WSJ : Nexstar Nears Deal to Acquire Majority Control of CW Network

Nexstar Nears Deal to Acquire Majority Control of CW Network
Owner of local TV stations is looking to broaden CW’s programming to cater to older audience

Nexstar Media Group Inc., NXST -1.19%▼ the nation’s biggest owner of local television stations, is close to a deal to acquire majority control of the CW Network from co-owners Warner Bros. Discovery Inc. WBD -3.59%▼ and Paramount Global, PARA -1.88%▼ according to people familiar with the matter.

Under the terms being discussed, Nexstar would acquire 75% of the CW, a broadcast network aimed primarily at teens and young adults, with Paramount and Warner Bros. Discovery each retaining 12.5% stakes, the people said.

Nexstar isn’t expected to pay cash for the CW but instead would assume at least a significant portion of the network’s current losses, which could exceed $100 million, some of the people said. The talks could still fall apart, but the people familiar with the matter say an agreement could be finalized in the coming weeks.

CBS—the broadcast network of Paramount—and Warner Bros. are expected to continue to create content for the CW going forward, but Nexstar is also planning to acquire shows from other producers as well, the people said. In addition, Paramount and Warner Bros. Discovery are expected to retain several hundred million dollars in content-licensing revenue from pre-existing deals, including a significant pact with Netflix Inc., some of the people said

Nexstar already is the largest owner of CW affiliates. By taking over control of its operations, the broadcaster is continuing a strategy to invest further in creating and owning content. Over the past few years, it has launched the NewsNation cable channel and acquired the political news outlet The Hill.

One of the motivations for Nexstar is to pivot the programming on the CW to something closer to the older audience of its local stations, a person familiar with the broadcaster’s thinking said. The CW already has taken some steps in that regard by veering slightly away from teen-angst dramas such as “Riverdale” and adding shows such as “Walker,” about a Texas lawman, and “The Professionals,” a new action hour about a private security firm premiering this season.

The CW was born out of the 2006 merger of Warner Bros.’ WB and CBS’s UPN networks, both which had been struggling. The rationale behind the merger was that it would provide a platform for the companies’ production arms to place content at a time when selling to other networks was becoming more difficult as a result of industry consolidation.

Although the CW itself rarely made a profit, it was very successful for its parent companies, thanks primarily to the Netflix licensing agreement. While the audience for the CW was often small compared with other broadcast and cable networks, its shows such as “Riverdale” and “Arrow” developed big followings on Netflix. On Wednesday, two CW dramas—“Legacies” and “All American”—were ranked in the U.S. top 10 of most-popular shows on the streaming service.

The license fees from Netflix made the CW profitable for its partners. At the same time, it also sometimes created differing priorities between the partners on one hand and the CW Network and its local station affiliates on the other, people close to the network said. Shows whose ratings had declined, such as “Dynasty” and “Charmed,” were renewed for years because Netflix would continue to pay for global distribution rights despite their weak performance on the network.

In 2019, the CW’s parent companies decided to end the Netflix agreement because both wanted CW content for their own streaming services—Paramount+ and HBO Max, respectively. That meant shows created after the agreement expired wouldn’t go to Netflix but shows currently available on Netflix would remain for several more years.

While the decision was motivated by a desire to bolster their own platforms, it also meant increased costs to license the content on top of the loss of fees from Netflix.

That, combined with a shift in priorities at both Paramount Global and Warner Bros. Discovery, meant that the CW became something of an afterthought. Paramount Global is focused on its own streaming service as well as rebuilding its Paramount movie studio, while Warner Bros. Discovery, which is under new ownership, is looking to cut costs and determine which businesses aren’t a priority.

Immediate on-air changes aren’t expected at the CW, the people familiar with the matter said. In May, the network announced its lineup of new shows for the upcoming 2022-23 season, and that isn’t expected to change in the event of the sale. The CW also just completed selling ad inventory for its new lineup, which would also make any immediate changes challenging.

>>> US Close Dow +0,27% S&P -0,07% Nasdaq -0,75% Russell -1,12%

Closing Stock Market Summary

It was a choppy day for the stock market with the major indices sticking to a narrow range, though with volatile price action. The indices set early session lows before rolling along the rest of the day above those levels. There was more of a negative bias than what the major indices showed.

Rate hike and growth concerns weighed on trading mentality. There was little conviction from the buyers today as evidenced by the advance-decline line. Decliners led advancers by a roughly 2-to-1 margin at both the NYSE and Nasdaq.

Another factor that showed growth concerns were the mega caps which outperformed the broader market. The Vanguard Mega Cap Growth ETF (MGK) closed up 0.3% compared to the 0.6% loss in the Invesco S&P 500 Equal Weight ETF (RSP). The Russell 2000 and S&P Mid Cap 400 were down 1.2% and 0.8%, respectively.

Of the 11 S&P 500 sectors, six closed in the green. Some of the outperformers were counter-cyclical sectors, including health care (+0.9%), consumer staples (+0.5%), and utilities (+0.1%). 

The cyclical sectors lagged today. The energy (-3.4%), real estate (-0.8%), materials (-0.7%), financials (-0.6%), and industrials (-0.6%) sectors all closed in the red, further fueling the growth concern narrative.

Rate hike concerns were fueled this morning by Cleveland Fed President Mester (FOMC voter) saying she would advocate for another 75 basis point rate hike in July if conditions remain the same. Fed Chair Powell for his part acknowledged at an ECB forum that the importance of fighting inflation is worth the risk of slowing economic activity too much, which was another way of saying that it will be challenging for the Fed to achieve a soft landing.

Treasury yields closed lower. The 10-yr note yield fell 11 basis points to 3.09% and the 2-yr note yield fell seven basis points to 3.07% in a curve-flattening trade.

Reviewing today's economic data:

  • Q1 GDP - Third Estimate -1.6% ( consensus -1.5%); Prior -1.5%; Q1 GDP Deflator - Third Estimate 8.2% (consensus 8.1%); Prior 8.1%
    • The key takeaway from the report is that consumer spending wasn't as strong as previously reported. Personal consumption expenditures increased just 1.8% in the first quarter versus the second estimate, which showed growth of 3.1%.
  • Weekly MBA Mortgage Applications Index 0.7%; Prior 4.2%
  • EIA Crude Oil Inventories had a draw of 2.76 mln barrels (prior week showed a build of 1.96 mln barrels) and gasoline inventories had a build of 2.56 mln barrels (prior week showed a draw of 710K barrels)

Looking ahead to Thursday, the Personal Income (Briefing.com consensus 0.5%; prior 0.4%), Personal Spending (Briefing.com consensus 0.5%; prior 0.9%), PCE Price Index (consensus 0.7%; prior 0.2%), and the Core PCE Price Index (consensus 0.3%; prior 0.3%) for May will be released at 8:30 a.m. ET. The weekly initial jobless claims (consensus 234,000; prior 229,000) and continuing claims (prior 1.315 million) will also be released at 8:30 a.m. ET. The Chicago PMI consensus 58.8; prior 60.3) for June will be released at 9:45 a.m. ET. The weekly EIA Natural Gas Inventories (prior +74 bcf) will be released at 10:30 a.m. ET.

  • Dow Jones Industrial Average: -14.6% YTD
  • S&P 500: -19.9% YTD
  • S&P 400: -19.4% YTD
  • Russell 2000: -23.4% YTD
  • Nasdaq Composite: -28.6% YTD

WSJ : Crypto Hedge Fund Three Arrows Ordered by Court to Liquidate

Crypto Hedge Fund Three Arrows Ordered by Court to Liquidate
The order follows creditor lawsuits over the crypto hedge fund’s failure to repay loans

A British Virgin Islands court ordered the liquidation of Three Arrows Capital Ltd. after creditors sued the cryptocurrency hedge fund for failure to repay debts.

Nichol Yeo, a partner at law firm Solitaire LLP, said Three Arrows Capital is considering its options and seeking legal advice in the British Virgin Islands.

Three Arrows Capital suffered losses in recent weeks due to a punishing decline in the value of cryptocurrencies. Twin forces have hit the digital asset ecosystem: a broad market selloff sparked by the Federal Reserve’s interest-rate increases and concerns over individual crypto coins and firms. Bitcoin’s dollar value has fallen by more than a third this month.

Two executives of Global advisory firm Teneo, Russell Crumpler and Christopher Farmer, were appointed by the British Virgin Islands to oversee the liquidation of assets and safeguard them, according to people familiar with the proceedings. The firm isn’t representing Three Arrows or the creditors.

Creditors to whom Three Arrows owes debts will be able to file their claims online, the people said. The process for debtors to reclaim their assets is likely to be lengthy, they said, noting the liquidation order would mark the start of that process.

Former schoolmates and Wall Street traders Su Zhu and Kyle Davies started Three Arrows nearly a decade ago. It had roughly $3 billion in assets under management in April, just before crypto markets cratered, Mr. Davies told The Wall Street Journal earlier this month.

Three Arrows Capital invested in Luna, “Lido Staked ether” tokens and Grayscale Bitcoin Trust. Luna collapsed last month when its sister cryptocurrency TerraUSD, failed to maintain its value against the dollar, sending ripples through the crypto universe. The two coins together lost more than $60 billion in value.

Hedge funds such as Three Arrows invested in Grayscale to arbitrage the difference between the value of the trust and bitcoin, whose value it tried to mimic. The Grayscale trade suffered as the trust faced competition from investment products created for everyday investors. Grayscale Bitcoin Trust, which traded at a premium to bitcoin in the past, was trading at a 29% discount to bitcoin’s price as of Monday, according to YCharts data.

Several creditors have sued over the firm’s failure to repay loans. Crypto broker Voyager Digital Ltd. earlier this week said that Three Arrows had defaulted for failing to make loan payments tied to large bets in the digital-currency realm. The loan, which included 15,250 bitcoin and $350 million in USD Coin, amounted to about $656 million based on bitcoin’s current price. Voyager Digital said it intends to recover its assets and is discussing legal remedies with its advisers.

The liquidation order was reported earlier by Sky News.

Three Arrows Capital operated as a regulated fund manager in Singapore until last year, when it shifted its domicile to the British Virgin Islands, part of a plan to relocate its operations to Dubai.

WSJ : Chinese Lithium Giant Targets Up to $1.7 Billion in Hong Kong IPO

Chinese Lithium Giant Targets Up to $1.7 Billion in Hong Kong IPO
Tianqi Lithium is already listed in Shenzhen, where its stock has roughly doubled over the past 12 months

Tianqi Lithium Corp., 002466 -4.36%▼ one of the world’s largest producers of battery-grade lithium compounds, said Wednesday that it plans to raise the equivalent of up to $1.7 billion in a Hong Kong initial public offering, braving a subdued global market for stock issuance.

Investment banks handling the transaction will start taking orders from investors on Thursday and price the deal on July 6. The lithium producer expects to list on July 13.

The listing is poised to become the largest IPO in Hong Kong so far this year. Tianqi Lithium set a maximum price for its shares of 82 Hong Kong dollars, the equivalent of $10.45 apiece. At that price, Tianqi Lithium would pocket about $1.7 billion from the share sale.

Tianqi Lithium shares are already traded in mainland China, and the high end of the IPO price range is roughly 43% below the Wednesday closing price of its Shenzhen-listed stock.

Earlier this month, The Wall Street Journal reported that the Chengdu-based company aimed to raise more than $1 billion from the share offering, citing people familiar with the matter.

Jiang Weiping, Tianqi Lithium’s chairman, said that supply exceeded demand for most of the past two decades in the lithium industry. But that dynamic changed in 2021 with the growing popularity of electric vehicles, which depend on lithium-based chemicals for their rechargeable batteries. “We think this will be a far-reaching and long-term development,” Mr. Jiang said at a press conference on Wednesday.

The IPO proceeds would be first used to repay about $1.1 billion of bank loans, and then for other uses including funding the construction of a lithium-carbonate manufacturing plant in the Anju district of Suining, a city in China’s Sichuan province.

The company’s Shenzhen-listed shares declined 4.4% on Wednesday to close at 122.80 yuan, or the equivalent of about $18.31. They have roughly doubled in the past 12 months.

FT : French star Kylian Mbappé backs NFT fantasy football start-up Sorare

French star Kylian Mbappé backs NFT fantasy football start-up Sorare
Footballer to invest in SoftBank-backed company that allows consumers to buy digital football cards

French footballer Kylian Mbappé is following fellow superstars Cristiano Ronaldo and Lionel Messi into the world of non-fungible tokens by becoming an investor in a SoftBank-backed fantasy football platform.

Mbappé, 23, will also become a brand ambassador for Sorare, which operates an online game where players can create football teams based on the digital trading cards they own.

Football players, clubs and leagues have been rushing to tap into the growth of digital assets, such as tradable NFTs and so-called fan tokens, as a way to monetise their global fan base and generate revenue on top of broadcast and sponsorship deals.

Crypto companies have also courted sports teams, signing stadium and shirt sponsorship deals, with the aim of breaking through to the huge global audience that follows sport.

That trend has continued unabated despite the current turmoil roiling the market for cryptocurrencies and the increasing scrutiny on digital fan tokens, most of which have seen their value collapse within days of launch.

The UK financial regulator warned consumers about the danger of investing in such markets earlier this year, saying: “If you buy crypto assets you should be prepared to lose all the money you invest.”

Such warnings have not deterred big-name players from embracing the nascent market. Ronaldo inked a deal last week to promote NFTs for crypto exchange Binance, while Lionel Messi agreed a deal earlier this year with Socios, the fan token company.

Sorare hopes that signing up a player widely seen as the world’s best will help boost its limited profile. Mbappé has a combined Twitter and Instagram following of more than 80mn, compared with Sorare’s 155,000.

The Paris-based start-up hit a valuation of $4.3bn last year when it raised $680mn in a funding round led by SoftBank’s Vision Fund 2. The company, which says it has been profitable since its early days, also counts tennis star Serena Williams and Spanish footballer Gerard Piqué among its backers. It is due to launch a fantasy baseball game later this year after agreeing a deal with Major League Baseball.

The company declined to provide any financial details of its deal with Mbappé.

Although it operates an exchange for its NFT player cards, the company has sought to distance itself from other digital asset platforms by downplaying the notion that players can make money through trading the digital cards.

“What sets us apart is we have a utility for the NFTs, which is a game. We are building a gaming company,” said Nicolas Julia, Sorare’s chief executive. “I see the technology as an enabler to provide what we want to provide. But it’s not an end — so you don’t see the word NFT in our product.” 

However, the company also noted that its card trading volumes had grown more than 260 per cent in the first half of the year compared with a year earlier.

Mbappé’s deal with the French start-up comes soon after he signed a new contract with Qatari-owned Paris Saint-Germain. The striker’s importance to the country as a cultural asset was underscored by the involvement of President Emmanuel Macron in convincing him to stay in France and reject a move to Spain.