After Hours Summary: STNE +14%, SYNH +9%, REV -10% among notable earnings/guidance moversAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: STNE +14.2%, SYNH +9.1%, AMRS +5.2% (also signed agreement for cannabinoid development, licensing and commercialization containing $300 million of R&D and milestone payments plus long-term royalties), EOLS +2.7% (also secures $100 mln senior debt facility with Oxford Finance), TLRY +2.4%
Companies trading higher in after hours in reaction to news: FOE +7% (ticking higher; to join S&P SmallCap 600), PAGS +3.3% (attributed to STNE results), BIOS +2.6% (modestly rebounding from 16% decline), MIK +0.8% (ahead of earnings tomorrow before the open), PLOW +0.4% (President, Dejana Truck & Utility Equipment Company disclosed the purchase of 6.5K shares)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: REV -9.9%, CVTI -8.7% (light volume), TACO -5.7%, WAGE -5.3%, HQY -4.7%, UNIT -2.3%
Companies trading lower in after hours in reaction to news: YEXT -9% (files for 7 mln share common stock shelf offering ), TORC -8.8% (commenced $50 mln common stock underwritten public offering), NOMD -4.9% (announces public offering of 20.0 mln of ordinary shares), TWO -2.9% (commenced public offering of 18 mln shares of common stock), NSTG -2.8% (files mixed securities shelf offering and announced public offering of 4.5 mln shares of common stock pursuant to its shelf - includes 2.5 mln by the company), AGS -2.3% (ticking lower; announces secondary public offering of 4.0 mln shares of common stock by selling shareholders), WHD -1.9% (light volume; commences secondary offering of 8.5 mln shares of its Class A common stock by selling shareholders), DERM -1.1% (proposed public offering of $110.0 mln of common stock)
Asia Market Update: Asian equity volatility muted ahead of Fed meeting; RBA Minutes reiterated no strong case for near-term rate change
General Trend:
- Property shares decline in early trading in Shanghai
- Tencent speculated to consider job cuts ahead of Q4 earnings report
- Australian coal miner New Hope declines after H1 earnings
- Australian Q4 housing prices decline at the fastest rate in years
- Aussie bond yields decline after RBA minutes and housing figures
- After RBA minutes, focus shifts to Aussie monthly employment data due on Thursday, includes more comments than typical on China/US trade dispute
- US dollar trades generally weaker ahead of Fed meeting
- US Fed to hold policy meeting March 19-20 (Tuesday-Wed)
- China’s Bank of Communications (BOCOM) said to plan to reduce convertible issuance by ~50%
- Brexit expected to be delayed by 9-12 months, EU expected to make formal announcement this week
***Headlines/Economic Data***
Australia/New Zealand
-ASX 200 opened +0.1%
- (AU) Australia RBA Assistant Gov Kent: The past year in Australia was a bit of a mixed bag in terms of issuance of fixed income securities – Bonds and Benchmarks at the KangaNews DCM Summit
- WBC.AU Moves wealth and insurance units into expanded business and consumer divisions; initial estimates include one-off costs of A$250-300M
- (AU) AUSTRALIA RBA MEETING MINUTES FROM MARCH 5TH: REITERATES SEES NO STRONG CASE FOR NEAR TERM ADJUSTMENT IN POLICY; `CONSIDERABLE UNCERTAINTY' AROUND CONSUMPTION OUTLOOK
- (AU) Australia 3-yr yield has fallen below RBA cash target rate of 1.50% for the first time since 2016
- (AU) AUSTRALIA Q4 HOUSING PRICE INDEX Q/Q: -2.4% V -2.0%E; Y/Y: -5.1% V -5.0%E (multi year low)
-GCY.AU Trading halted: Reviewing FY19 guidance, operational performance for the quarter to date being below expectation; progressing potential funding options and will provide an update on progress later this week
- (NZ) New Zealand to repurchase April 2020 bonds
Japan
-Nikkei 225 opened -0.1%
- (JP) Japan monthly Cabinet report expected Wednesday expected to repeat that the economy is assessed as "recovering at a moderate pace" and highlight overseas risks – Nikkei
- (JP) Japan to cap leverage in crypto margin trading – Nikkei
- (JP) Japan Fin Min Aso: Base pay is definitely heading upwards
- (JP) Japan Q4 Flow of Funds: Household Assets ¥1,830T (-1.3% y/y) - BOJ
- (JP) Japan Econ Min Motegi: Hope the BOJ will keep doing its upmost towards reaching price target
- (JP) Some BOJ members said to see that achieving the 2% price traget by 2021 seemed unlikely - financial press
-(JP) Japan MoF sells ¥1.0T v ¥1.0T indicated in 0.50% (prior 0.50%) 20-yr bonds; avg yield 0.391% v 0.419% prior; bid to cover 4.84x v 4.67x prior
Korea
-Kospi opened +0.2%
- 005380.KR Several US state to investigate "spontaneous fires" of Hyundai and Kia vehicles – Yonhap
- (KR) South Korea Foreign Min Kang: Should consider an envoy to North Korea
-005380.KR With Kia to invest $300M in India's Ola a mobility service provider
China/Hong Kong
-Hang Seng opened flat; Shanghai Composite opened +0.1%
- (US) White House Hassett: still working hard on reaching deal with China but still facing differences on oversight - CNBC
- Hong Kong Monetary Authority (HKMA) purchased HK$2.01B as the Hong Kong dollar (HKD) traded at the weak end of its trading band versus the US dollar
- (CN) China PBoC head of financial stability Wang Jingwu: Stability of yuan exchange rate and forex reserves faces pressure; “gray rhino” risks in China’s financial sector are rising and regulators will step up efforts to control them - financial press
- (CN) China Assistant Commerce Min Ren Honghin said to take array of measures to support foreign trade in 2019 – Xinhua
- (CN) China PBoC Open Market Operation (OMO): To inject CNY50B in 7-day reverse repos v CNY60B in 7-day prior; Net: CNY50B injection v CNY60B injected prior
- (CN) China PBoC sets yuan reference rate: 6.7062 v 6.7088 prior
- (CN) China Feb FX Net Settlements (CNY): -102.3B v +103.1B prior (update)
- (CN) US Senate introduces bill to ban rolling stock (railroad, bus) manufactured by Chinese companies with state ties; claims China poses clear and present danger to national security and has infiltrated rail and bus manufacturing - SCMP
-0728.HK Reports FY18 (CNY) Net 21.2B v 20.4Be; EBITDA 104.2B v 105Be; Rev 377.1B v 380.8Be
-700.HK To target 10% of managers for job cut, demotion; cuts expected to focus on low performers
North America
- SPDR Gold Trust holdings +1.1% to 779.3 metric tons
- (CA) Alberta Canada to increase crude production limit by 25.0K bps starting in May and an additional 25.0K in June (prior had called for cut to production starting June 1st) - press citing local Govt
- BA CEO Dennis Muilenburg: Based on facts from the Lion Air Flight 610 accident and emerging data as it becomes available from the Ethiopian Airlines Flight 302 accident, we're taking actions to fully ensure the safety of the 737 MAX. We also understand and regret the challenges for our customers and the flying public caused by the fleet's grounding
- CBOE Will no longer offer bitcoin futures when last contract expires in June - press
Europe
- (UK) Reportedly Ministers are expecting EU to grant a 9-month extension of Article 50 on Brexit; 9-months seen as the maximum delay that will be allowed – ITV
- (UK) EU to formally agree on Brexit delay this week – Guardian
- (UK) PM May said to have requested a 9-12 month delay to Brexit – press
- (UK) Parliament Speaker Bercow: PM May must change Brexit deal to hold third 'meaningful vote'; May CANNOT put the same Brexit deal to a third vote
- (FR) France raises counter cyclical capital buffer for banks to 0.5% from 0.25% - press
***Levels as of 01:20ET***
- Hang Seng -0.1%; Shanghai Composite -0.1%; Kospi -0.1%; Nikkei225 -0.1%; ASX 200 -0.1%
- Equity Futures: S&P500 +0.1%; Nasdaq100 +0.1%, Dax flat; FTSE100 +0.1%
- EUR 1.1350-1.1333 ; JPY 111.15-111.46 ; AUD 0.7112-0.7089 ;NZD 0.6863-0.6840
- Commodity Futures: Gold +0.5% at $1,307,/oz; Crude Oil -0.1%at $59.34/brl; Copper +0.1% at $2.915/lb
Notable post-earnings/guidance movers
- Post-earnings/guidance gainers: STNE +9.2%, AMRS +8.9%, SYNH +8.6%, TLRY +2.4%
- Post-earnings/guidance losers: WAGE -9.8%, CVTI -8.7%, TACO -7.4%, REV -4.4%, HQY -4.1%
Closing Stock Market SummaryThe S&P 500 gained 0.4% on Monday in a session led by the cyclical sectors. Some follow-through buying interest amid a lack of "new" catalysts helped the market advance in front of the Fed's policy meeting this week.
The Dow Jones Industrial Average gained 0.3%, the Nasdaq Composite gained 0.3%, and the Russell 2000 gained 0.7%.
The S&P 500 energy (+1.4%), consumer discretionary (+1.1%), financials (+1.0%), and industrial (+0.9%) sectors outperformed the broader market. Conversely, the communication services (-0.8%), real estate (-0.5%), and utilities (-0.4%) sectors underperformed.
From a macro perspective, the market appeared uninterested by the latest developments pertaining to U.S.-China trade, Brexit, or slowing growth.
Specifically, a trade deal summit between President Trump and President Xi may not happen until June, according to the South China Morning Post; UK Speaker John Bercow warned PM Theresa May that he will not allow a third vote on the Brexit deal unless the proposal is substantially different from the previous versions; and Japan reported its third consecutive year-over-year decline in exports (-1.2%) for February.
Boeing (BA 372.28, -6.71, -1.8%) and Facebook (FB 160.47, -5.51, -3.3%), meanwhile, extended losses from last week on some familiar story lines.
The Wall Street Journal reported the Department of Transportation is investigating the FAA's approval of Boeing's 737-MAX aircraft. Facebook was downgraded to 'Hold' from 'Buy' at Needham, which warned that strategic, regulatory, and brand risks could create a negative network effect for the company.
Monday's session also featured a burst of M&A activity and speculation. Notable deals included Fidelity National Information Services (FIS 108.12, -0.76, -0.7%) acquiring Worldpay (WP 108.51, +9.83, +10.0%) in a $43 billion cash-and-stock deal and Deutsche Bank (DB 9.26, +0.38, +4.3%) confirming it is in merger talks with Commerzbank (CRZBY 8.67, +0.58, +7.2%).
U.S. Treasuries closed near their unchanged marks. The 2-yr yield and the 10-yr yield increased one basis point each to 2.45% and 2.60%, respectively. The U.S. Dollar Index declined 0.1% to 96.49. WTI crude rose 1.4% to $59.30/bbl, supported by news that OPEC canceled its April meeting and will let its current production cuts run until at least June.
In economic data, the NAHB Housing Market Index for March stood at 62 (consensus 63), unchanged from February.
Looking ahead, investors will receive Factory Orders for January on Tuesday.
- Nasdaq Composite +16.3% YTD
- Russell 2000 +16.0% YTD
- S&P 500 +13.0% YTD
- Dow Jones Industrial Average +11.1% YTD
Lyft seeks $23bn valuation in New York IPO
Ride-hailing company looks to raise $2.1bn in biggest US tech listing in 2 years
Lyft, the ride-hailing company, is hitting the road to pitch the biggest US technology listing in two years, as it looks to raise up to $2.1bn at a valuation of almost $23bn.
The San Francisco-based company suggested a price range of $62 to $68 per share in an updated filing on Monday to the US Securities and Exchange Commission, as it kicked off its investor roadshow. It will use the ticker symbol LYFT when it begins trading on the Nasdaq exchange later this month.
A $22.9bn valuation, at the top of the range and on a fully diluted basis, would peg Lyft’s worth in the range of the market capitalisations of public tech companies including Hewlett Packard Enterprise, Twitter and AMD, as well travel groups Hilton and Expedia. It would be the biggest offering by a US tech group since Snap went public in 2017, according to Dealogic.
The filing gives the first indication of what ride-sharing companies could be worth in the public markets. Lyft’s IPO is expected to be followed by a public listing from its larger rival Uber as soon as next month, which may fetch a market valuation topping $100bn.
Stuart Bedford, a corporate partner at the law firm Linklaters, said it was hard to value Lyft, since there is no predecessor to compare it to.
“The fact is that they (ride-hailing apps) are not ‘steady state’ businesses, they are all still driving for significant further growth and the battle being fought in the ride-hailing space means it remains hard to predict future revenues,” he said.
But one investor who holds a stake in Uber said the offer was tempting. “I think this is going to trade very well and that will bode very well for Uber.”
The listing will kick off what is expected to be a busy period for technology IPOs with other Silicon Valley stars including Pinterest and Airbnb waiting in the wings.
In Monday’s filing, Lyft said it would offer 30.8m shares, while underwriters have the option to purchase an additional 4.6m shares. JPMorgan, Credit Suisse and Jefferies are the lead bookrunners for the offering.
After expenses, Lyft expects to see net proceeds of about $1.9bn, rising to as much as $2.2bn if the underwriters exercise their purchase options.
About 5 per cent of the shares will be offered for sale to some of its longest-serving drivers, who have completed more than 10,000 rides through its app, as well as to Lyft’s directors, certain employees and their friends and family.
At a price of $68 per share, Lyft’s two co-founders, Logan Green and John Zimmer, would see the values of their stakes rise to $569m and $393m respectively.
They also plan to create a new class of shares carrying 20 votes a piece, which will give them control of 48.8 per cent of voting power, despite their ownership of less than 5 per cent of the company.
Lyft’s largest shareholder, Japanese ecommerce company Rakuten, will hold a stake worth $2.13bn at the high end of the price range. It originally paid $300m for 11.9 per cent of Lyft in 2015 and invested in additional private rounds in 2016 and 2017.
General Motors, which invested $500m in 2016, will have a stake worth $1.27bn. Among other top shareholders, Fidelity’s stake will be worth $1.26bn, venture capital firm Andreessen Horowitz will own a stake worth $1.02bn and Alphabet’s holdings will be worth $872m.
Lyft, which was founded in 2012 and operates in more than 300 cities in the US and Canada, had revenues in the past year of $2.16bn and a net loss of $911.3m.
Lyft kicked off its roadshow in New York on Monday. Executives and bankers will travel to Boston, Baltimore, San Francisco, Los Angeles, Kansas City and other cities to meet potential investors, according to a schedule seen by the Financial Times. The shares are expected to price on March 28 and begin trading the next day.
The company’s case to investors will emphasise growth, particularly the increases in active riders and revenue per active rider, according to a video presentation for investors.
The number of active riders — people who have taken at least one ride in the past quarter — rose more than fivefold from 3.5m in early 2016 to 18.6m at the end of 2018. Revenue per active rider more than doubled to $36.04 in that time.
“This is a key indicator of our ability to drive usage and monetisation of our platform,” said Brian Roberts, Lyft’s chief financial officer, in the video.
Costs have also increased substantially, however, tripling to $3.1bn last year from 2016.
Deutsche Bank/Commerzbank: dream team
Heroic assumptions are required to make the numbers work on analysts’ spreadsheets
Fans of underdog sports teams can feel oddly destabilised if their side starts winning. A 4.1 per cent jump in the shares of Deutsche Bank may have given some investors the same frisson. The stock has fallen by three-quarters since 2015. News of formal merger talks with rival Commerzbank might just be the moment when the luck of investors begins to turn.
Just as US banks benefit from a strong home base, a combined group could prosper from serving Germany’s powerful exporters. Deutsche’s barely profitable investment bank would focus on that goal after shrinking. Retail and commercial divisions would be boosted by economies of scale.
Berlin might retain a 5 per cent stake. Federal politicians would have an interest in making the deal work in a market where the plethora of savings and co-operative banks erode lending margins.
One tiny difficulty: the numbers do not stack up. Because Deutsche would acquire Commerzbank for less than it is theoretically worth — it trades at just 0.4 times tangible book value — the combined bank would book a gain. But perhaps €10bn or more would have to be raised for restructuring costs and to strengthen the balance sheet.
Heroic assumptions are required to make the numbers work on analysts’ spreadsheets. Commerzbank’s shareholders might have to sell control for no premium. Tough German trade unions might have to agree 30,000 job losses with a nod and a wink. Deutsche bosses, whose record is hardly exemplary, would have to execute a complex integration.
Politicians and the banks’ supervisory boards will not look too closely at spreadsheets. They will worry about which bank will stand by German companies in the next financial crisis. More cheerfully, they will imagine higher eurozone interest rates restoring margins on core lending businesses. They will dream of a national champion bolstering the economy and leading European bank consolidation. One day.
Arki Busson’s hedge fund gives up Swiss licence and cuts jobs
LumX had already been slimming down following years of losses
The embattled hedge fund group run by Arpad “Arki” Busson has given up its mutual fund licence in Switzerland and announced job cuts.
In a statement LumX said it has “decided to terminate its activities as a manager of collective investment schemes in Switzerland and has accordingly requested to no longer be regulated as such by the Swiss regulator Finma”.
It also disclosed it would cut “a single-digit number of employees in Switzerland” as a result, citing “investor trends and headwinds”.
The money manager will instead operate as an asset manager “as a member of the Swiss Association of Asset Managers”.
It is possible to manage assets in Switzerland without having a licence from Finma but managers need to be a member of a self-regulating body such as SAAM and are subject to restrictions. They may only manage foreign-domiciled funds on behalf of qualified investors with less than SFr100m ($99.8m) in open-ended funds and less than SFr500m in closed-end funds.
LumX, which provides risk analysis services and a managed account platform as well as investment management, has been slimming down following years of losses.
It reported a net loss of $4.5m in the six months to June last year. In 2017 it reported a net loss of $7m, the eighth consecutive year of losses for the group.
Mr Busson, executive chairman, said in the interim report he was “disappointed” by the results but added that the group was having “multiple conversations with large asset owners and asset managers interested in its technology for . . . risk analysis and regulatory reporting purposes”.
Mr Busson, who co-founded the children’s charity Ark, is well known for his philanthropic work and former relationships with Uma Thurman, the Hollywood actress, and Elle Macpherson, the model.
LumX had 48 staff at the end of June, down from 133 at the end of 2014. The company had $7.1bn in fee-earning assets at the end of June last year, less than half of the $18bn it managed when it was known as Gottex at the end of 2007.
The company declined to comment further on the announcement which it published on its website earlier this month.
The FT reported last year that UK asset manager Artemis, a top five shareholder, was looking to sell down its stake. It holds 5.8 per cent in LumX through its Artemis Alpha Trust. The UK fund manager declined to comment.
The biggest shareholder in LumX is Rozel Trustees, a Channel Islands-based trust, which owns about 26 per cent according to Bloomberg data. It could not be reached for comment. Quaero Capital, a Swiss fund manager and the second-largest shareholder with an 11.3 per cent stake, did not respond to a request for comment.
LumX, which will remain regulated by the UK Financial Conduct Authority, will report annual results next month.