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Stock futures pointed higher Friday as Wall Street returned for a shortened trading session following the Thanksgiving holiday. Retailers will be in focus on Black Friday, which marks the unofficial start to the Christmas shopping season.
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Shareholders of Walmart Inc. may have had an inkling of today’s stock selloff if they had been watching the performance of its bonds over the last two weeks.
The bonds have seen net selling even as spreads have tightened, according to data solutions company BondCliQ Media Services.
The same is true for Costco Wholesale Corp.
COST,
as the company’s stock fell in sympathy with Walmart on Thursday. That was after Walmart
WMT,
Chief Executive Doug McMillon said he expects to see a U.S. deflation trend in the coming months.
McMillon was the first retail executive to raise the specter of deflation on an earnings call this season so far.
For more, read: Walmart’s stock on pace for largest daily percentage decline in over a year after earnings
The comment came after the retail giant posted better-than-expected third-quarter earnings, but offered per-share earnings guidance that was below consensus, sending the stock down more than 7%.
The following charts show what’s been happening with Walmart and Costco bonds in the run-up to today’s numbers.
Bondholders tend to be keenly focused on a company’s underlying financials and closely watched metrics such as cash flow to ensure it can cover interest payments.
That’s because, by buying corporate bonds, they are effectively lending money to a company for a set term and want to be sure they will get their full investment back once they mature. Shareholders tend to be more tuned into daily stock-price movements.
The following chart shows the two-week volume for the bonds by trade type.
The next chart focuses on two-week client flows, showing net selling for both issuers over the period.
The selling has come as spreads have been tightening, as the next chart illustrates.
Walmart’s numbers come after other retailers this week said they are seeing signs of pushback from their customers, especially when it comes to big-ticket items.
That was the message from Target Corp.
TGT,
on Wednesday, with that company’s sales number lagging consensus. Chief Executive Brian Cornell the company saw soft industry trends in discretionary categories, as well as higher inventory shrink.
See also: Target CEO says consumers are still spending, but sees pressure on discretionary items
On Tuesday, Home Depot Inc.
HD,
said its customers were avoiding big-ticket items.
“The third quarter was in line with our expectations – similar to the second quarter, we saw continued customer engagement with smaller projects and experienced pressure in certain big-ticket, discretionary categories,” said Home Depot CEO Ted Decker, during a conference call to discuss the results.
For more, see: Home Depot CEO says 2023 ‘a period of moderation’ in home improvement spending
Costco’s stock was down 2.5%, while Home Depot was down 0.7% and Target was down 0.2%.
The SPDR S&P Retail exchange-traded fund
XRT
was down 3% and has gained 2% in the year to date, while the S&P 500
SPX
has gained 17%.
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When you build a startup, the best shot you have at seeing a big payday is becoming an acquisition. Sure, a handful of startups end up going to IPO. But the likelihood of acquisition beats your chances of going public by a ratio of 10 to one.
Unfortunately, the exciting possibility of an acquisition leads new founders to make all kinds of mistakes. They end up losing out on much better deals, huge sums of money and even years of their lives stuck in post-acquisition work that they can’t stand.
I know this from experience. In my early days as an entrepreneur, I ran into some of these pitfalls. In my work advising founders over the years, I’ve had many founders come to me too late, after they’d already fallen for some investors’ unethical practices.
And since my company, Awesome Motive, has acquired numerous small businesses in ways aimed at helping them grow, I’ve seen that founders can take steps to ensure ethical acquisitions with founder-friendly terms. When they do, everyone comes out ahead — including the acquiring company.
Here are some tips to watch out for when considering an acquisition, and how to protect yourself.
One of the most unethical things some investors do, oftentimes in private equity, is sensitive information mining. They convince you that they’re so excited about the possibility of acquiring your startup for a big figure, but first need to “learn more” about how you operate. At the same time, they may secretly have another company in their portfolio that’s considering offering similar solutions to yours, so they bait you into giving up your intellectual property and proprietary trade secrets.
An acquiring company should be able to look at your revenue, costs, and other basics to offer a fair valuation without needing access to any of your secret sauce.
Yes, you can have them sign an NDA and guarantee that they will delete any information and not share it with others. But they can’t delete it from their own brains. They can take what they learn from you and apply it elsewhere. I fell for this. I was a new founder and didn’t know any better.
An acquiring company or group should be able to look at your revenue, costs, and other basics to offer a fair valuation without needing access to any of your secret sauce. Don’t let them see internal processes and other proprietary information until the sale has gone through.
One of my mentors told me, “You name the price, I name the terms, and I will always win.” I’ve seen this truth play out for founders all too often. They request a big price for an acquisition, which the other party seems to accept. That figure then goes high up in the contract, which makes it feel real.
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Carrie Andrews
Source link
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Soros Fund Management, the investment firm founded by billionaire George Soros, took new positions or bulked up on IPOs and a number of tech names during the third quarter.
But it sold off small holdings of some of the largest — like Nvidia Corp. and Microsoft Corp. — as well as electric-vehicle maker Rivian Automotive.
According to a filing on Tuesday, the firm during the third quarter bought up 325,000 shares of chip designer Arm Holdings
ARM,
which went public in September, for $17.4 million. It also bought smaller stakes in recent IPOs such as Maplebear Inc.
CART,
better known as grocery-delivery platform Instacart, and digital-marketing firm Klaviyo Inc.
KVYO,
Those purchases were disclosed as investors remain cautious on new IPOs.
Elsewhere, the fund took a new position, of around 41,000 shares, in Apple Inc.
AAPL,
And it did so as well for Datadog Inc.
DDOG,
buying 62,000 shares during the quarter. It also bought up 574,962 shares of Splunk, and took fresh positions in Snowflake Inc.
SNOW,
and Taiwan Semiconductor
TSM,
Soros also packed on more to some of its other tech holdings. It added 125,000 shares to its stake in Uber Technologies Inc.
UBER,
boosting its position by 16.6% for a total of 878,955 shares. It also bought 42,000 more shares of another gig-economy player, DoorDash Inc.
DASH,
a 30.9% increase for 178,075 shares.
While Soros boosted its stake in General Motors
GM,
it sold off its 4.2 million shares in Rivian
RIVN,
The firm also sold off its positions — of roughly 10,000 shares apiece — in tech giants Microsoft
MSFT,
and Nvidia
NVDA,
Soros Fund Management also sold off its stake in Walt Disney Co.
DIS,
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Groupon Inc. shares were tumbling more than 20% in Thursday’s extended session after the discounting marketplace announced a new rights offering and acknowledged “challenged” business conditions.
The company said in a Thursday afternoon release that its board approved an $80 million fully backstopped rights offering to all holders of its common stock. The rights offering will occur through the distribution of nontransferable subscription rights to purchase common stock at a price of $11.30 a share.
Groupon
GRPN,
also posted third-quarter results, showing revenue down to $126.5 million from $144.4 million a year prior and slightly below the $129.7 million FactSet consensus, which is based on estimates from three analysts.
The company logged a net loss of $41.4 million, or $1.31 a share, compared with a loss of $56.2 million, or $1.86 a share, in the year-earlier period.
“We are turning our focus to delivering projects across product, engineering, sales, marketing and revenue management that we expect will reinvigorate our marketplace and position our business to return to growth,” interim CEO Dusan Senkypl said in a release.
Added Senkypl: “While we did not make as much progress on key projects as I expected and our business continues to be challenged, I am pleased to see sequential improvement in our financial performance, Local Billings return to growth, and our plan to strengthen our liquidity position.”
In addition, co-founder Eric Lefkofsky plans to leave Groupon’s board of directors, according to Thursday’s release. “With a new management team and the announcement of today’s financing strategy, I am confident that Groupon is on the right track to become the ultimate destination for experiences and services,” Lefkofsky said.
Groupon’s stock is up 58% so far this year but off 97% from its 2011 all-time high.
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By Miriam Mukuru
UBS Group issues $3.5 billion in Additional Tier 1 bonds in the first issuance since the acquisition of Credit Suisse.
It is comprised of two tranches of $1.75 billion of 9.25% perpetual notes redeemable at the option of UBS after five years and $1.75 billion of 9.25% perpetual notes redeemable after 10 years.
“Each issue is a direct, unsecured and subordinated obligation of UBS Group AG,” it said.
“The notes provide that, following approval of a minimum amount of conversion capital by UBS Group AG’s shareholders, upon occurrence of a trigger event or a viability event, the notes will be converted into UBS Group AG ordinary shares rather than be subject to write-down,” UBS added.
Write to Miriam Mukuru at miriam.mukuru@wsj.com
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In less than a year, Chevron has gone from being Wall Street’s favorite Big Energy company to a show-me story. Investors who buy the stock now should end up liking what they see.
Chevron stock (ticker: CVX) has fallen 17% in 2023, making it the worst performer by far among the half-dozen global super majors this year. Exxon Mobil (XOM), by comparison, is down just 2% this year, and the Energy Select Sector SPDR exchange-traded fund (XLE) is about flat.
Most of the drop has come during the past few weeks after a disappointing earnings report that included news of a surprise delay in the development of a key oil field in Kazakhstan, while Chevron’s $60 billion deal to buy Hess (HES), an independent energy producer, not only failed to excite investors but was seen as a sign of weakness by some.
Continue reading this article with a Barron’s subscription.
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Going back decades, if you wanted to buy or sell a stock on the open market, you had to pay a 2% commission to buy and a 2% commission to sell. Then the advent of discount brokerage, led by Charles Schwab Corp.
SCHW,
made lower commissions available until eventually, with improved technology and efficiency, the entire industry changed to enable the average investor to avoid commissions completely.
But the internet hasn’t done much to reduce the cost of selling a home in the U.S. Sellers typically pay a 6% commission to a real-estate agent to list and sell a home, with the seller’s agent splitting that commission with the buyer’s agent. But all of that may change because of a verdict this week in a class-action lawsuit in federal court against the National Association of Realtors.
Aarthi Swaminathan covers the case, what may happen next and the implications for home sellers and buyers:
Quentin Fottrell — the Moneyist — works with three readers to answer tricky real-estate questions:
On Wednesday, Federal Reserve Chair Jerome Powell may have bolstered the case that the central bank is finished raising interest rates for this economic cycle. The federal-funds rate was left in its target range of 5.25% to 5.50%.
Jon Gray, the president of Blackstone Group, spoke with MarketWatch Editor in Chief Mark DeCambre and said he expected the Fed to succeed in bringing down inflation without pushing the U.S. economy into a deep recession.
Friday employment numbers: Jobs report shows 150,000 new jobs in October as U.S. labor market cools
FactSet
Normally, longer-term bonds have higher yields than those with short maturities. But the yield curve has been inverted for nearly a year, with 3-month U.S. Treasury bills
BX:TMUBMUSD03M
having higher yields than 10-year Treasury notes
BX:TMUBMUSD10Y.
There has been elevated demand for long-term bonds, as investors have anticipated a recession and a reversal in Federal Reserve interest-rate policy. When interest rates decline, bond prices rise and vice versa.
As you can see on the chart above, the yield curve was narrowing until mid-October. Yields on 10-year Treasury notes were close to 5% on Oct. 19, but they have been falling the past several days as the three-month yield has remained close to 5.5%.
In this week’s ETF Wrap, Christine Idzelis reports on where all the money is flowing in the bond market.
In the Bond Report, Vivien Lou Chen summarizes the action as investors react to the Federal Reserve’s decision not to change its federal-funds-rate target range this week and to other economic news.
For income-seekers looking to avoid income taxes, here’s a deep dive into municipal bonds, with taxable-equivalent yields and a deeper look at those within four high-tax states.
Getty Images
Ford Motor Co.’s
F,
credit rating was upgraded to an investment-grade rating by Standard & Poor’s on Monday. This takes about $67 billion in bonds out of the high-yield, or “junk,” market, as Ciara Linnane reports.
Courtesy Everett Collection
By now you have probably heard the term “Magnificent Seven” used to describe stocks of the tremendous tech-oriented companies that have led this year’s rally for the S&P 500
SPX
: Apple Inc.
AAPL,
Microsoft Corp.
MSFT,
Amazon.com Inc.
AMZN,
Nvidia Corp.
NVDA,
Alphabet Inc.
GOOGL,
GOOG,
Meta Platforms Inc.
META,
and Tesla Inc.
TSLA,
With Tesla’s recent decline, that company is now the ninth-largest holding in the portfolio of the SPDR S&P 500 ETF Trust
SPY,
which tracks the benchmark index. Here are the top 10 companies held by SPY (11 stocks, including two common-share classes for Alphabet), with total returns through Thursday:
| Company | Ticker | % of SPY portfolio | 2023 total return | 2022 total return | Total return since end of 2021 |
| Apple Inc. |
AAPL, |
7.2% | 37% | -26% | 1% |
| Microsoft Corp. |
MSFT, |
7.1% | 46% | -28% | 5% |
| Amazon.com Inc. |
AMZN, |
3.5% | 64% | -50% | -17% |
| Nvidia Corp. |
NVDA, |
3.0% | 198% | -50% | 48% |
| Alphabet Inc. Class A |
GOOGL, |
2.1% | 44% | -39% | -12% |
| Meta Platforms Inc. Class A |
META, |
1.9% | 158% | -64% | -8% |
| Alphabet Inc. Class C |
GOOG, |
1.8% | 45% | -39% | -11% |
| Berkshire Hathaway Inc. Class B |
BRK.B, |
1.8% | 13% | 3% | 17% |
| Tesla Inc. |
TSLA, |
1.7% | 77% | -65% | -38% |
| UnitedHealth Group Inc. |
UNH, |
1.4% | 2% | 7% | 9% |
| Eli Lilly and Company |
LLY, |
1.3% | 60% | 34% | 115% |
| Sources: FactSet, State Street (for SPY holdings) | |||||
Five of these stocks (including the two Alphabet share classes) are still down from the end of 2021. SPY itself has returned 14% this year, following an 18% decline in 2022. It is still down 7% from the end of 2021.
Mark Hulbert makes the case that a decade from now, the Magnificent Seven are unlikely to be among the largest companies in the stock market.
More from Hulbert: These dividend stocks and ETFs have healthy yields that can lift your portfolio
A different market opportunity: India is seeing a multidecade growth surge. Here’s how you can invest in it.
The MarketWatch 50 series is back, with articles and video interviews starting this week, including:
MarketWatch/PayPal
After the market close on Wednesday, PayPal Holdings Inc.
PYPL,
announced quarterly results that came in ahead of analysts’ expectations, and the stock soared 7% on Thursday even though the company lowered its target for improving its operating margin.
In the Ratings Game column, Emily Bary reports on the positive reaction to PayPal’s new CEO, Alex Chriss.
A less enthusiastic earnings reaction: EV-products maker BorgWarner’s stock suffers biggest drop in 15 years after downbeat sales outlook
Mario Tama/Getty Images
Here’s more of the latest corporate financial results and reactions. First the good news:
And now the news that may not be so good:
AP
It might seem that some legal battles never end, but it took only a year from the collapse of FTX for the cryptocurrency exchange’s founder, Sam Bankman-Fried, to be convicted on all seven federal fraud and money-laundering charges brought against him. The charges were connected to the disappearance of $8 billion from FTX customer accounts.
Here’s more reaction and coverage of the virtual-currency industry:
Want more from MarketWatch? Sign up for this and other newsletters to get the latest news and advice on personal finance and investing.
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Shares of Six Flags Entertainment Corp.
SIX,
and Cedar Fair Entertainment Co.
FUN,
are rising following a report in the Wall Street Journal that the regional theme-park operators could announce a merger as soon as this week. Six’s stock is up 1.5% on Wednesday, while shares of Cedar Fair have climbed 5.6%. Cedar’s properties include Great America in Santa Clara, Calif., Kings Island in Cincinnati, and Canada’s Wonderland in Toronto.
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BP replacement cost profit of $3.29B misses forecasts, announces $1.5 bn buyback
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By Jiahui Huang
Zhejiang Leapmotor Technology’s shares were lower at the mid-day break after initially rising on news of a 1.5 billion euro ($1.58 billion) investment by Stellantis in the Chinese electric-vehicle maker.
Leapmotor shares ended the morning session down 9.4% at 33.40 Hong Kong dollars, reversing course from early gains of as much as 11.5%.
Some of the whipsawing into negative territory arose from early investors in the company seeking an exit point, said Ke Qu, an analyst at CCB International Securities.
“The stock price is under pressure due to selling pressure from pre-IPO investors,” Qu said in an email. “Most may think this partnership announcement creates [a] better exit window for their three-year or even longer investment.”
Qu added that Leapmotor is relatively short on cash compared with other listed startups in China, and can benefit from a partner to leverage its exposure and competitiveness in European or U.S. markets.
“Greater access to [the] EU means better profitability than elsewhere in the world,” she said.
Netherlands-based Stellantis said early Thursday that it is taking a roughly 20% stake in Leapmotor, with the companies planning to create a joint venture to sell Leapmotor products outside of China, starting with Europe.
Leapmotor debuted in Hong Kong in September 2022 after raising about HK$6.06 billion (US$774.8 million) in its initial public offering.
The Chinese company delivered 44,325 vehicles in the third quarter, up almost 25% from a year earlier. Revenue in the quarter rose 32% on the year to CNY5.66 billion.
Write to Jiahui Huang at jiahui.huang@wsj.com
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Updated Oct. 23, 2023 5:58 am ET
Chevron said it would buy Hess in an all-stock deal worth $53 billion, in the latest sign of consolidation in an oil-and-gas industry flush with cash.
The U.S. energy giant said buying Hess would upgrade and diversify its portfolio, adding a large oil asset in Guyana and bolstering its U.S. shale operations. Chevron also highlighted the attraction of Hess’s assets in the Gulf of Mexico and its natural-gas business in Southeast Asia.
Copyright ©2023 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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When Eyal Waldman thinks of his youngest daughter and her boyfriend, he sees them dancing.
“Danielle and Noam loved dancing, and I hope they continue dancing somewhere up there,” Eyal Waldman told MarketWatch.
Danielle Waldman and Noam Shay were killed at a music festival in southern Israel last week, part of a campaign by the Hamas terrorist group that has led to further bloodshed.
Danielle’s father — an Israeli tech executive who co-founded Mellanox, which became the largest acquisition in Nvidia Corp.’s
NVDA,
history — spoke with MarketWatch as Friday turned to Saturday in Israel, in hopes of increasing attention on the hostages who are still held in Gaza as well as to memorialize his daughter, who was 24, and Shay, who was 26.
Courtesy of Eyal Waldman
Danielle Waldman — who was born in Palo Alto, California, but moved back to Israel with her family at age 4 — and Israeli native Shay were students who met six years ago in the army, and her father said they had been inseparable since. They attended the Supernova music festival in early October with friends, and were killed while attempting to escape Hamas terrorists in a car that Eyal Waldman found bullet-riddled near the festival’s location.
“Danielle and Noam have done nothing bad to anyone, and they were murdered only because they were Israelis,” he said.
Eyal Waldman, a onetime Israeli combat fighter, founded Mellanox in 1999, and sold it 20 years later to Nvidia for $6.9 billion. He is known internationally for attempting to foster peace between Israelis and Palestinians through his work in technology — Mellanox hired Palestinian tech workers in Gaza, Nablus and the West Bank town of Rawabi, which led to a “60 Minutes” appearance.
“We wanted to make peace, to work together, to bring prosperity to the Palestinian people, the same as we have in Israel,” he said. “I brought even Apple
AAPL,
to open a design center in Rawabi and I brought other companies to open design centers in Rawabi.”
The death of his daughter and Shay and the scope of the attacks and counter-attacks dominating headlines in recent days have not changed Waldman’s hope for peace in the future, he said, but not the near future. He believes this time, the violence “took us back several years, if not decades.”
“We need time to build the trust, if at all, between the two nations and start working together to be able to talk about peace,” he said. “Until then, we will continue protecting ourselves in a very direct manner in Gaza and everywhere else around Israel.”
Waldman also said he would continue to try to hire Palestinians and work with them to be a part of the Israeli tech ecosystem, as long as they state “that they are working for peace, and they are not supporting — not financially and not in any other way — any terror actions, or any actions that are not civilian economics between the two nations.”
“Our hands are always reaching out for peace. But at the same time, before we do this, we need people to understand that Israel is strong, Israel is united, and we will never let anyone harm the citizens of the state of Israel again.”
Read: Israel-Gaza war scenarios: Here’s what might lift oil prices to $95, $100 and $115 a barrel
Waldman was thankful for U.S. aid and was forceful in discussing the need to find hostages that were still missing. One of Nvidia’s current employees was kidnapped, according to an email that Chief Executive Jensen Huang sent to employees that was obtained by Insider, which reported that the employee was also at the Supernova music festival.
Nvidia has more than 3,000 employees in Israel mostly working for Mellanox, which makes networking gear that connects Nvidia’s high-performance data-center products. In an emailed statement, an Nvidia spokesman said “our focus now is working with our Israel leadership to ensure our employees and their families are safe and well cared for. We will then turn our focus to shoring up [the company’s] execution if necessary to ensure continued operations of our business.”
Waldman said the return of hostages is top of mind.
“What’s important now is to focus on bringing back the hostages, and that is the No. 1 priority for the State of Israel and for the international community,” he said.
Continuing to worry about others while suffering his own tragedy is a trait that Eyal Waldman seems to have passed down to his youngest daughter. He said that he had received a note from another festival attendee who was wounded in the eye in the initial attack. That victim told him that Danielle Waldman had stopped to attend to her and make sure she was safe before attempting to escape in a car that was later believed to have been attacked by Hamas terrorists with rifles.
“They loved to celebrate life,” Waldman said of his daughter and her boyfriend.
“And they went down on Friday night to celebrate life, love and freedom, and they were massacred.”
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By Kim Mackrael
Microsoft’s acquisition of videogame company Activision Blizzard won approval from U.K. competition authorities, clearing a path for the companies to close the $75 billion deal after a lengthy struggle with regulators.
The U.K.’s Competition and Markets Authority said Friday that the proposed deal no longer poses a major threat to competition in cloud gaming. The shift comes after Microsoft offered to restructure the deal by forfeiting cloud-streaming rights for “Call of Duty” and other popular Activision franchises in much of the world.
-Sarah E. Needleman contributed to this article
Write to Kim Mackrael at Kim.mackrael@wsj.com
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Higher interest rates may be painful in the short term, but banks, savers and the financial ecosystem will be better off in the long run, said Sheila Bair, former chair of the Federal Deposit Insurance Corp.
“When money is free, you squander it,” Bair said in an interview with MarketWatch. “It’s like anything. If it doesn’t cost you anything, you’re going to value it less. And we’ve had free money for quite some time now.”
Bair, who led the FDIC from 2006 to 2011, caused a stir recently in criticizing “moonshots,” the crypto industry and “useless innovations” like Bored Ape NFTs, which proliferated because of speculation and near-zero interest rates.
Her main message has been that the path to higher rates, while potentially “tricky,” ultimately will lead to a more stable financial system, where “truly promising innovations will attract capital” and where savers can actually save.
Bair sat down for an interview with Barron’s Live, MarketWatch edition, to talk about the ripple effects of higher rates, what could trigger another financial crisis and why more regional banks sitting on unrealized losses could fail in the wake of Silicon Valley Bank’s collapse in March.
“We probably will have more bank failures,” Bair said. “But you know what? Banks fail. It’s OK. The system goes on. It’s important for people to understand that households stay below the insured deposit caps.”
The FDIC insures bank deposits up to $250,000 per account. It also has overseen 565 bank failures since 2001.
“I know borrowing costs are going up, but your rewards for saving it are going up too,” she said. “I think that’s a very good thing.”
However, Bair isn’t focused only on money traps and pitfalls for grown-ups. She also has two new picture books coming out that aim to explain big financial themes to young readers, including where easy-money ways, speculation and inflation come from.
“One thing that I’ve learned from the kids is to not ask them what a loan is, because when I did that, a little hand when up, and she said: ‘That’s when you’re by yourself,’” Bair said.
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Iconic German sandal maker Birkenstock Holdings Ltd.’s stock fell 10% out of the gate in its trading debut Wednesday, signaling that investors remain cautious about new deals and the casual-footwear market remains competitive.
The company’s initial public offering priced at $46 a share late Tuesday, a bit shy of the midpoint of its expected range. The company
BIRK,
is trading on the New York Stock Exchange under the ticker “BIRK.” Goldman Sachs, JPMorgan and Morgan Stanley were the lead underwriters on the deal.
The deal was expected to prove the latest test for the IPO market, which recently saw three key deals perform strongly on their first day of trade, only to fall back in subsequent sessions.
Chip maker Arm Holdings Ltd.
ARM,
; Klaviyo
KVYO,
a digital marketing company; and Instacart, which trades as Maplebear Inc.
CART,
; all enjoyed strong gains on their first day of trade but pared those in the following sessions. Instacart was quoted at $25.50 on Wednesday, well below its issue price of $30.
Birkenstock clearly has its fans, as its customers are brand loyal, with 70% of existing U.S. consumers, for example, purchasing at least two pairs of its shoes, according to its filing documents.
A survey found 86% of recent purchasers said they wanted to buy again, while 40% said they did not even consider another brand while buying.
But as Kyle Rodda, Senior Market Analyst at Capital.com, said the Birkenstock deal was to be a good measure of broader market sentiment and sentiment toward consumer-sensitive stocks.
“It might tell us, too, whether cashed-up millennials like to buy the stocks of products they commonly find on the bottom shelf of their wardrobes,” he said in emailed comments.
The valuation of around $8.6 billion also looks rich, he said. Based on the company’s latest revenue release, the stock’s price-to-sales ratio is above 6, “which is at the higher end of comparable consumer discretionary companies on Wall Street.
“In a higher interest rate environment, these multiples may be hard to sustain in the short term, especially if consumer spending slows as expected next year as interest rate hikes bite households,” Rodda said.
David Trainer, Chief Executive of independent equity research company New Constructs, said ahead of the deal that the valuation was far too high, noting that it was higher than peers such as Skechers USA Inc.
SKX,
Crocs Inc.
CROX,
and Steve Madden Ltd.
SHOO,
“Even more shockingly, the only footwear companies with a larger market cap are Nike Inc.
NKE,
and Deckers Outdoor
DECK,
” he said, referring to the maker of Uggs.
“While Birkenstock is profitable, we think it is fair to say that the $8.7 billion valuation mark is too high, especially for a company that was valued at just $4.3 billion in early 2021. Not a whole lot has changed since then,” Trainer said in a report.
For more, see: Birkenstock is going public: 5 things to know about the iconic German sandal maker’s IPO designs
Trainer estimated that Birkenstock would need to generate more than $3.8 billion in annual revenue to justify its valuation, which is more than three times the $1.24 billion chalked up for all of 2022, according to its filing documents with the Securities and Exchange Commission.
“We don’t doubt that Birkenstock has strong brand equity and produces stylish sandals, but there is really no reason for this company to be public,” said Trainer. “We don’t think investors should expect to make any money by buying this IPO.”
The Renaissance IPO exchange-traded fund
IPO
has gained 29% in the year to date, while the S&P 500
SPX
has gained 13%.
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If anyone wanted evidence that the market feels skittish just look at stocks related to electric vehicles. They are getting hammered on capital raising activity that, frankly, should surprise no one.
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Exxon Mobil Corp. confirmed Wednesday an agreement to buy shale driller Pioneer Natural Resources Co. in an all-stock deal valued at $59.5 billion, or $64.5 billion including debt.
“Pioneer is a clear leader in the Permian with a unique asset base and people with deep industry knowledge,” said Exxon Mobil Chief Executive Darren Woods. “The combined capabilities of our two companies will provide long-term value creation well in excess of what either company is capable of doing on a standalone basis.”
Pioneer shares rose 1.9% in premarket trading, while Exxon’s stock fell 1.3%.
Under terms of the deal, Pioneer shareholders will receive 2.3234 Exxon shares
XOM,
for each Pioneer share
PXD,
they own. The companies said that based on the Oct. 5 closing prices of $108.99 for Exxon’s stock and $214.96 for Pioneer’s stock, the deal values Pioneer shares at $253.23 each, or a 17.8% premium.
The Wall Street Journal had reported on Oct. 5 that a deal was near.
The deal combines Pioneer’s more than 85,000 net acres in the Midland Basin with Exxon’s 570,000 net acres in the Delaware and Midland Basins. Combined, the companies will have an estimated 16 billion barrels of oil equivalent in the Permian.
Exxon Mobil Corp.
Exxon said the merger will increase its lower-cost-of-supply production and short-cycle capital flexibility. From Pioneer’s assets, the company expects a cost of supply of less than $35 per barrel.
Exxon said the deal will accelerate plans to achieve net zero greenhouse gas emissions in the Permian, as the company plans to use its own plans to accelerate Pioneer’s net-zero emissions plan by 15 years, to 2035.
The deal is expected to immediately add to Exxon’s earnings per share and free cash flow when it closes, which is expected to occur in the first half of 2024. The merger is expected to result in “significant” synergies.
Siebert Williams Shank analyst Gabriele Sorbara expects the deal, which “fits perfectly” for Exxon, to generate about $2 billion of synergies over the next decade. Sorbara also sees an “inflection to improved well productivity” in the second half of 2023 and beyond, which isn’t currently reflected in analyst expectations, so it boost the benefit to Exxon.
While Sorbara expects some scrutiny from the Federal Trade Commission, but believes “the deal should ultimately close,” without the receipt of a competing bid.
Citi was lead financial advisor to Exxon, and Centerview Partners was financial advisor and Davis Polk & Wardwell was legal advisor. For Pioneer, Goldman Sachs, Morgan Stanley, Petrie Partners and Bank of America Securities were financial advisors and Gibson, Dunn & Crutcher LLP was legal advisor.
Exxon’s stock has rallied 12.7% over the past 12 months through Tuesday and Pioneer shares have slipped 3.5%. In comparison, the Energy Select Sector SPDR ETF
XLE
has climbed 11.6% and the S&P 500 index
SPX
has advanced 21.4%.
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David Scott, the head of Exxon Mobil Co.’s shale oil and gas production business, was arrested in Texas and faces a charge of sexual assault.
According to public records from the Montgomery County, Texas, Sheriff’s Office, Scott, 49, was arrested Thursday afternoon on second-degree felony sexual-assault charges. According to the records, he was released on $30,000 bond. Police records show he was arrested at a La Quinta Inn & Suites hotel in Magnolia, Texas, near Exxon’s headquarters in Spring, Texas, just north of Houston.
No further details of the incident were made clear.
According to his LinkedIn profile, Scott is vice president of Exxon’s upstream unconventional unit, and has worked for Exxon for 26 years at the company’s operations in Australia, the U.K., the United Arab Emirates, Malaysia, Angola and the U.S.
In a statement Sunday, Exxon Mobil
XOM,
said it was “aware of the allegations and cannot comment on a personal matter.” However, “we can say that this individual will not continue work responsibilities as the investigation proceeds.”
Scott’s arrest comes as Exxon Mobil is reportedly closing in on a roughly $60 billion deal to buy shale driller Pioneer Natural Resources
PXD,
as it looks to become the dominant player in the oil-rich Permian Basin in western Texas and New Mexico.
Scott oversees Exxon’s operations in the Permian Basin, but it was unclear if or how he might be involved in the Pioneer deal.
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