(BofA-ML) The Flow Show - Equities Outflows -$1.8b, Small Inflows in Europe

>>> Asset Class Flows
- Equities: modest $1.8bn outflows (note $2.7bn mutual fund outflows vs $0.9bn ETF inflows) 
- Bonds: $5.2bn inflows (17 straight weeks) 
- Precious metals: $0.9bn inflows (largest in 13 weeks)

>>> Equity Flows
- EM: $1.5bn outflows (outflows in 9 out of past 10 weeks) 
- Europe: small $0.4bn inflows (16 straight weeks, but weakest inflows in 15 weeks…faltering momentum) 
- US: $4.5bn outflows (outflows in 10 out of past 11 weeks) 
- Japan: 10 straight weeks of inflows ($0.8bn)

>>> Fixed Income Flows 
- 71 straight weeks of inflows to IG bond funds ($4.3bn) 
- 7 straight weeks of inflows to TIPS funds ($0.3bn) 
- $1.0bn inflows to EM debt funds (largest in 9 weeks) 
- $0.6bn outflows from HY bond funds (largest outflows in 14 weeks) 
- $0.3bn outflows from govt/tsy funds (first outflows in 8 weeks)

--> Weekly flows: buyers’ strike in equities (outflows in 5 out of past 6 weeks) vs 17 straight weeks of bond inflows ($5bn inflows this week). 

--> Notable flows: largest inflows to precious metals in 13 weeks ($0.9bn); weakest European equity inflow in 15 weeks ($0.4bn); largest EM debt inflow in 9 weeks ($1.0bn); biggest HY outflow in 14 weeks ($0.6bn); US equities redemptions in 10 out of past 11 weeks.

(Betaville) Hotel Buzz - part 3 ...Next round o f consolidation in the Hotel sec

Hotel Buzz - part 3


A friendly analyst has got in touch with his view on what the likely combinations are from the next round of consolidation in the hotel sector. I will list them below - to be clear, this is just his speculation...

1. Accor combining with either Marriott International or Whitbread

2. InterContinential Hotels merging with Starwood Hotels and Resorts Worldwide

3. Marriott International combining with Starwood Hotels and Resorts Worldwide

4. Hilton Worldwide Holdings buying Accor

To reiterate, this is just an analyst's view on how the consolidation might play out.

>>> What to look at today ( & this Week End) - 5th of May 2015

Dow+1,02% S&P+1,09% Nasdaq+1,29% Russell+0,65%
US MArket closed Higher after a weak week. Session was queit with S&P Bouncing above its 50d MA on the first hour and holding it the all session. Nine of ten sectors posted gains with materials (+1.7%) ending the day and the week (+2.0%) ahead of the remaining sectors. Today, the growth-sensitive group received support from Monsanto as the stock spiked 3.9% after Bloomberg reported the company has approached Syngenta about a potential takeover. Outside of energy, the financial sector (+0.8%) was the only other cyclical group that ended the day behind the broader market. Meanwhile, the top-weighted technology sector (+1.5%) outperformed even as LinkedIn plunged 18.6% after its cautious guidance overshadowed a one-cent beat. However, LinkedIn's weakness was offset by most large cap names with the likes of Apple, Oracle, and Intel gaining between 1.7% and 3.0%...China April final HSBC manufacturing PMI posted 48.9, missing consensus of 49.4, as largest contraction for one year with total new orders declining at the strongest pace for a year while production levels stagnated. The weak results bolstered chances that PBoC to further ease monetary policy. Separately, Chinese press printed opinion piece suggesting the window for both interest rates and RRR cuts is approaching but anther QE is unnecessary to deal with downturn pressure now. Most Asian markets resume after holidays. Shanghai composite deepened decline by 1.1% after HSBC data but changed into positive territory afterwards. China developers rally with improving results in April. For the first time over a decade, IMF is close to declare Yuan is fairly priced, shifting to counter the Obama administration view that Yuan is "significantly undervalued". South Korea President comments economy shows positive signs of recovery while New Zealand Prime Minister Key sees it will take longer time to return to budget surplus.

Nikkei +0.06% Hang Seng +0.13% Shanghai +0.56%

Eur$ 1.1215 RUB $51.6765 EURCHF 1.0465 CHF 0.9332 WTI $59.13 (-0.03%)

S&P -0.08% EuroStoxx -0.08% Dax +0.22% SMI +0.28%


Macro :
- HSBC China April Manufacturing PMI 48.9; Est. 49.4
- ECB Representatives to Sit on Boards of Banks, El Pais Reports
- Icahn Says BlackRock’s Fink Makes Fixing Bad Businesses Harder
- Greek Aid Talks Gain Urgency as Breakthrough Remains Elusive
- Greece Willing to Consider Single VAT Rate in Debt Talks: FAS
- Iran Expects First Draft of Nuclear Deal Within Days
- Buffett Says Euro in Its Present Form Won’t Work
- Buffett Says Berkshire Will Buy German Co. in Next Five Years

Keep an eye on :
- ADS GY : Adidas CEO Opposes Selling Off Reebok as Separate Company: FAS
- ALV GY : Allianz to Join Bid for London Sewer Project, Sunday Times Says
- AMS SM : Japan Airlines to Use Amadeus Cloud Computing System: Nikkei
- AREVA FP : Areva Weighs Selling Stake to Chinese Energy Companies, JDD Says
- BNP FP : BNP Paribas May Move Geneva Back-Office Jobs to Portugal: Temps
- BRE IM : Brembo May Consider Acquisitions in Automotive, Aerospace: Sole
- BT/ LN : BT to Submit EE Acquisition Case to Regulators, FT Says (Yday)
- AM FP : Hollande Arrives in Qatar to Sign Dassault Contract, AFP Says
- AM FP : Dassault CEO Says More Contracts Possible in 2015, Figaro Says
- DGE LN : Diageo Considering sale of portions of its wine operations - Sky News - Has been approached by potential buyers of its global wine operations, including Blossom Hill and Sterling Vineyards. Wine brands only account for 4% of Diageo's sales.
- EDF FP : EDF’s Nuclear Energy Prices Won’t Rise on July 1, Les Echos Says
- F US : Ford Abandons Plans for Car Seats That Detect Heart Attacks: FT
- HSBA LN : HSBC May Set Aside Funds for Additional Fines, Telegraph Says
- IBM US : IBM - Warren Buffett: bought more IBM during Q1 - CNBC Buffett declines to say how much more he bought but said the exact numbers will be in the company's SEC quarterly holdings filing (as of the end of Q1) due around the middle of this month. Berkshire held 7.8% as of Dec 31, making it the top institutional holder.
- KPN NA : KPN Is Logical Takeover Target in the Long Run, CEO Tells FD
- KPN NA : KPN CEO Blok, CFO De Jager Buy Co. Shares: Regulatory Filings
- KPN NA : KPN chief not averse to merger with Proximus - Financieele Dagblad
- NEX FP : Amber Backs Nexans Cost-Cutting Strategy, Les Echos Says
- NEX LN : National Express Set for Rhine-Ruhr-Express Tender: Rheinische
- OCR US : Omnicare attracts interest of Walgreens Boots Alliance
- ORA FP : Orange Will Need to Give Up Jazztel ADSL Network, El Pais Says
- ORA FP : Orange Faces French Tax Control Procedure, Le Parisien Says
- RNO FP : Nissan U.K. Plant at Risk if Country Quits EU: Sunday Times
- REP SM : Repsol Announces New Natural Gas Discovery in Bolivia
- SAP GY : SAP denies press report about talks with CRM; says never considered acquiring Salesforce.com
- SIE GY : Siemens Investigated in China for Alleged Bribery: Reuters
- SKG LN : Smurfit Kappa CEO says company open to takeover; International Paper looking at making bid
- STL NO : Statoil interested in acquisitions - Dagens Naeringsliv
- TSCO LN : Tesco turns down GBP 4bn offer for South Korean operations from Carlyle
- TETY SS : Tethys Petroleum hires advisor, expands strategic review
- FP FP : Total to Pay French Tax on 2015 Profits, Usine Nouvelle Says
- UBSN VX : UBS to Pay Up to CHF1b in FX Probe This Month: Sonntagszeitung
- VOD LN : Vodafone, EE Said to Sell Weve Stakes to O2: The Times

>>> Ira Sohn Conference: Monday Presentation Schedule


Ira Sohn Conference: Monday Presentation Schedule

The Sohn Conference is set to take place this next Monday-Tuesday in New York, NY and will give a variety of investment managers the opportunity to speak about their view on markets, positions, etc.... A breakdown of the Monday speaker list is detailed below, with associated, notable stocks and notes listed for each manager. Stocks listed have a positional relationship to the speaker and may be subject to commentary: (Please see criteria and commentary below the following list)
  • David Einhorn (Greenlight Capital) - 
    • Is Long MU (14.54%), AAPL (12.67%), SUNE (6.47%) and CNX (5.96%) 
    • Is Short RAI (Unknown) 
    • Recently Added AER (1.93%), CBI (1.64%), GM (Unknown)
    • Note: Positions sourced directly from Greenlight's Shareholder Letter
  • Barry Rosenstein (Jana Partners) - 
    • Is Long PETM (6.86%), HTZ (7.56%) and QCOM (3.99%) 
    • Is Short XLE (6.89%) and SPY (4.46%) 
    • Recently Added NCR (3.05%) 
    • Note: Most recent headlines include positions in QCOM and HTZ
  • Keith Meister (Corvex Management) - 
    • Is Long WMB (22.98%), ARCP (0.89%)
    • Is Short XLE (6.89%)
    • Recently Added SIG (8.9%)
    • Note: Media speculation today implied that Corvex has taken a recent top-5 shareholder stake in YUM. These reports are presently unconfirmed and speculative
  • Leon Cooperman (Glenview Capital Management) - 
    • Is Long ATLS (3.03%), SHPG (1.68%), ASPS (1.27%) and GILD (0.96%)
    • Note: Each listed position above has been the topic of direct/peripheral discussion in recent months
  • Larry Robbins (Glenview Capital Management) - 
    • Is Long CYH (3.26%), RLGY (1.39%), WOOF (3.12%), FNF (0.36%)
    • Note: Each stock listed above was recently included in a media piece as being one of Robbins' "top new ideas"
  • Mala Gaonkar (Lone Pine Capital) -
    • Is Long ADK (228%), PCLN (91%), FB (56%) and MA (32%)
    • Note: % represent the fund's Q/Q change from Q3 to Q4 (not % of portfolio) and is included to show recent fund capital flow
  • Jeff Gundlach (DoubleLine Capital) - 
    • Notes: Provides regular macro-economic commentary in media pieces, and runs a fixed income fund. Has been known to make interest rate predictions that can affect a variety of markets.
  • David Tepper (Appaloosa Management) -
    • Long GM (12.65%) and TX (1.14%)
    • Note: TX was one of only two (excluding GM warrants) of Appaloosa's Q/Q increased equity positions from Q3 to Q4
  • Bill Ackman (Pershing Square Capital Management) - 
    • Is Long ZTS (11.15%) and VRX (Unknown) 
    • Is Short HLF 
    • Note: VRX was disclosed as a new position this past quarter, and its weight in the portfolio is not yet known. Also, speculation about another short, in addition to HLF, within the portfolio is intriguing. The existence or identity of such a short is unknown yet however.

  1. (% in quotations, refer to the percentage of a manager's portfolio that a given stock represents- as of end 4Q15. Lone Pine Capital being the exception)
  2. The use of an (Unkown) denotes a new position since Q4 disclosure or other factor that does not allow for reliable portfolio calculation
  3. Positions for inclusion were determined using several criteria. Notably, sizeable positions (+5%) with either recent media mention/inclusion or a substantive Q/Q increase were targeted for analysis. 
    • Positions that are notably smaller than 5% were included based upon recent media focus or for outlying Q/Q increases. 
  4. Positions listed for each manager above, do not represent the entirety or proportionality of their respective fund's composition. 

>>> Asian Update

TradeTheNews.com Asian Mid-session Update: China HSBC final PMI falls to 1-yr low after markets resume from holiday


***Economic Data***
*(CN) CHINA APR FINAL HSBC MANUFACTURING PMI: 48.9 V 49.4E (biggest contraction in a year)
*(AU) AUSTRALIA MAR BUILDING APPROVALS M/M: +2.8% V -1.5%E; Y/Y: 23.6% V 16.7%E
*(AU) AUSTRALIA APR ANZ JOB ADS M/M: +2.3% V -1.3% PRIOR
*(NZ) NEW ZEALAND APR ANZ COMMODITY PRICE M/M: -7.4% V +4.6% PRIOR
*(AU) AUSTRALIA APR TD SECURITIES INFLATION M/M: 0.3% V 0.4% PRIOR; Y/Y: 1.4% V 1.5% PRIOR
*(KR) SOUTH KOREA APR HSBC MANUFACTURING PMI: 48.8 V 49.2 PRIOR (2nd consecutive contraction)
*(KR) SOUTH KOREA MAR CURRENT ACCOUNT: $10.4B V $6.4B PRIOR
(ID) Indonesia Apr HSBC Manufacturing PMI: 46.7 V 46.4 prior (7th straight month of contraction)
(TW) Taiwan Apr HSBC Manufacturing PMI: 49.2 v 51.0 prior
(VN) Vietnam Apr HSBC Manufacturing PMI: 53.5 v 50.7 prior
*(ID) INDONESIA APR CPI M/M: 0.4% V 0.4%E; Y/Y: 6.8% V 6.8%E; CPI CORE Y/Y: 5.0% V 5.0%E


***Index Snapshot (as of 02:30 GMT)***
- Nikkei225 closed, S&P/ASX -0.2%, Kospi +0.3%, Shanghai Composite flat, Hang Seng flat, Jun S&P500 -0.1% at 2,099

***Commodities/Fixed Income***
- Jun gold +0.6% at $1,182/oz, Jun crude oil -0.6% at $58.81/brl, May copper -1.0% at $2.90/lb
- (TW) Taiwan sells 12-month Bills; Yield: 0.557% v 0.571% prior, bid-to-cover: 2.55x

***Market Focal Points/FX***
- China April final HSBC manufacturing PMI posted 48.9, missing consensus of 49.4, as largest contraction for one year with total new orders declining at the strongest pace for a year while production levels stagnated. The weak results bolstered chances that PBoC to further ease monetary policy. AUD/USD drops over 30 bps to 0.7800 after the data. Separately, Chinese press printed opinion piece suggesting the window for both interest rates and RRR cuts is approaching but anther QE is unnecessary to deal with downturn pressure now.

- Most Asian markets resume after holidays. Shanghai composite deepened decline by 1.1% after HSBC data but changed into positive territory afterwards. China developers rally with improving results in April. For the first time over a decade, IMF is close to declare Yuan is fairly priced, shifting to counter the Obama administration view that Yuan is "significantly undervalued". South Korea President comments economy shows positive signs of recovery while New Zealand Prime Minister Key sees it will take longer time to return to budget surplus.


***Equities***
US equities / ADRs:
- ALGT: Allegiant Air successfully receives a court order blocking the Teamsters from striking and safeguarding Allegiant's passengers from travel disruptions
- FB: David Goldberg, CEO of SurveyMonkey and husband of Facebook COO Sandberg, died suddenly last night of undetermined causes
- EIX: Teams Up with Tesla for Battery Storage Projects
- TWTR: In talks to acquire mobile news app Circa, unclear at what valuation - press
- CRM: SAP denies press report about talks with CRM; says never considered acquiring Salesforce.com - press
- ON: Reports Q1 $0.20 v $0.18e, R$870.8M v $861Me

Notable movers by sector:
- Consumer discretionary: Stockland SGP.AU +0.8% (Q3 results)
- Financials: Westpac Banking WBC.AU -3.7% (H1 results); Evergrande Real Estate Group 3333.HK +8.0% (China developer in housing market recovery); Fosun International 656.HK +7.0% (Q1 result, to acquire IronShore)
- Industrials: McAleese MCS.AU -45.6% (cuts guidance); Worley Parsons WOR.AU -9.8% (cuts guidance)

(BN) Mylan Disagrees With Itself in Effort to Spurn Teva Takeover


Mylan Disagrees With Itself in Effort to Spurn Teva Takeover
2015-05-01 23:01:00.829 GMT


By Ed Hammond
(Bloomberg) -- Mylan NV, the generic drugmaker, is acting
like two companies: One has big problems with a takeover offer
that’s below $100 a share. The other would be delighted with a
share price of $73.33.
Mylan is on the offensive against Teva Pharmaceutical
Industries Ltd., the Israeli rival that’s been bidding for it.
In a letter this week, the company said Teva’s opening offer of
$82 a share, “grossly undervalues” it and the buyer shouldn’t
even bother coming back until it’s prepared to pay
“significantly in excess of $100 per share.”
Elsewhere, the company has put a very different price on
itself. Mylan outlined a performance-based incentive plan for
executives, which -- among other things -- includes a $73.33
price target that was reiterated in a 10-K filing this week.
Reaching such a price, as well as an adjusted earnings per
share figure of $6, by the end of 2018 would represent an
“extraordinary achievement by our leadership team in such a
short period of time,” the company said.
The disconnect is explained in part by Mylan’s
determination to rebuff Teva. In its eight-page missive, it
accuses the Israeli company of ineptitude, laziness,
disingenuousness and bumbling racism.

Control Premium

Certainly, any acquirer has to pay what’s known as a
control premium to take over a rival. As recently as April 7,
before Teva’s approach, Mylan was trading at $59.57 -- meaning
Teva’s opening offer was already 38 percent higher.
Mylan’s two valuations come from either side of the
Atlantic. The letter to Teva was sent from the company’s tax
headquarters in the English town of Potters Bar. The 10-K was
filed from Canonsburg, Pennsylvania -- where the company employs
actual workers and produces drugs.
Perhaps that’s another explanation for the split. The
strain of having to manage a long-distance relationship with
itself may have gotten to Mylan, causing a cognitive dissonance
whereby it’s simultaneously entertaining the ideas that, if it
totally crushes it, it should be worth $73.33 a share, and
anyone who thinks it is worth as little as $82 a share is
clinically moronic.
Its a situation that Teva will surely try to exploit.

For Related News and Information:
Mylan Board Unanimously Rejects Teva Takeover Bid as Too Low
Teva Doesn’t See Antitrust or Culture Issues With Mylan Proposal
Top Stories:TOP<GO>

To contact the reporter on this story:
Ed Hammond in New York at +1-212-617-1963 or
ehammond12@bloomberg.net
To contact the editors responsible for this story:
Mohammed Hadi at +1-212-617-2914 or
mhadi1@bloomberg.net
Elizabeth Wollman

>>> What to look at this Week End- 2nd & 3rd of May 2015

Global equities felt the pull of gravity this week as indices in Asia, Europe, and the US came off recent all-time highs. Meanwhile, in a development that caught investors' attention, European and US sovereign bonds sold off hard on a confluence of factors. Talks between Greece and its creditors continued at a frustratingly slow pace. The first reading on US Q1 GDP was quite disappointing. The Fed acknowledged the weak first quarter by downgrading the economic conditions commentary in the FOMC policy statement, but continued to attribute the slow growth to transitory factors. Despite oil prices continuing to rebound, the BOJ reigned in its inflation outlook, pushing back the timing of achieving 2% inflation until early 2016. Speculation about more extraordinary Chinese stimulus that helped fuel recent rallies couldn't stem the selling this week. For the week, the DJIA slipped 0.3%, the S&P500 fell 0.5% and the Nasdaq lost 1.7%.


Macro
- Icahn Says BlackRock’s Fink Makes Fixing Bad Businesses Harder
- Greek Aid Talks Gain Urgency as Breakthrough Remains Elusive
- Greece Willing to Consider Single VAT Rate in Debt Talks: FAS
- Iran Expects First Draft of Nuclear Deal Within Days
- Buffett Says Euro in Its Present Form Won’t Work
- Buffett Says Berkshire Will Buy German Co. in Next Five Years

Keep an eye on :
- ADS GY : Adidas CEO Opposes Selling Off Reebok as Separate Company: FAS
- ALV GY : Allianz to Join Bid for London Sewer Project, Sunday Times Says
- AMS SM : Japan Airlines to Use Amadeus Cloud Computing System: Nikkei
- AREVA FP : Areva Weighs Selling Stake to Chinese Energy Companies, JDD Says
- BRE IM : Brembo May Consider Acquisitions in Automotive, Aerospace: Sole
- DGE LN : Diageo Considering sale of portions of its wine operations - Sky News - Has been approached by potential buyers of its global wine operations, including Blossom Hill and Sterling Vineyards. Wine brands only account for 4% of Diageo's sales.
- F US : Ford Abandons Plans for Car Seats That Detect Heart Attacks: FT
- HSBA LN : HSBC May Set Aside Funds for Additional Fines, Telegraph Says
- IBM US : IBM - Warren Buffett: bought more IBM during Q1 - CNBC Buffett declines to say how much more he bought but said the exact numbers will be in the company's SEC quarterly holdings filing (as of the end of Q1) due around the middle of this month. Berkshire held 7.8% as of Dec 31, making it the top institutional holder.
- KPN AN : KPN Is Logical Takeover Target in the Long Run, CEO Tells FD
- OCR US : Omnicare attracts interest of Walgreens Boots Alliance
- ORA FP : Orange Will Need to Give Up Jazztel ADSL Network, El Pais Says
- RNO FP : Nissan U.K. Plant at Risk if Country Quits EU: Sunday Times
- REP SM : Repsol Announces New Natural Gas Discovery in Bolivia
- SAP GY : SAP denies press report about talks with CRM; says never considered acquiring Salesforce.com
- SIE GY : Siemens Investigated in China for Alleged Bribery: Reuters
- SKG LN : Smurfit Kappa CEO says company open to takeover; International Paper looking at making bid
- STL NO : Statoil interested in acquisitions - Dagens Naeringsliv
- TSCO LN : Tesco turns down GBP 4bn offer for South Korean operations from Carlyle
- TETY SS : Tethys Petroleum hires advisor, expands strategic review
- UBSN VX : UBS to Pay Up to CHF1b in FX Probe This Month: Sonntagszeitung

WSJ : Spotify’s Valuation Assumes Full Stream Ahead

Spotify’s Valuation Assumes Full Stream Ahead
The music-streaming business has seen heavyweight entrants like Jay Z and Apple. But trying to model the future for Spotify shows the risks still inherent in the industry.

Money is pouring into music-streaming services—but very little in the way of profits is streaming out.

Rapper Jay Z, along with other backers, relaunched the streaming service Tidal in March. That followed Apple’s purchase of Beats last August and the launch of Amazon.com’s Prime Music Service last June.

And if you’re looking for big numbers, consider Spotify, the closely held streaming service based in Sweden that raised $400 million last month implying a value of $8.4 billion. Spotify is losing money but that valuation reflects hopes of big profits at some point.

Such hopes may be justified—but the assumptions required to reach that valuation are subject to a lot of noise.

One example of how hard it is to value music streaming—and make a sustainable business from it—concerns Pandora Media. Yet to report an annual profit, its value soared from about $2.6 billion at its initial public offering in 2011 to almost $8 billion in 2014. It is now worth $3.7 billion.

Spotify operates differently from Pandora, focusing on paid subscriptions over advertising and negotiating directly with artists instead of paying a government-mandated rate per play. Spotify said in January it had 15 million subscribers.

But modeling its future, based partly on publicly available data from 2012 and 2013, suggests its valuation is highly subjective. And even if trends move in the right direction, it is a stretch to see Spotify meriting its recent private-market valuation. That points to how frothy the streaming-music business has become overall.

A lot of inputs go into making a Spotify model. Say Spotify finishes 2015 with 25 million subscribers, up 60%. Then assume it grows to about 85 million by the end of 2024, about 15% a year on average but with the pace trailing off over time. Assume also that Spotify can raise its monthly price, now $10, by 3% a year and that ad-sales growth—23% in 2013—stays relatively high but decelerates by two percentage points a year.

On the cost side, royalties ate up 70% of revenue in 2014, but that could fall to a steady state of 65% by 2017. As Spotify grows, it may also squeeze operating expenses down to 25% of revenue by 2020 from about 30% in 2013. Capital expenditure is assumed to be just 2% of revenue, not dissimilar to Pandora.

Very-long-term profits beyond 2024 are valued, after taxes, at 12 times given that growth will likely have slowed by then. The resulting cash flows are discounted at 10%.

On these assumptions, Spotify is worth about $6.2 billion. That is compelling, but obviously a big step down from the latest private-market figure.

It is also very sensitive to all those assumptions. Say the number of subscribers grows at 11%, compounded annually, instead of 15%, to 64 million. The valuation drops to $4.8 billion. Alternatively, what if Spotify achieved higher growth but couldn’t raise prices due to competition from giants such as Apple? Its value falls to $4.9 billion.

In terms of costs, say royalties stay stuck at 70% of revenue: The valuation plummets to $2.5 billion. Or if operating expenses reach a steady state of 26% of revenue—only one percentage point higher than in the base case—the value falls to $5.5 billion. The long time horizon also makes the valuation very sensitive to assumptions around the discount rate—putting it up to 12% shaves off about $1 billion.

Of course, Spotify might yet grow faster than anticipated or cut royalties further with the help of more alliances with artists. These would raise its value, perhaps sharply.

Even so, the bulk of Spotify’s valuation rests on a long-term bet. In the base case, about three quarters of its net present value stems from cash flows projected beyond 2023. That leaves plenty of time for risks around execution, competition or technology to have an impact. Investors shouldn’t get swept away by the music stream.

NY Post : Study reveals valuable purpose of naked short selling

Study reveals valuable purpose of naked short selling

Study reveals valuable purpose of naked short selling

It’s the revenge of naked capitalism on the Street.
A new study that examined NYSE and Nasdaq stock movements over a 42-month period says naked short selling, when not abused, serves a valuable purpose.
The study’s findings fly in the face of claims by Lehman Bros.’ Dick Fuld and Bear Stearns’ Jimmy Cayne that naked short sellers took their companies down, and bring into question the validity of the Securities and Exchange Commission’s decision at the height of the 2008 crisis to ban most of the practice.
In a naked short, the trade, almost always done by a market maker for itself or for a large client, involves selling stock that it does not own and is not borrowing from someone else. Here it owes the shorted shares to the buyer, but “fails to deliver.”
There’s no evidence these back-office stock delivery “failures” by traders caused the crash of Lehman and the other big names, according to the study, conducted by Vikas Raman of Warwick Business School in the UK, Veljko Fotak of the University of Buffalo and the University of Oklahoma’s Pradeep Yadav and published by the Journal of Financial Economics.
Spikes in the number of fails came after Lehman and other firms announced they had hit an iceberg, the authors noted. These fails were blamed in part for Lehman’s destruction.
“While we do not advocate tolerance for fails to deliver (FTD) tied to manipulative episodes, we find no evidence indicating that FTDs, in aggregate, systematically and manipulatively precipitated price declines, even in the extreme situation of the 2008 financial crisis,” Raman told The Post.
A surge in FTDs actually led to a reduction in pricing errors, intraday volatility, spreads and order imbalances, to the study said.
“The ability to fail arguably reduces stock-borrowing costs at the time when such costs are at the highest,” Dr. Raman added.
Short sellers emerge more as folk heroes than cowboy capitalists in the study, which exhaustively examined 1,492 NYSE and 2,381 Nasdaq stock movements from January 2005 to June 2008. Yet naked short sellers, long regarded as bad boys, have been squeezed.
“By all means, let’s crack down on abuses of naked shorting, but the practice itself is not an abuse,” said Dr. Edward Swanson of Texas A&M University, in the wake of an earlier study on this topic.
The study puts pressure on regulators to loosen their post-crisis grip preventing the practice.
“This is great news. There is nothing better than a free and open market,” one professional trader gushed to The Post. “Limiting people from short selling only creates zombie companies and doesn’t allow for new and nimble companies to enter the market.”