Ft : Liberty plans move for whole of Sirius XM

John Malone’s Liberty Media, which has been strengthening its hold over Sirius XM since the depths of the financial crisis, on Friday proposed to make the satellite radio broadcaster a wholly owned subsidiary, in a deal that could give it more firepower in its push to consolidate the US cable industry.

Liberty Media owns about 53 per cent of Sirius as part of its portfolio of media, communications and entertainment businesses. It is pitching the transaction to Sirius shareholders as a way to convert a non-controlling stake in a subsidiary into an equity position in a more liquid parent company.

The tax-free transaction values Sirius at about $3.68 per share, or a 3.1 per cent premium on the $3.57 closing share price on Friday. Sirius had an equity value of about $21.5bn on Friday.

If approved, the deal would convert each share of Sirius common stock into 0.0760 of a new share of Liberty’s Series C common stock. Liberty said Sirius public shareholders would ultimately own about 39 per cent of Liberty’s outstanding common stock.

Greg Maffei, Liberty’s chief executive, told a conference call on Friday that the proposal was intended to simplify the two companies’ capital structures and eliminate the ambiguity of their long-term relationship.

It would enhance Liberty’s access to capital “to support the pursuit of other potential attractive investment opportunities”, he added.

“All it does is move the Sirius XM shareholders in the position of a non-controlling economic stake at the sub level to a similar non-controlling economic position in new Liberty at the parent,” he said.

For the first nine months of 2013, Sirius reported that free cash flow increased 42 per cent to $624m from the same period in the previous year.

The move comes after Liberty spun off its Starz entertainment company and continues to push for consolidation of the fragmented US cable business.

In May, Liberty paid $4.6bn for 27 per cent of Charter Communications. Since then, Liberty and Charter have circled rival cable operator Time Warner Cable. However, Mr Maffei dodged questions on whether the new source of cash would be used to pursue Liberty’s ambitions to consolidate the cable market.

Charter, which has an enterprise value of about $28bn, would require substantial funding to snap up the larger Time Warner Cable, which has an enterprise value of about $61bn.

In 2009, Sirius accepted a $530m rescue package from Liberty, saving the company from a bankruptcy filing or a forced deal with Charlie Ergen, chief executive of Dish, the US satellite broadcaster.

In exchange, Liberty acquired preferred shares in Sirius along with seats on its board. As Sirius’s business rebounded, Liberty increased its stake and petitioned US regulators until it acquired a controlling stake in January 2013. The following month, Mel Karmazin left his post as chief executive of Sirius, after signalling his reluctance to work for a controlling shareholder.

Sirius said on Friday that a special committee of independent directors would consider the proposal. Mr Maffei said Liberty saw no significant regulatory hurdles given that it already had a controlling stake.

FT : Legal & General to vote against Unilever HQ move to Netherlands

Legal & General to vote against Unilever HQ move to Netherlands
Sixth-largest shareholder joins growing list of disgruntled investors

Unilever has been dealt another blow in its bid to convince British shareholders to back its plans to move its headquarters to the Netherlands after the UK’s largest asset manager said it would vote against the relocation.

Legal & General Investment Management, the sixth-largest shareholder in Unilever, has added its voice to Aviva Investors, Columbia Threadneedle and M&G Investments, which have all warned they will not support Unilever’s proposals to scrap its dual Anglo-Dutch structure.

Sacha Sadan, director of corporate governance at LGIM, which holds 2.28 per cent of Unilever’s share capital, said the $1tn asset manager had been a shareholder in the company for more than 25 years and engaged heavily with the maker of Dove soap on the proposed relocation.

However, he added: “We do not believe Unilever has made a compelling case for many PLC shareholders to support the recommendation in favour of Dutch incorporation. Therefore, we intend to vote against Unilever’s proposed resolution.”

Investors holding more than 11 per cent of Unilever’s UK stock have already said they are unsupportive of the plans, according to a Financial Times estimate.

Three-quarters of Unilever’s UK share capital needs to be voted in favour for the proposal to pass. The company also needs a majority of UK shareholders present or represented to vote in favour of the move at an October 25 meeting.

It is the latter requirement that makes the outcome quite difficult to predict.

“Much will depend on the turnout,” said Henri Dumeny, an analyst at Makor Group, an independent research provider. “If lots of small shareholders come out and vote against, they could sink the proposal.”

Unilever appears increasingly aware that it has a fight on its hands. The chairman and chief financial officer launched a media offensive on Tuesday in an attempt to convince shareholders of the benefits of the switch. Marijn Dekkers, chairman of Unilever, urged small UK shareholders to back the proposal.

Mr Dekkers repeated that the move was the best option for Unilever to remain competitive in a packaged food and consumer industry entering a period of consolidation and lower growth. Having a unified corporate structure and one type of share would make it easier to sell off and buy assets, as well as provide better governance, he argued.

Unilever did not immediately return a request for comment.

But British shareholders have expressed concerns they will become forced sellers and face potential tax implications, if the move goes ahead. If approved by shareholders, the maker of Axe deodorant will be kicked out of the FTSE 100 index, forcing passive funds that use the popular benchmark, as well as many active funds, to sell their holdings.

The Investor Forum, a group of big investors in the UK, said it had engaged with Unilever over its members’ concerns.

In addition to LGIM, Aviva Investors, Columbia Threadneedle and M&G Investments, Lindsell Train, the investment house co-founded by well-known fund manager Nick Train, has heavily criticised Unilever’s plans. Lindsell Train said it holds 2.5 per cent of the company’s shares as of September.

Standard Life Aberdeen, which holds 2.4 per cent of the company’s UK shares, is also expected to vote against the move in its passive funds, as well as in active funds that use the FTSE as a benchmark. NFU Mutual, a smaller shareholder, will also vote against the relocation.

In addition to the 11 per cent of the UK listed shareholders that have come out against the switch, analysis by Makor’s Henri Dumeny found a further 4.7 per cent would likely vote against it given their investment mandates. That takes the total to 16 per cent, still short of the 17.5 per cent threshold needed to block the proposal if the quorum of shareholders attending the vote was 70 per cent, in line with the past five years’ average.

Last week, ShareSoc and UKSA, associations for small shareholders, urged individual investors to vote against the move. “UKSA and ShareSoc are very doubtful whether these changes will be in the best interests of most private shareholders,” it said.

Only BlackRock, the world’s largest asset manager, and Leverhulme, a trust, hold more than 5 per cent of the company. Neither have publicly commented on how they plan to vote.

WSJ : Slack Actively Preparing for Early 2019 IPO

Slack Actively Preparing for Early 2019 IPO
Messaging company, recently valued at roughly $7 billion, aims to debut in the first half

Slack Technologies Inc. is actively preparing for an initial public offering in the first half of 2019, with an eye toward going public as soon as the first quarter, according to people familiar with the company’s plans.

Slack expects it could achieve a valuation well in excess of roughly $7 billion—the level at which a recent round of financing valued the company, these people said. Still, valuations can change until a company prices its IPO.

Slack would be one of the largest tech IPOs since Snap Inc.’s debut in 2017 that valued the company at nearly $24 billion.

Slack operates a popular workplace instant-messaging app that as of earlier this year had more than 8 million daily active users and 3 million paid users.

The IPO preparations come not long after the Slack’s most recent private round of funding. It raised $427 million earlier this year in a round led by Dragoneer Investment Group and General Atlantic. That followed a round led by SoftBank Group Corp. in 2017 that valued the company at $5.1 billion. In all, Slack has raised more than $1 billion since it launched in 2013 at increasingly higher valuations.

Slack has been working on its IPO readiness since at least 2017, but has more recently opted to take specific steps to be prepared to launch in early 2019, people familiar with the company’s plans said.

The company hasn’t yet hired underwriters but could do so soon, these people said.

Slack Co-Founder and Chief Executive Stewart Butterfield in a May interview with The Wall Street Journal ruled out a 2018 IPO and said the company was in a multiyear process of preparing to go public.

After years of opting to remain private, pushing out IPO timelines and reaping large sums of money from private investors, technology companies are now increasingly being drawn toward the IPO market, which is seen by bankers and advisers as one of the best in years.

That is especially the case for fast-growing tech companies, as yield-hungry investors have been scrambling to buy shares of those companies tapping the market.

On average, shares of newly U.S.-listed tech companies have risen an average of roughly 50% this year, according to Dealogic, far outpacing the year-to-date gains in broader stock indexes. As of Thursday, 43 technology companies had made their debut on U.S. exchanges this year, raising $16.9 billion, according to Dealogic. That is more than technology companies had raised for the full years in 2015, 2016 and 2017, but down from 2014’s pace.

But even as the pace of IPOs has ramped up, some of the most notable companies remain sidelined in the private markets, including Uber Technologies Inc. and Airbnb Inc.

WSJ : A Tesla Without Elon Musk Would Threaten Electric-Car Maker’s Future

A Tesla Without Elon Musk Would Threaten Electric-Car Maker’s Future
Securities regulators’ lawsuit against the CEO raises the specter of an exit that could have dire consequences

The legal threat from securities regulators to ban Elon Musk from Tesla Inc. TSLA -0.67% raises the specter of a once-unfathomable exit that would potentially have dire consequences for the electric-car company.

Few companies and their leaders are as indivisible as Mr. Musk and the 15-year-old company he helped build into a powerful player in the automotive industry. He isn’t only Tesla’s chief executive, chairman and largest shareholder but also its chief engineer, salesman, marketer and, possibly to his detriment, a Twitter user.

Following his Aug. 7 tweets announcing that he had secured funding to take the electric-car maker private at $420 a share, the Securities and Exchange Commission is seeking to bar Mr. Musk from serving as an officer or director in any publicly traded company, accusing him of misleading shareholders about a corporate buyout.

It is far from certain whether the case will go all the way to court and he would face a ban. Mr. Musk has denied wrongdoing and the company’s board issued a statement late Thursday backing him as CEO.

But the mere prospect of the SEC moving swiftly to try to remove Mr. Musk has rattled investors, who were already concerned about his fitness as CEO following weeks of behavior perceived by some as erratic. Tesla’s stock fell nearly 12% in after-hours trading Thursday.

If Mr. Musk were forced to step down at some point, Tesla would be left without the visionary entrepreneur who has captivated investors with his grand ambition to replace the internal combustion engine with electric, self-driving systems. Tesla doesn’t have a clear succession plan nor an obvious No. 2 after droves of executives departed in recent years.

That could spook investors enough to send the stock price spiraling, hurting Tesla’s ability to raise the cash analysts say is required. Tesla is also reliant on the faith of its customers, many of whom are devoted fans of Mr. Musk and place deposits on future vehicles, such as the Roadster sports car, that add cash to the books.

“Tesla requires positive news flow around the future of the company, innovation in future vehicles and adjacent markets in our view,” Jeffrey Osborne, an analyst at financial-services firm Cowen, said in a note Thursday. “The question is does this news around Mr. Musk personally impact order rates or more importantly lead to order cancellations.”

The latest worry over Mr. Musk comes as Tesla races to finish the third quarter with a profit—a milestone that the CEO has bet will prove to doubters that the auto maker has turned a page and can begin generating the cash it needs to do business without having to raise additional capital.

Many analysts are skeptical. Tesla’s debt has ballooned to more than $10 billion. The company has been burning cash at a rate of about $1 billion a quarter and finished the second quarter with $2.2 billion in cash on hand.

Tesla has issued billions in convertible bonds in recent years, an appealing funding tool because it allows the company to pay lower interest rates than traditional debt and doesn’t immediately dilute shares like a stock offering.

Tesla will need to pay down a $230 million convertible bond this November if its stock doesn’t reach a conversion price of $560.64, and a $920 million convertible note next March if the stock doesn’t reach $359.87. Shares traded at $270.90 in after-hours trading on Thursday.

Some suppliers have become jittery about Tesla’s ability to pay, too. A survey conducted by Original Equipment Suppliers Association found that 18 of 22 suppliers that responded believed Tesla is now a financial risk. To conserve cash, Tesla has asked some of its capital-equipment suppliers this summer for cash back. Tesla has stressed it was a small number of suppliers and not those that Tesla depends upon to make cars

Even before Thursday’s developments, some analysts were already discussing whether a premium built into Tesla’s share price due to Mr. Musk was in danger of being lost. “That point may be approaching,” Adam Jonas, an analyst at Morgan Stanley, cautioned investors earlier this month. “An investment in Tesla shares should incorporate a long-term horizon and should be agnostic to whether Elon Musk remains CEO of the company.”

Tesla’s executive bench is thin after more than 50 vice presidents or higher-ranking executives have departed over the past two years. Tesla’s top sales executive, Jon McNeill, left for a role as chief operating officer at ride-hailing company Lyft Inc., while the auto maker’s engineering chief, Doug Field, returned to a job at Apple Inc.

Tesla Chief Financial Officer Deepak Ahuja came out of retirement last year to resume that role.

A possible successor on the board isn’t immediately obvious, either. Unlike General Motors Co.’s board, which tapped a succession of its members to fill the CEO office ahead of current boss Mary Barra taking the helm in 2014, there aren’t many Tesla directors with experience in running a major company.

Among Tesla’s directors, James Murdoch has arguably the highest-profile position as the CEO of 21st Century Fox Inc. Brad Buss retired as CFO of SolarCity Corp. ahead of Tesla’s acquisition in 2016, while Robyn Denholm will soon move from her role as COO to CFO at Telstra Corp., an Australian telecommunications company.

Mr. Musk told The Wall Street Journal in a recent interview that he doesn’t know of anyone better to replace him. “This is not me clinging to be CEO,” he said.

Those close to him say he privately worries about what would happen to Tesla without him as the head.

The idea of a Tesla without Mr. Musk was unthinkable a little more than a year ago when Mr. Musk celebrated the start of production of the Model 3 at the company’s Fremont, Calif., assembly plant.

But as Tesla struggled to ratchet up production of the Model 3 during the past year and as Mr. Musk in recent months seemed to continue to stumble through a self-created crisis, questions arose about his ability to manage and whether he has become overextended.

This summer, he suggested on Twitter that one of the cave explorers that helped in the rescue efforts of a boys soccer team in Thailand was a pedophile, a claim that has resulted in a recent defamation lawsuit. He tangled with short sellers who he accused of plotting against Tesla’s success. He recently took a puff of a blunt during a live interview broadcast on YouTube.

“As certain as this company wouldn’t have been created without him, its demise is just as certain with him in the leadership,” said Jeffrey Sonnenfeld, a management professor at Yale University.

>>> US Early premarket gappers

Early premarket gappers

Gapping up:

  • CCXI +21.2%, SPRO +11%, IGC +10.9%, CAMP +7.6%, TXMD +3.2%, ZNGA +1.8%, JCP +1.7%, GLDD +1.7%, LLY +1.4%, HTGM +1.1%, DVN +0.6%, NVO +0.5%

Gapping down:

  • AAOI -21.7%, PRGS -13.6%, TSLA -10.9%, ROSE -6%, ALDX -3.1%, OMC -2.3%, NITE -2.3%, RYI -1.7%, HES -0.8%, IPG -0.8%, WPP -0.8%, ADMP -0.6%, APA -0.6%

>>> US close


Closing Market Summary: First Win of the Week

The S&P 500 got its first win of the week on Thursday, adding 0.3%, as investors continued to chew on Wednesday's policy statement from the Fed. The Dow Jones Industrial Average advanced 0.2%, and the Nasdaq Composite climbed 0.7%. The small-cap Russell 2000 underperformed, closing lower by 0.1%.

Stocks climbed through the morning, pushing the S&P 500 up as much as 0.7%. However, the bullish tone died down in the afternoon as the benchmark index descended back towards its opening mark. Trading volume was somewhat lighter-than-usual; 751 million shares changed hands at the New York Stock Exchange.

FAANG names helped support Thursday's climb, with Apple (AAPL 224.95, +4.53) showing particular strength after being initiated with an 'Overweight' rating at JPMorgan Chase. Amazon (AMZN 2012.98, +38.13) also outperformed after Stifel raised its target price for the internet retail giant from $2020 to $2525 -- a new Street high. Shares of Apple added 2.1%, and shares of Amazon climbed 1.9%.

Most S&P sectors advanced on Thursday, but gains were limited. The consumer discretionary (+0.5%), information technology (+0.5%), communication services (+0.8%), and utilities (+1.0%) sectors were the top performers, while materials (-1.0%) finished at the back of the pack. The heavily-weighted financial sector (-0.3%) underperformed yet again, extending its weekly loss to 3.0%.

On the earnings front, Bed Bath & Beyond (BBBY 14.86, -3.95) plunged 21.0%, hitting its lowest level in nearly two decades, after missing earnings estimates and reporting a decline in same-store sales for a sixth consecutive quarter. Carnival (CCL 63.74, -3.24) and Conagra (CAG 32.98, -3.08) also fell after reporting earnings, losing 4.8% and 8.5%, respectively.

Looking at other markets, the greenback soared on Thursday, with the U.S. Dollar Index rising 0.8% to 94.58; U.S. Treasuries held steady, with the yield on the benchmark 10-yr Treasury note closing unchanged at 3.06%; and WTI crude futures advanced 0.8% to $72.18/bbl, closing near a two-and-a-half month high.

In Washington, political drama unfolded as Supreme Court nominee Brett Kavanaugh and his accuser, Christine Ford, who alleges that Mr. Kavanaugh sexually assaulted her back in high school, testified before the Senate Judiciary Committee. It's unclear if Republicans will move forward with Mr. Kavanaugh's confirmation.

Investors received a big batch of economic data on Friday that included Durable Goods Orders for August, the third estimate for Q2 GDP, weekly Initial Claims, advance readings for August International Trade in Goods, Retail Inventories, and Wholesale Inventories, and the Pending Home Sales report for August:

  • August durable goods orders rose 4.5% (consensus +1.8%), and the prior month's reading was revised to -1.2% (from -1.7%). Excluding transportation, durable orders increased 0.1% (consensus +0.4%) to follow the prior month's unrevised reading of +0.2%.
    • The key takeaway from the report is that the headline increase was driven by a jump in nondefense aircraft and parts orders while growth in other areas was shy of expectations.
  • The third estimate of second quarter GDP pointed to an expansion of 4.2% (consensus 4.3%), unchanged from the second estimate.
    • The key takeaway from the report is that it showed no change in personal spending growth (3.8%) from the second estimate.
  • The latest weekly initial jobless claims count totaled 214,000, while the Briefing.com consensus expected a reading of 209,000. Today's tally was above the revised prior week count of 202,000 (from 201,000). As for continuing claims, they rose to 1.661 million from an unrevised count of 1.645 million.
    • The key takeaway from the report is that even with the increase in initial and continuing claims, both series remain near their lowest levels in almost 50 years.
  • The Advance report for International Trade in Goods for August showed a deficit of $75.8 billion (consensus -$71.0 billion). Meanwhile, the Advance report for Wholesale Inventories for August showed an increase of 0.8%, and the Advance report for Retail Inventories for August showed an increase of 0.7%.
  • Pending Home Sales decreased 1.8% in August (consensus -0.4%). Today's reading follows a revised 0.8% decrease in July (from -0.7%).

Looking ahead, August Personal Income, Personal Spending, and PCE Prices, and the final reading of the University of Michigan Consumer Sentiment Index for September will be released on Friday morning.

  • Nasdaq Composite +16.5% YTD
  • Russell 2000 +10.1% YTD
  • S&P 500 +9.0% YTD
  • Dow Jones Industrial Average +7.0% YTD

TechCrunch : Compass nabs $400M, valuing the real estate technology startup at $

Compass nabs $400M, valuing the real estate technology startup at $4.4B

Compass, the New York startup that has built a tech-first platform to take on the antiquated market of real estate, is building up its own house today. To double down on domestic growth, build out its tech, and to finally open up for business outside the US, the company has raised another $400 million of funding.

Jointly led by SoftBank’s Vision Fund and the Qatar Investment Authority, this Series F — likely to be the last before it goes public — now values Compass at a whopping $4.4 billion.

(Other investors in this round include Wellington, IVP and Fidelity, with the total raised by Compass now at $1.2 billion to date.)

Compass has been on nothing less than a funding roll. (Part of a wider one for the real estate startup market: today SoftBank also led a $400 million round into Opendoor, and last week Zumper raised $46 million.)

Compass’s money comes on the heels of the startup raising $450 million less than a year ago at a $2.2 billion valuation, also led by the Vision Fund, and picking up $100 million just before that, totalling $900 million for this year.

These sums underscore just how far and fast the company has leaped since first being founded as Urban Compass in 2012. Indeed, while the real estate market has had its ups and downs, you could argue that Compass has been witnessing a boom of its own.

The company cleared $34 billion in sales in 2018 ($14.8 billion in 2017) and is on track to make $1 billion in revenues. It already claims to be the biggest independent brokerage in California. This, it should be said, was partly due to inorganic growth: it acquired Pacific Union International in August, and although Compass doesn’t rule out more M&A, this will never replace organic growth, according to Ori Allon, the co-founder (with CEO Robert Reffkin) and executive chairman of the startup.



Allon would not say whether Compass is currently profitable, but it sounds like an intentional no. “We are in a strong financial position and continue to heavily invest in growth,” Allon — a search engineer himself who previously sold companies to Google and Twitter — said in an interview.

Compass at its most basic offers a clear and easy way for property owners to list, market and sell properties, as well as follow through on the many pieces of complex transactional data that occur before and after the deal is made. But it has also built its business in a quite traditional way, too: by adding people.

The company says it now has more than 7,000 agents on the ground, triple the number it had in 2017, and is on track with a strategy to control 20 percent of all residential property sales in the US’s top 20 markets. (In addition to big cities like New York, Washington, Boston and San Francisco, it’s been expanding into the next wave of markets, including San Diego, Dallas, Seattle, Philadelphia and Atlanta, and soon Austin, Nashville and Houston).

In Allon’s view, the tech and human elements are essentially two sides to the same coin.

“We are continuing to build an end-to-end technology platform that services agents and their clients through every step of the real estate journey,” Allon said. “This is why so many agents make the transition to Compass. Our vision is for Compass to be everywhere, and we are excited to expand internationally in 2019.”

Compass is not the only company trying to disrupt (and improve) real estate with tech. In addition to the now-established guard of sites like Redfin and Zillow that aggregate listings and provide a way to view properties from a range of agencies, there are startups like Zumper looking to tackle the rental market.

“We’re all trying to make the whole ecosystem better, but are focusing on fundamentally different parts of the ecosystem,” Allon said of Zumper (which itself raised a round just last week). “It’s great to see other companies investing in innovation for the real estate industry. Our industry will be better for the changes these companies are making and it will prepare us all to thrive for many years to come.”

That’s not to say that Zumper — and others — might not one day become more direct competition. “Our goal is to eventually service all aspects of real estate, ultimately creating a single platform for the industry, with agents at the center of the referral economy,” Allon said in response to a question of whether it would tackle more short-term lettings a la Airbnb. This would be a market you could imagine might be interesting, given how many property investors specifically buy to rent out the spaces.

The Adyen of real estate?
There is an interesting trend in the tech world of businesses that are tackling what some would describe as “unsexy” problems: in many industries, there are too many pieces that need to work together to get something done, and this slows down not only the overall industry’s growth, but how smaller players can engage and use it. Adyen has built a solution to tie up and simplify working with the many moving parts of the payments space, and it seems that this too is what Compass wants to build for the real estate industry.

“As we build new tech and tools, our goal is seamless integration — of our tech, tools and backend data,” Allon said. “There is not one company that has seamlessly integrated the real estate journey for agents or consumers on an end-to-end platform. Our current focus is on creating a seamless experience that allows agents to complete daily tasks more intelligently, which will eventually extend beyond close, to title, insurance, mortgage, escrow, and more.”

In terms of investors, Allon describes SoftBank as “an incredible partner” — not least, I’m guessing, because it has been so willing to back Compass (twice!). Notably, he said that Compass is in a position where it didn’t need to raise — words that must be some of the most welcome ones that any investor hears as the term sheets are drawn up — but “this latest round of funding gets us steps closer, faster.”

“Compass’s continued growth is being driven by their commitment to empowering agents with best-in-class technology that helps them expand their business and better serve consumers,” said Justin Wilson, SoftBank Investment Adviser’s board representative. “We’re excited to continue to support Compass as they further invest in their data and technology capabilities to create a next generation platform for home transactions and ownership.”

QIA, meanwhile, is an interesting and likely strategic investor, given its holdings also in real estate globally. (It’s a very prominent player in my town of London, for example, with stakes or full ownership of some of the city’s most iconic properties.)

“We believe Compass is well positioned in the real estate brokerage sector driven by technology. We look forward to partnering with Compass and existing shareholders in the next stage of the company’s growth. Our investment marks QIA’s ongoing commitment to investing in high quality technology, media and telecommunications assets.” said a spokesperson for the QIA, in a statement.