Square float is missing three sides 15 Oct 2015 The U.S. payments upstart’s IPO narrative is based on growth, but it’s missing three other critical storylines. It’s losing money. Governance is compromised, with dual-class stock and a part-time CEO in Jack Dorsey. And the company’s allies may have incentives to become rivals.
Dell-EMC tracker stock gives arbs a new plaything 14 Oct 2015 The mega-LBO touted at $67 bln is now worth $3 bln less, while EMC’s full market cap is only some $56 bln. That means investors aren’t sure the deal will close or they’re nervous about the synthetic shares in EMC’s VMware unit that will be issued as part of the deal – or both.
Wal-Mart outpaced by mass-market trends 14 Oct 2015 The mega-retailer’s shares fell almost 10 pct, wiping out more than $20 bln of value, after it warned pay and tech spending would hit next year’s profit unexpectedly hard. Changing shopping habits – think Amazon – and wage pressures are stronger headwinds than investors thought.
Chill on M&A lawsuits puts heat on Wall Street 14 Oct 2015 A judge has poured cold water on HP’s attempt to settle claims over its $2.7 bln Aruba purchase, slamming the practice of buying peace with fees. But suing bankers over conflicts provides better kindling. Efforts to cut deal litigation are simply blowing legal fires elsewhere.
Twitter patches broken wing with chairman choice 14 Oct 2015 Putting Google’s Omid Kordestani atop the board kills two birds with one appointment. It supplements Jack Dorsey’s stretched position as a two-timing CEO and adds a much-needed money man to survey a foundering business model. Ideally, they’d reverse the roles completely.
TripAdvisor’s Priceline deal leaves rivals in dust 14 Oct 2015 The travel review site had plenty of users but its dependence on advertising made it an internet laggard. Sharing business with the hotel-booking powerhouse gives it fee revenue and a shot to become a one-stop tourist site. Peers are quickly receding in the rearview mirror.
Wells and JPMorgan expose BofA’s $7 bln challenge 14 Oct 2015 Brian Moynihan’s bank needs to earn that much in extra annual profit for a 10 pct return on equity. Cost cuts to match Wells-type efficiency wouldn’t quite do it. And Jamie Dimon’s outfit has fair returns even on falling revenue. Only a rate hike might get BofA over the line.
JPMorgan Q3 gives lie to investors’ biggest wish 13 Oct 2015 Shareholders say more loan growth would make them bullish on U.S. banks. CEO Jamie Dimon delivered that in spades, but earnings fell, excluding tax breaks. Blame the obvious culprits of low-risk borrowers and rock-bottom rates. The reality is investors live in cloud cuckoo land.
J&J buyback a sensible regimen for ailing stock 13 Oct 2015 The pills-to-Band-Aids group will use debt to repurchase $10 bln of shares, adding to a healthy dividend. CEO Alex Gorsky can credibly argue that currency swings and a full but slow drug pipeline make the stock underpriced. It’s the rare case when juicing its value is justified.
The Bernie Sanders budget math 13 Oct 2015 Breakingviews estimated that the socialist U.S. presidential wannabe would spend $8 trln more over 10 years than his tax proposals would bring in. Readers questioned our figures. As with rival analyses, many assumptions are required. Some of them are laid out in more detail here.
VW scandal fuels investor fears about environment 13 Oct 2015 Shareholders managing some $1 trln in assets are pushing the biggest carmakers to disclose how emissions rules affect their businesses. The investors also want to know about the companies’ links to regulators. It’s another sign of how climate issues can sometimes take the wheel.
Rob Cox: VW needs an eight-step recovery plan 13 Oct 2015 That’s the minimum number of constituencies the $68 bln carmaker, snagged in a giant engineering deception, must now mollify to restore credibility. Customers, investors, suppliers, dealers, governments, unions, staff and ordinary people each will require a unique approach.
Hef’s cover-up exposes magazine industry softness 13 Oct 2015 Playboy is to stop publishing pictures of nude women and focus on journalism to try to boost sagging readership. But print industry ad revenue is down 30 pct since 2000 and competition is fierce. The notion that more men really will read Playboy for the articles could be a tease.
AB InBev must change spots to make SAB deal work 13 Oct 2015 Having won its UK rival’s agreement to merge, the Budweiser brewer now gets to put its fearsome talent for cost-cutting to work. But that may not be enough. AB InBev will need to create growth and court governments to make the $104 bln bid stack up. Those are different skills.
President Bernie Sanders would dig an $8 trln hole 12 Oct 2015 The socialist U.S. candidate would shake up the economy with dramatically more government spending. But promises from free college tuition to a government health system would cost more than $12 trln over a decade – far short of additional revenue, like a Wall Street trading tax.
Sergio Marchionne revs pre-IPO Ferrari to the max 12 Oct 2015 The Fiat Chrysler boss has cranked up margins at the sports car firm, which he chairs. That could help justify a near $10 bln market cap and a bumper multiple. The need to keep the investment tank full and get the top line growing, though, may mean margins and the valuation fade.
Couch-sports on TV could be whole new ball game 12 Oct 2015 U.S. cable network TBS is starting a competitive videogame league with talent agent William Morris in a bid to build on the power of live programs. With online viewership for “League of Legends” battles already on a par with events like soccer’s World Cup, it may be a big score.
AB InBev makes an offer SABMiller shouldn’t refuse 12 Oct 2015 Budweiser’s parent has made a fourth proposal for the UK-listed brewer at some $103 bln. The cash-and-shares bid is 42 pct above SAB’s stock price before the latest approaches were made, and comes at nearly 15 times last year’s EBITDA. It is just about time to say “I do.”
EMC investors get $67 bln ticket out of trouble 12 Oct 2015 Michael Dell and others are paying $33 a share for the tech conglomerate. Sure, most of the notional 38 pct premium comes as a flaky tracking stock in EMC sub VMware. But there are no other obvious bidders and breaking up the company is a risky alternative for only slight gains.
Dell takes $67 bln EMC challenge out of public eye 12 Oct 2015 The PC maker has deleveraged since going private in 2013. That’s also how it plans to handle the disk storage firm after adding debt to buy it. A waning EMC core business, a need for revenue synergies and other twists make this another deal best tackled behind closed doors.