Gapping down
In reaction to earnings/guidance:
- SEDG -18.5%, PACB -10.9%, ESPR -8.6%, NPTN -7.2%, OSPN -6.7%, BRKR -5.7%, FBM -5.6%, PYPL -5.5%, ICHR -5.5%, KMT -5.1%, EVER -4.6%, SRC -4.4%, MOS -4%, RCM -4%, NTR -3.8%, FRPT -3.5%, LEG -2.5%, JCI -2.4%, RMBS -2.3%, STE -1.7%, ETRN -1.7%, O -1.5%, MDLZ -0.9%
Other news:
- AUPH -8.1% (Phase 2/3 data for dry eye syndrome did not meet primary endpoint)
- DRRX -5.6% (names new Chief Medical Officer)
- FELE -1.8% (acquires Waterite)
- EDU -1.5% (prices global offering of 8,510,000 new common shares)
- BAND -0.8% (stock offering)
- BMRN -0.8% (receives acceptance from FDA for its NDA for Vosoritide; PDUFA Action Date is Aug 20)
Analyst comments:
- GHL -4.7% (downgraded to Underperform from Mkt Perform at Keefe Bruyette)
- MOS -4% (downgraded to Sector Perform from Sector Outperform at Scotiabank)
Hong Kong Amends Crypto Law to Regulate All Exchanges - https://bit.ly/384jWwo
Cryptocurrency regulation in Hong Kong is undergoing changes. The Securities and Futures Commission (SFC) is reportedly introducing a new licensing system to regulate all crypto exchanges operating in Hong Kong.
Hong Kong’s New Crypto Regulation
The CEO of the SFC, Ashley Alder, talked about implementing a new cryptocurrency regulatory framework at Hong Kong Fintech Week on Tuesday.
All cryptocurrency trading platforms operating in Hong Kong or targeting local investors will be required to apply for a license with the SFC, Radio Television Hong Kong (RTHK) reported. “Later today, the government will propose a new licensing regime under the Anti-Money Laundering Ordinance for platforms which trade any type of crypto asset even if not classified as securities,” Alder was quoted as saying.
The SFC introduced an opt-in regulatory framework for crypto exchanges in November last year. However, it only applies to platforms that offer at least one cryptocurrency that falls under the legal definition of securities.
Alder noted that the current regulatory system has serious limitations, making it possible for some trading platforms to operate away from the purview of the regulator. “If a platform operator is really determined to remain completely off the regulatory radar, it can do so simply by ensuring that its traded crypto assets are not within the legal definition of a security,” he explained.
Many cryptocurrency exchanges operate in Hong Kong but they choose not to apply for a license, which is possible under the current system. According to Reuters, the SFC has not issued a full license to any exchange to date, but it has agreed in principle to issue a license to OSL Digital Securities, a cryptocurrency arm of Fidelity-backed BC group. Alder elaborated:
Once this new regime is in place, all virtual asset trading platforms in Hong Kong would be regulated, supervised and monitored.
Early premarket gappers
- Gapping up:
- ALSK +59.7%, IEA +13.5%, ANET +11.7%, MED +10.7%, INSP +10.4%, KPTI +10.3%, CPE +10.1%, CDLX +9.8%, CRUS +8.4%, WBT +8.4%, HALO +7.7%, KFRC +7.2%, JCOM +6.6%, JAZZ +6.3%, PAA +6.2%, VNOM +5.3%, AMC +4.2%, GLPG +3.8%, LPX +3.8%, MIME +3.2%, JELD +3.2%, PAGP +3%, SIMO +3%, FANG +2.9%, TREX +2.3%, BMRN +2.2%, NEE +2%, CDK +1.9%, TWTR +1.7%, HII +1.7%, BTI +1.6%, ONTO +1.6%, WPX +1.5%, WMB +1.4%, NGL +1.2%
- Gapping down:
- SEDG -15.1%, PACB -13.2%, AUPH -10.3%, NPTN -7.2%, EVER -7.1%, OSPN -6.7%, BRKR -5.7%, DRRX -5.6%, FBM -5.6%, ICHR -5.3%, KMT -5.1%, FRPT -4.6%, PYPL -4.5%, DOOR -4.4%, SRC -4.4%, NTR -4.1%, MOS -3.5%, ESPR -2.7%, O -2.7%, RMBS -2.3%, OMI -2.1%, FELE -1.8%, COUP -1.7%, STE -1.7%, VOXX -1.6%, LEG -1.2%, TRIL -1%, BAND -1%
G4S rejects second bid as takeover battle intensifies
UK security group turns away US rival Allied Universal after £3.3bn offer
G4S rejected a £3.3bn bid from US rival Allied Universal last week, turning away a second suitor in the takeover battle for the world’s biggest security company.
The British company is publicly fighting a lower £3bn hostile bid from Canada’s GardaWorld. It said it had also rejected a conditional offer from Allied last Wednesday at a price of “at least 210p a share” on the grounds that it was too low.
G4S added that talks were continuing and it was “engaged with Allied and an independent consultant to establish a process through which commercially desensitised information may be provided”.
Its intervention kicks off a three-way contest for G4S, which employs 530,000 staff in 85 countries guarding embassies, sports stadiums and music events, as well as providing justice services such as the management of prisons.
Shares in G4S rose 4.9 per cent to 214.60p on Tuesday, giving the company a market value of £3.3bn.
Tyler Tebbs, an analyst at Louis Capital, said the Allied bid could “light a fire under Garda’s butt and force them to put their real offer on the table”. “It sounds like Allied is serious and will come back,” he added.
Last week G4S recommended that shareholders reject Garda’s bid, which is backed by private equity company BC Partners, calling the offer of 190p a share “wholly inadequate”.
Allied Universal is a security and facilities manager with more than 200,000 staff in the US, Canada, Mexico and the UK. There are concerns that any deal with G4S could raise competition issues in its domestic market.
The company is backed by Canadian pension fund Caisse de Dépôt et Placement du Québec, private equity company Warburg Pincus and J Safra Group, a Brazilian bank. Allied was unavailable for comment.
GardaWorld, based in Montreal, has 102,000 staff and £2.1bn in revenue. It has been on a dealmaking spree, adding nine businesses in the year to January 2020.
If G4S is sold, it would be among the 10 largest UK public companies to be taken private in the past five years, according to Refinitiv data.
Advent International’s £4bn acquisition of Cobham and the $6bn purchase of satellite company Inmarsat by a group led by Apax and Warburg Pincus are among the others.
Robert Plant, an analyst at Panmure Gordon, said: “We see scope for higher offers from both companies and have a 225p target price.
“G4S, as the market leader, is a unique asset which should be appealing to potential bidders.”
Ikea says second round of lockdowns will have less impact on its business
World’s largest furniture retailer steps up production to meet demand for home improvements
Ikea has shrugged off the impact of a second round of coronavirus lockdowns in Europe as “incomparably” less than the first, saying that this time it will be able to keep on producing its flat-pack furniture.
Martin van Dam, chief financial officer of Inter Ikea, the main company in the Ikea retail empire, told the Financial Times on Tuesday that sales were being hit by some stores being closed after a strong “old-fashioned school start” in September and October.
“This lockdown is incomparable to the first one. The big thing is we don’t stop production. There are slower sales, but there is not the inefficiency of the first lockdown,” he added.
Ikea was forced to give substantial financial help to its hundreds of external suppliers earlier this year to stop them going bankrupt and allow them to pay workers as lockdown restrictions in much of Europe and parts of China heavily disrupted its production.
The uneven lifting of the first lockdown strained logistics in Ikea’s supply chain whereas at present there was little of that, Mr van Dam said.
About one in 10 of Ikea’s stores are closed — in France, Israel, Ireland, Czech Republic, Slovakia, Belgium and the UK — but the effects have been mitigated by allowing customers to collect online orders from some shops. At the peak of Covid-19 in April, about three-quarters of Ikea’s 450 stores were closed — on average for seven weeks each.
The world’s largest furniture retailer has in the past few months asked suppliers to work extra shifts as pent-up demand from the first lockdown and an increased focus on home improvements by consumers working from their dwellings has led to a rebound in sales.
Mr van Dam said Ikea had given its suppliers loans, prepayments for goods and funded their working capital. “We had to go back to our suppliers and say — what can we do together to make sure that stopping your production doesn’t bring you into financial problems. We had to make sure they don’t go bankrupt. But now we’re asking more of them, especially our furniture suppliers, and in particular in storage and organise.”
He said that consumers had changed what and how much they were buying. The average basket size had increased this year by almost a third from €93 to between €118 and €120. Its Pax clothes storage products were selling well while its food department was suffering.
“When stores reopened there was a tsunami of sales coming in. People want to improve their homes as they’re in them for most of the day. There’s been a super strong acceleration in demand and we’re producing like never before,” Mr van Dam added.
His comments came as Inter Ikea, the owner of the Ikea brand and concept, revealed its net profits rose 17 per cent to €1.73bn in its financial year to the end of August, even as revenues declined 6 per cent to €23.6bn.
Inter Ikea benefited from lower purchase volumes and prices from suppliers due to coronavirus as well as recruitment freezes in several businesses.
Mr van Dam said Ikea was ploughing most of its development money into making its online store as attractive as its physical shops. It opened its own ecommerce site in China earlier this year, adding to its first-ever test in selling on a third-party website, Alibaba’s Tmall.
China tells Ant to expect scrutiny of credit business ahead of record listing: sources
BEIJING/HONG KONG (Reuters) - China’s top financial regulators told Ant Group Co Ltd’s founder Jack Ma and two top executives that the company’s lucrative online lending business faces tighter government scrutiny, sources told Reuters, days before its record-setting listing.
Ant’s controller Ma, its Executive Chairman Eric Jing and Chief Executive Simon Hu were summoned to a rare joint meeting with senior representatives from four regulators on Monday, as Beijing published new draft rules for online micro-lending.
The trio were informed that the company, notably its cash-cow consumer lending business, will face tougher scrutiny over matters including capital adequacy and leverage ratios, said two sources who were briefed on the matter. They declined to be identified as details of the meeting have not been made public.
The move comes as some of the regulators were “surprised” by Ant’s business and financial figures, including the scale and profitability of its credit business, details of which were disclosed for the first time in its IPO prospectus in late August, said the first source.
Ant’s credit unit contributed close to 40% of the group’s revenue in the first half of the year. It holds Ant’s consumer credit business that includes Huabei, which operates like a virtual credit card service, and short-term consumer loan provider Jiebei.
Beijing has become more uncomfortable with banks heavily using micro-lenders or third-party technology platforms like Ant for underwriting consumer loans, amid fears of rising defaults and deteriorating asset quality in a pandemic-hit economy.
Ant’s consumer lending balance was 1.7 trillion yuan ($254 billion) as of the end of June, accounting for 21% of all short-term consumer loans issued by Chinese deposit-taking financial institutions.
“Regulators have long aimed to curb the fast-growing online lending industry to prevent systematic risks to the vast financial sector,” said the first source.
“Ant’s high-profile blockbuster IPO has become the tipping point as it urges all relevant regulators to step up efforts to look into its sprawling business.”
During the meeting on Monday, the People’s Bank of China (PBOC), China Securities Regulatory Commission (CSRC), China Banking and Insurance Regulatory Commission (CBIRC) and the foreign exchange regulator also told Ant to properly comply with the new micro-lending rules, said the second person.
Ant declined to comment. CBIRC and the State Administration of Foreign Exchange did not immediately respond to faxed requests for comment. The PBOC and CSRC were unable to be reached by phone outside of business hours.
China’s central bank and banking regulator separately published draft micro-lending rules on Monday which seek to increase the bar for micro-lenders to be able to provide online loans directly to consumers or jointly with banks, while limiting the amount they can lend.
The draft, open for public feedback until Dec. 2, requires small online lenders to provide at least 30% of any loan they fund jointly with banks, which is widely considered to be a key rule that will hurt the profitability of Ant’s current business model.
Only 2% of the 1.7 trillion yuan consumer loans Ant facilitated were on its balance sheet as of the end of June, its prospectus showed. The company takes an average 30%-40% cut of the interest on loans it facilitates, analysts estimate, without bearing such products’ credit risks.
Ant is set to go public in Hong Kong and Shanghai on Thursday after raising about $37 billion, including the greenshoe option of the domestic leg, in a record public sale of shares.
The latest regulatory move will likely cast a cloud over Ant’s post-debut performance, warned the sources and some institutional investors in its IPO.
“One tree far taller than others may fall victim to a strong wind more easily,” said the second source.
Reuters -China's Ant expected to double on debut amid pent-up retail demand: fund managers - https://reut.rs/3emNO8g
SHANGHAI/HONG KONG (Reuters) - China’s Ant Group is expected to double its market value on debut, as unmet demand from mom-and-pop investors and an impending inclusion in major global indexes could offset worries about tighter regulations, fund managers said.
The fintech giant will be listed in Hong Kong and Shanghai’s Nasdaq-style STAR Market on Thursday following its record $37 billion IPO, which attracted from retail investors alone a bid value equivalent to Britain’s GDP.
The IPO values Ant 6688.HK688688.SS, a spinoff from Jack Ma's Alibaba Group 9988.HK, at about $315 billion. The combined market cap of JPMorgan JPM.N, Morgan Stanley MS.N, Citigroup C.N and Goldman Sachs GS.N is $548 billion.
“Ant will be the market’s icon,” said fund manager Zhang Yingbiao from Shenzhen Longteng Huijin Fund Management Co, which bought Ant’s IPO shares via a bidding process.
The stock is expected to more than double in Shanghai on its debut due to its “uniqueness”, but the listing could “suck blood and steal the limelight” from the rest of the market with heavy first-day turnover, he said.
Ant, China’s dominant mobile payments firm that also offers loans, insurance and asset management, presents itself mainly as a technology vendor for financial institutions, but financial regulators say the firm remains under their purview.
The Hangzhou-based giant is benefiting from the richer valuations the market affords to tech firms than to financial institutions, analysts say.
For many fund managers in China, Ant stock is a “must-have” given its “huge growth potential”, said Zhong Daqi, founding partner of Guangzhou Zeyuan Investment Management Co, which expects Ant to rise as much as 150% on debut in Shanghai.
Large issuances typically curb a stock’s first-day rally on STAR, where debut gains average about 160%, but a long queue of retail investors who missed out during the Ant IPO process could test that, Zhong noted. The Shanghai tranche of the IPO was heavily skewed toward strategic and institutional investors.
“Ant represents the future of banking, and is a disruptive force,” said Zeng Qiang, a retail investor who plans to buy shares on the secondary market.
“It’s no longer a catfish. It’s a whale.”
INDEX HOPES, REGULATORY WORRIES
Expectations that Ant shares will be included in major stock indexes are further burnishing their appeal.
Global index publisher FTSE Russell expects to include Ant’s Hong Kong-traded shares in relevant FTSE indexes at the close of Nov. 11 in “fast entry”.
MSCI intends to add Ant’s Hong Kong and Shanghai-listed shares to relevant indexes as of end-Nov. 30.
Ant will likely also be added to other indexes over the next several weeks, such as Hong Kong’s Hang Seng and China’s CSI indexes, said Brendan Ahern, Chief Investment Officer at Krane Funds Advisors.
Its market debut comes against the backdrop of the U.S. presidential election, which could increase market volatility, and tighter regulatory scrutiny.
Just ahead of Ant’s listing, Chinese finance regulators held talks with Ant leaders, including billionaire founder Ma, as China unveiled new draft rules for online micro-lending, widely seen as targeting Ant’s aggressive expansion.
Ant’s growth potential could be capped by increasing regulatory scrutiny and saturation of the payment market, said Zhang Long, fund manager at Eastern Zeging (Xiamen) Asset Management Co. “Market expectation is too high for Ant.”