights permit. No wonder, since family fights are usually unprofitable.
Time for Sheryl Sandberg to lean out of Facebook 26 Mar 2014 She was the adult supervisor as Mark Zuckerberg’s dorm room creation became a $165 bln enterprise. The founder is now doing his own thing, as his latest $2 bln gadget acquisition shows. For Sandberg, he’s a liability. She could be U.S. president, but first needs to run something.
Edward Hadas: In defence of financial coercion 26 Mar 2014 Forcing people into bad economic choices sounds awful, but it can’t be avoided in a complex economy. The right question is not whether to coerce, but who. Savers are getting a bad deal today. Their sacrifice seems to be in vain. The UK’s solution is to coerce a different group.
Fee-free equity placings could catch on 26 Mar 2014 The investment banks that netted 4.2 bln stg for UK taxpayers in a second sell-down of Lloyds stock waived fees and commissions. Other governments may expect banks to pay similar penance for the industry’s failings. But these high-profile deals may just bring in other business.
Roman corporate governance purge could backfire 26 Mar 2014 Italy wants state-controlled companies to eject board members who are under criminal investigation for financial crimes. Probity is laudable, but this plan could hurt the innocent and create harmful uncertainty. Stronger boards and tougher penalties would be a better way forward.
U.S. bond yields may ape trailblazing UK shifts 26 Mar 2014 Fixed-income investors are wondering if the Fed will raise rates sooner than expected. They won’t have to think too hard about how to react since a similar situation has already cropped up in Britain. Short-dated bond yields are likely to rise much faster than long-dated ones.
Standard Life prepares well for tougher times 26 Mar 2014 Shareholders see big benefits in the UK investment group’s agreed purchase of smaller rival Ignis. More was added to the buyer’s market value than it spent on the acquisition. But new rules and expectations for fund managers mean that Standard’s life may not always be this easy.
Zuckerberg grabs at alternate financial reality 26 Mar 2014 The Facebook founder is buying virtual-reality upstart Oculus for a whopping $2 bln. It’s arguably a riskier punt than spending $19 bln on WhatsApp. Both deals suggest a quest for the next big thing – and a willingness to use the social network’s stock to buy rather than build.
Sumitomo’s U.S. expansion needs cautious approach 26 Mar 2014 The Japanese bank is eyeing Royal Bank of Scotland’s American retail arm. A full takeover would give Sumitomo higher margins in a healthier economy and the UK bank a speedier exit from a non-core asset. But Citizens doesn’t yet look a business worth paying through the nose for.
Big tech valuations come in small packages 25 Mar 2014 Dropbox is now worth $10 bln and Airbnb soon could be thanks to recent funding rounds. Both cases would involve just a wee slug of equity. A flurry of such later-stage, private deals seems to be less about raising cash and more about egos, attention and anchoring future IPOs.
U.S. financial reform is still on to-do list 25 Mar 2014 The Dodd-Frank law brought broad new rules for Wall Street. Lawmakers are now focused on mortgage finance. That’s a valid priority, but if it weren’t for Washington’s logjam they could tackle far more, including money markets, mechanisms for bank failure and virtual currencies.
Dimon deputy epitomizes succession of all sorts 25 Mar 2014 Mike Cavanagh gave up a shot at following his mentor atop JPMorgan for one helping run Carlyle. Being CEO of a bank holds less appeal thanks to shrinking returns and growing regulation. The move shakes up leadership plans for two firms and underscores a bigger shift in finance.
RSA underwriters can sleep soundly 25 Mar 2014 The insurer’s 773 mln stg cash call has priced at a 33 pct discount to the shares’ theoretical price on completion. That’s narrower than other rights issues. But the underwriters look safe. The deal is small relative to the market cap and RSA has already cut balance-sheet risk.
Activists crash dealmaker party 25 Mar 2014 Shareholder lawsuits, cross-border mergers and defender-in-chief Marty Lipton will play supporting roles at the annual New Orleans M&A confab. Aggressive investors shaking dozy boards are the headliners. Their increasing presence at the gathering reinforces a growing power.
Gold benchmarks are next in need of reform 25 Mar 2014 UK and German authorities are probing daily gold “fixings.” They are yet to turn up evidence of market manipulation, and no bank traders have been suspended. But benchmark-setting for the precious metal is archaic, laborious and methodologically unsound. An overhaul is overdue.
Lower inflation could bring sterling down 25 Mar 2014 The British inflation rate is now comfortably below the Bank of England’s target, and the disinflationary trend is likely to continue for now. That will push back expectations for a UK interest rate rise, while a U.S. increase looks closer. The pound could slide.
Berlin’s housing boom has lessons for London 25 Mar 2014 The German central bank says Berlin’s property prices have risen 25 pct above fair value. But this mini-bubble is unlikely to expand to London proportions. Lending standards make speculation expensive, building is increasing sharply and the Bundesbank is on the case.
Rich world exports its way to trouble 25 Mar 2014 OECD countries are free-riding on world demand. Net exports by these 34 economies have been unusually high for two years. The strategy is both selfish and self-defeating. It has created an illusion of growth in rich nations, which an emerging market slump could now destroy.
Box ties a neat bow on Silicon Valley IPOs 25 Mar 2014 The cloud storage company plans to go public with a net loss greater than its revenue. Box is growing fast, doesn’t expect to be profitable any time soon, will have two classes of shares, a CEO who is under 30 and some mysterious metrics. It’s the internet era in one package.
Reverse takeover gives New Zealand a Mega headache 25 Mar 2014 The cloud storage company founded by Kim Dotcom is planning a $179 mln backdoor IPO. The internet entrepreneur, who is fighting extradition for online piracy, has already caused much embarrassment for local authorities. A stock market listing for Mega would add a financial sore.
GrubHub IPO includes needless flavor enhancers 24 Mar 2014 Investors are surely working up an appetite for the $1.7 bln U.S. online takeout service, as well as for its European peer Just Eat. Mobile device use should feed healthy expansion. But GrubHub’s prospectus flatters its growth. There’s the latest in not-so-tasty new metrics, too.
Exxon finally warms to climate change disclosure 24 Mar 2014 Investors fear that a crackdown on carbon emissions could make much of the energy giant’s crude reserves all but worthless. The company has agreed to reveal its assessment of that risk. The move could put Exxon ahead of rivals in weathering - and accounting for - global warming.
Piketty cult is a danger for his cause 24 Mar 2014 A gloomy new book on capitalism ends with a call for higher taxes on the rich. Sympathy for Thomas Piketty’s reasonable conclusion is feeding outsized praise for a half-baked economic analysis. Ultimately his confused arguments may weaken the case for pay restraint.
Elusive U.S. manufacturing boom is just delayed 24 Mar 2014 Job growth in the sector of just 5 pct since 2010 hardly counts as a renaissance, even though U.S. firms pay only half as much for energy as European and Asian rivals. But the advantage looks set to continue for years. That leaves time for industrial activity and jobs to return.
Co-op Bank looking ever less cooperative 24 Mar 2014 Having forced losses on bondholders last year, the lender now needs another 400 mln stg of equity to cover bad debts, technical problems and mis-selling charges. Its mutual backer, the indebted Co-op Group, may be diluted further. Given its track record, that may be no bad thing.