>>> Fed's Evans (dove, non-voter in 2016): Global risk is higher than it was in

Fed's Evans (dove, non-voter in 2016): Global risk is higher than it was in December, which is reflected in the adjusted dot chart - CNBC 
- If economic data comes in stronger, the FOMC could adjust the dot chart to reflect more than the two hikes currently indicated
- There's no need to raise rates too quickly, rates will normalize eventually 
- All meetings are live meetings, including the April meeting, would be surprised if we achieved necessary inflation conditions for an April move
- Not seriously concerned about a hard landing for China
- Economic fundamentals are quite good, labor market improvements have been quite strong
- See 2016 GDP +2.0-2.5%, which is a little above trend, we can drive unemployment a little bit lower
- Reason to believe inflation will move up toward our 2% objective, concerned inflation could stall around 1.8%
- Expect two rate hikes this year

>>> US Gapping Up

Gapping up
In reaction to strong earnings/guidance: LULU +5.3%, ARGS +2.9%, GOL+0.7%


Select metals/mining stocks trading higher: RIO +3.4%, BBL +3.3%, CLF+2.7%, FCX +1.6%, X +1.1%

Select oil/gas related names showing strength: STO +3.7%, CHK +3.5%, BP+3.4%, RDS.A +3.3%, PBR +2.1%, OAS +1.4%

Other news: ACAD +23.7% (affirms favorable AdComm review for NUPLAZID for the treatment of psychosis associated with Parkinson's disease) VICL +16.7% (announces that the FDA has granted fast track designation for its investigational antifungal product candidate, VL-2397, for the treatment of invasive aspergillosis), ATNM +8.9% (granted orphan designation by the FDA for its 131I-BC8 monoclonal antibody for the treatment of Acute Myeloid Leukemia), GLMD +7.5% (pre-clinical data demonstrating significant anti-fibrotic activity of AramcholTM in methionine and choline deficient diet in mice), ADAP +5.1% (confirms orphan drug designation to Adaptimmune's T-cell therapy targeting NY-ESO for treatment of soft tissue sarcoma), VRX +3.9% (launches process to obtain an amendment and waiver to its credit facility, intends to file 10-K on or before April 29), LODE +2.3% (prices offering of 10 mln shares of common stock at $0.35/share), TSLA +1.5% (still checking, likely higher with Futures), BABA +1.4% (trading higher with YHOO), YHOO +1.2% (cont strength), CFMS +0.7% (announces 'positive' results from clinical studies comparing the conformis itotal CR to other total knee replacement products)

Analyst comments: MDRX +5.4% (upgraded to Overweight from Equal-Weight at Morgan Stanley), SHAK +4.6% (upgraded to Buy from Neutral at Longbow), AAPL +1.1% (upgraded to Outperform at Cowen)

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance: VRNT -13.9%, (also announces $150 mln share buyback program ), LNDC -12.6%, WPRT -7.2%,FORM -6.7%, LSTR -4.1%, VNCE -1.9%, PLAY -1.1%, WMS -1%, RH -0.8%

Select metals/mining stocks trading lower: GOLD -2%, ABX -1.8%, GDX-1.6%, GFI -1.3%, GLD -0.8%

Other news: CTRV -13.2% ( to offer shares of its common stock and warrants to purchase shares of its common stock in a 'best efforts' underwritten public offering ), OPK -9% (receives CRL from the FDA for RAYALDEE NDA), ACRX -8.2% (names Howard B. Rosen as CEO, effective April 1; postpones the the start of the Zalviso Phase 3 trial (IAP312) originally planned for1Q16 ), DV -7.4% (block trade pricing below yesterday's close), SPKE -4.4% (announces 1.5 mln secondary offering of class A common stock by selling stockholders), STOR -2.6% (commences secondary offering of ~33.3 mln common shares by selling shareholders)

Analyst comments: INOV -2% (downgraded to Underweight from Equal-Weight at Morgan Stanley), ACOR -2.5% (initiated with a Sell at Goldman)

>>> US Early premarket gappers

Early premarket gappers

Gapping up: ACAD +21.8%, ATNM +11.8%, LULU +5.1%, VRX +4.4%, SHAK +4.2%, STO +3.4%, RIO +3.3%, BP+3.1%, BBL +3%, CLF +3%, CHK +3%, RDS.A +3%, PBR +2.1%, TSLA +1.7%, BABA +1.6%, FCX +1.6%, WMS +1.6%,OAS +1.4%, YHOO +1.2%, X +1.1%, AGIO +0.9%, MS +0.8%, GOL +0.7%

Gapping down: VRNT -15.5%, LODE -14%, CTRV -13.2%, LNDC -12.6%, ARGS -8.7%, ACRX -8.2%, DV -7.1%, WPRT-5.8%, SPKE -4.8%, SDRL -3.7%, STOR -3%, RH -2.6%, VNCE -1.9%, RIG -1.7%, PLAY -1.6%, GOLD -1.5%, GDX-1.4%, ABX -1.2%, NXPI -1.1%, GIF -1%, GG -1%, GLD -0.6%

NYT : Starwood Bidder Is a Reclusive Chinese Insurer With Opaque Backing

Starwood Bidder Is a Reclusive Chinese Insurer With Opaque Backing

He is often compared in the media to Warren E. Buffett. Like the American billionaire, he is leveraging his control of an insurance company to become one of the biggest names in global finance. Like Mr. Buffett, he looks to be acquiring an immense personal fortune.

But that is where the comparisons between Wu Xiaohui, the chairman of the Anbang Insurance Group of China, and Mr. Buffett come to a halt.

Mr. Buffett is a public figure who built his fortune over decades. Mr. Wu avoids interviews. The fax number on his company’s website connects to a dentist’s office. And, unlike Mr. Buffett, whose net worth can be easily calculated, Mr. Wu’s fortune is a cipher, lost in Anbang’s labyrinthine shareholding structure made up of 37 interlocking holding companies.

At a time of growing demands for transparency in business and finance, some experts say it is striking that an opaque Chinese insurer is forging headline-grabbing deals in the United States, especially in an election year that has put China’s economic influence under scrutiny as never before.

Mr. Wu’s company, which says it has assets of more than $291 billion, is now in an intense bidding war with Marriott International for control of Starwood Hotels & Resorts. On Monday, Anbang raised its offer to $14 billion. Earlier this month, Anbang agreed to pay $6.5 billion to the Blackstone Group for a portfolio of luxury hotels such as the Essex House in New York. In late 2014, Anbang bought the Waldorf Astoria hotel in New York for almost $2 billion.

Anbang, founded only in 2004, exploded in size two years ago, as those same 37 companies poured billions of dollars into its coffers.

“Any time somebody in China magically snaps their fingers and has a lot of money, in this case a colossal amount of money, that sets off red flags for me,” said Christopher Balding, associate professor of finance and economics at Peking University’s campus in Shenzhen, a city in southern China. “It’s in their interest to share information to say ‘we come in peace,’ but there’s just not that culture of information-sharing. In China, when people are hiding this amount of information, it’s for a reason.”

Mr. Wu has links to some of the most powerful families in China. He married Zhuo Ran, the granddaughter of Deng Xiaoping, China’s former paramount leader in the 1980s and much of the 1990s. That name, uncommon in Chinese, appears in corporate records tied to at least two of the 37 holding companies.

An Anbang director, Chen Xiaolu, is the son of a famous military commander who fought alongside Mao Zedong. Mr. Chen’s name has appeared as a top officer in at least four of the Anbang companies, according to a review of records filed online with Chinese officials. In 2014, the name of Levin Zhu, the son of former Premier Zhu Rongji, also showed up on Anbang’s list of directors.

Mr. Chen has said he does not own Anbang shares. Mr. Zhu told local media last week that he never agreed to be on Anbang’s board. Neither could be reached for comment.

Anbang joins a well-worn path used by Chinese companies that entered the global financial system with ties to China’s political elite. Among that group is Ping An Insurance, a vehicle of immense wealth for relatives of former Premier Wen Jiabao, and Dalian Wanda Commercial Properties, invested in by relatives or business associates of at least four former or current members of the Communist Party’s ruling Politburo, including the older sister of President Xi Jinping.

Calls to Anbang’s listed phone number were not answered. Nobody replied to a list of questions delivered to its Beijing headquarters, with its enormous lobby — the size of several basketball courts — and its large chandelier. An Anbang employee said the company did not answer media questions.

Mr. Wu, 49, a native of the city of Wenzhou in eastern China’s Zhejiang province, in rare public appearances talks of Anbang’s ability to generate high returns from the companies it takes over and the benefits to its corporate culture of globalization.

“For instance, if you choose to stay in rural villages, you can only meet common village girls; yet if you come to Paris, you will have the chance to lay your eyes on the Mona Lisa,” Mr. Wu told Harvard University students early last year.

His exact holdings in Anbang are not clear. A close examination of Anbang’s shareholding structure shows that the 37 companies control more than 93 percent of Anbang, while two Chinese state-owned companies own the rest. The 37 shareholders are linked by common phone numbers, email addresses and interlocking ownership, according to company records filed with the Chinese government and available online.

For example, one Anbang shareholder — a coal mining company in China’s western region of Xinjiang — is owned by another mining company, Zhongya Huajin, that listed a Zhuo Ran as its first legal representative, though that person has since resigned.

Zhongya Huajin shares an official website address with a different Anbang shareholder, a Beijing real estate company. Collectively, those companies own nearly 4.6 billion shares of Anbang, or more than 7 percent. The companies could not be reached for comment, and their common website now contains only links to pornography and gambling services.

Five shareholders list the same legal email address in government filings. Phones at those companies rang unanswered, and a message to that address was not returned.

The companies injected billions of dollars in capital into Anbang in 2014, its documents show, increasing its registered capital fivefold from 2011 levels and making it bigger than any other Chinese insurance company. “Warren Buffett got wealthy by growing a small insurance company into a behemoth,” Mr. Balding said. “This is the exact opposite of that.”

Collectively, the group of 37 companies controls enough of Anbang to make any one person one of China’s wealthiest individuals. Mr. Wu is not listed in the documents as a major shareholder, and he does not appear on wealth-tracking lists compiled by media companies.

A Chinese media report last year identified two people listed as directors or shareholders in six of the 37 companies as Mr. Wu’s siblings. The report, by the Southern Weekend newspaper, was later removed from its website. Southern Weekend issued an apology to Anbang, stating that there were “inaccuracies” in the article, without specifying what they were.

Chang Ping, a former editor in chief of the paper who was not employed by Southern Weekend at the time, said that the apology had been made “under pressure” for political reasons.

Tech Crunch : Spotify raises $1 billion in debt with devilish terms to fight App

Spotify raises $1 billion in debt with devilish terms to fight Apple Music

On-demand streaming music is inevitable, so Spotify is taking whatever fuel it can get to win the race against Apple. Whoever can sign up customers faster to consume their data and network effect could earn money off them for a long, long time. So it makes sense that Spotify would be willing to raise money at ugly, exploitative terms now for a better chance at earning those riches later.

Today Spotify raised $1 billion in convertible debt from TPG, Dragoneer, and clients of Goldman Sachs, as first reported by Wall Street Journal’s Douglas MacMillan. By raising debt rather than equity, it doesn’t have to worry about poor signaling from a down-round raised at a lower valuation than the $8.5 billion it set in June 2015.

Spotify confirms the news is true, and TPG tells me “This financing gives them the strategic resources to further strengthen their leadership position.” The money will be spent on growth and marketing.

But here’s the catch.

If Spotify doesn’t perform well, some aggressive deal terms could cost it a lot of money.

TPG and Dragoneer get to convert the debt to equity at a 20% discount of whatever share price Spotify sets for an eventual IPO. And if it doesn’t IPO within the next year, that discount goes up 2.5% every extra six months.

Spotify also has to pay 5% annual interest on the debt, and 1% more every six months up to a total of 10%. And finally, TPG and Dragoneer can sell their shares just 90 days after the IPO, before the 180-day lockup period ends for Spotify’s employees and other investors.

This all could screw employees if Spotify has a bad year vs Apple Music, since the deal gives these late-stage investors cheaper shares and early sale advantages. Then again, employees’ stock is only valuable in Spotify succeeds, and it needs this cash to do so.

Update: If Spotify can grow its value significantly and the IPO goes well, the discount and early sale terms won’t be that bad. Arguably, it’d be better than raising money with equity now that would be would worth a lot more later if Spotify does well.

A source familiar with Spotify’s finances tells me it still had €570 million still in the bank, so there was no gun to its head to raise this money. Apparently it wanted to raise through debt because it believes this year will go well.

What the debt does provide Spotify is opportunities to make acquisitions. With SoundCloud and Pandora in the dumps, Spotify could potentially make a play to bring more independent music or radio listeners into its music empire.]

Why would Spotify agree to these aggressive terms? Because it’s competing with the most well funded company in history: Apple.

Many people around the world don’t even understand that on-demand streaming exists. Companies selling it will have to undertake expensive advertising campaigns to educate consumers and sign them up before someone else does. They’ll also have to forge relationships and strike deals with top artists to get exclusive or early access to their music. Plus, having the money to potentially acquire other music companies like SoundCloud or Pandora could give Spotify a leg up in the fight.

None of that comes cheap, though. So Spotify signed a devilish deal.

WSJ : Spotify Raises $1 Billion in Debt Financing

Spotify Raises $1 Billion in Debt Financing

TPG and Dragoneer Investment Group lead the Spotify debt deal

Music-streaming site Spotify AB has raised $1 billion in convertible debt from investors, a deal that extends the money-losing company’s runway but comes with some strict guarantees, people familiar with the matter said.

Private-equity firm TPG, hedge fund Dragoneer Investment Group and clients of Goldman Sachs Group Inc. participated in the deal, which has been signed and is expected to close at the end of this week, these people said.

Tech startups are increasingly turning to convertible debt—bonds that can be exchanged for stock—as investors push back on rich valuations amid a volatile stock market and economic uncertainty.

By raising debt instead of equity, Spotify adds to its war chest without the possibility of setting a lower price for its stock, which can sap momentum and hamper recruiting.

In June 2015, Spotify was valued at $8.5 billion.

In return for the financing, Spotify promised its new investors strict guarantees tied to an IPO. If Spotify holds a public offering in the next year, TPG and Dragoneer will be able to convert the debt into equity at a 20% discount to the share price of the public offering, according to two people briefed on the deal. After a year, that discount increases by 2.5 percentage points every six months, the people said.

Spotify also agreed to pay annual interest on the debt that starts at 5% and increases by 1 percentage point every six months until the company goes public, or until it hits 10%, the people said. This interest—also called a “coupon” and in this case paid in the form of additional debt, rather than cash—is commonly used in private-equity deals but rarely seen in venture funding.

In addition, TPG and Dragoneer are permitted to cash out their shares as soon as 90 days after an IPO, instead of the 180-day period “lockup” employees and other shareholders are forced to wait before selling shares, the people said.

TPG and Dragoneer will buy $750 million worth of the deal, with the remainder going to clients of Goldman Sachs Group Inc., which advised on the financing, according to people familiar with the deal.

Spotify indicated to new investors it plans to go public in the next two years, people familiar with the matter said.

Other highly valued tech companies that have raised debt recently include daily fantasy-sports operator DraftKings Inc., which sold nearly $100 million worth of notes in December that could convert to discounted shares, The Wall Street Journal previously reported. DraftKings was valued at $2.1 billion last July before battling regulators over whether its service constitutes illegal gambling.

While Spotify’s valuation doesn’t technically change with the debt round, one of its mutual-fund investors has marked down its stake. Fidelity Investments held its Spotify shares at $1,643 a share in January, down 27% from last August, according to regulatory filings. Another mutual fund, Vanguard International Growth, paid $2,229 a share for a stake in Spotify and still held it at that price as of December.

Before raising the convertible debt, Spotify had more than $600 million left on its balance sheet, a person familiar with the company said. It has previously raised a total of more than $1 billion from investors including Founders Fund, Accel Partners, Technology Crossover Ventures and Kleiner Perkins Caufield & Byers.

Spotify, which invests heavily in music royalties, posted a net loss of €162 million in 2014, the last year for which it has disclosed financials. Revenue rose 45% to €1.08 billion, from €747 million in the same period in 2013.

The company is under increasing pressure from a growing set of challengers including Apple Inc., which last year launched a subscription-based streaming-music service and a 24-hour global Internet radio station.

Spotify is valued at more than three times market value of Pandora Media Inc., the radio-streaming company whose stock has lost more than one third of its value during the past 12 months. Pandora said Monday it was replacing its chief executive with its founder, Tim Westergren, who will lead the company’s effort to expand overseas and to launch a subscription, on-demand tier that could increase revenue.

TPG is investing from a private-equity fund focused on fast-growing companies, as well as from its credit and special situations arm. The latter group, led by former Goldman Sachs partner Alan Waxman, has recently focused on providing capital for large, fast-growing pre-IPO companies that offers some protection, particularly as the tech financing has cooled, according to people familiar with the firm’s thinking.

TPG has invested in Uber Technologies Inc. and Airbnb Inc., two of the most highly-valued private tech companies. Uber last year raised $1.6 billion in convertible debt from wealthy clients of Goldman Sachs, people familiar with the deal told The Wall Street Journal.