|Bid||49.70 x 3100|
|Ask||50.00 x 1100|
|Day's Range||49.73 - 50.24|
|52 Week Range||36.74 - 50.24|
|Beta (3Y Monthly)||1.38|
|PE Ratio (TTM)||10.65|
|Forward Dividend & Yield||1.40 (2.85%)|
|1y Target Est||N/A|
(Bloomberg Opinion) -- The end of Libor as a benchmark for interest rates on everything from mortgages to credit cards is just two years away, leaving the market in search of a viable substitute. More than $370 trillion of existing financial contracts are pegged to Libor worldwide; of those, roughly $200 trillion are denominated in U.S. dollars and need to be addressed immediately — a monumental task in such a short period.Fortunately, significant progress has been made in moving toward an alternative called the Secured Overnight Financing Rate, or SOFR, which is based on an average daily volume of more than $1 trillion of actual transactions in the U.S. Treasury repo market. I am chair of the Alternative Reference Rates Committee, a public-private committee convened and sponsored by the Federal Reserve to facilitate the transition in the U.S. It recommends institutions stop using Libor as quickly as possible and move to SOFR. As we all know, the best way to get out of a hole is to stop digging.There are misconceptions that SOFR’s daily variability makes it undesirable as a Libor successor. Given the importance of the transition, I am eager to address those concerns, which fundamentally misunderstand how SOFR is truly used in financial contracts. They also vastly oversimplify what SOFR’s variability represents. It’s especially important to understand these complexities as the end of the year approaches, which typically brings wider movements in money market rates.Repo market prices respond to changes in supply and demand. SOFR, which is based on actual transactions, reflects variability in actual market pricing. Unlike Libor, which has become increasingly based on estimates, SOFR accurately measures the market it was created to represent. This is a critical reason the ARRC selected it as its recommended alternative. The ARRC picked SOFR fully aware that market-based rates are inherently variable. Given that SOFR is averaged when used in financial instruments, variability should not be an issue. And as might be expected, those averages have been quite stable. For example, consider the period of money market pressure in September. Although SOFR rose sharply over a few days, a three-month average rose only 2 basis points compared with the weeks before those fluctuations. Over that same period, three-month U.S. dollar Libor rose 4 basis points. In fact, this SOFR average has been less volatile than three-month U.S. dollar Libor over a wide range of market conditions. Although market participants can calculate averages on their own, and some are already doing so, many are understandably uncomfortable with taking on that responsibility. They worry about the consistency of calculation relative to their peers and consumer transparency. That is why we need accessible SOFR averages.In November, the Federal Reserve Bank of New York outlined plans to produce SOFR averages along with a SOFR index. By publishing these averages on its website, which is expected to begin in the first half of 2020, the New York Fed will provide consistently calculated SOFR averages across various terms and an index to facilitate the calculation of averages over custom periods. Because they will be endorsed by the official sector, these averages should give all market participants the peace of mind that they can use the same reliable source.Once publication begins, more market participants will be able to directly reference SOFR averages. So instead of adding to existing Libor risks, market participants can start constructing new SOFR-based contracts, especially with the clock ticking to the expiration of Libor.To help ease the transition, if institutions must enter new Libor-referencing contracts, they can use fallback language the ARRC has released, which will help market participants safeguard their contracts should Libor no longer be available. They can also consult the ARRC’s practical implementation checklist, which outlines steps to consider during the transition.While many milestones have been reached, two years is a short period to close out the remaining tasks. The strength of institutions individually, and the architecture of the financial system broadly, relies on everyone doing their part to ensure a smooth transition to SOFR.To contact the author of this story: Tom Wipf at email@example.comTo contact the editor responsible for this story: Daniel Niemi at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tom Wipf is the chair of the Alternative Reference Rates Committee and vice chairman of institutional securities at Morgan Stanley.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- Morgan Stanley’s drive into a lucrative niche in the foreign-exchange market has hit a major road block.The firm has more than doubled its activity since 2016 to overtake rivals such as Goldman Sachs Group Inc. in the bazaar for currency-linked derivatives known as FX options. Now, Morgan Stanley is probing whether traders improperly valued the esoteric securities, concealing as much as $140 million in losses, Bloomberg reported last week, citing people familiar with the matter.The world’s biggest stock brokerage adopted a “go big or go home strategy” in the business, said Mark Williams, a finance lecturer at Boston University’s Questrom School of Business. “Doubling their OTC FX option trading book in only three years, given an already sizable market presence, speaks to Morgan Stanley’s aggressive risk appetite.”While a potential loss would hardly be catastrophic for a broader fixed-income trading business that generated $5 billion in revenue last year, it contrasts with Chief Executive Officer James Gorman’s effort to fashion a steadier, less risky franchise. His approach has allowed Morgan Stanley to close a market-value gap with Goldman Sachs that was more than $50 billion after the financial crisis.Four years ago, Morgan Stanley’s then-equities chief Ted Pick also took control of the firm’s fixed-income unit with a pledge that it would stop trying to be “all things to all people” and pick spots in the bond and currency markets where it could find adequate returns. The bank had long struggled to compete in the area of interest rates and foreign exchange, known collectively as macro trading, where larger commercial banks benefited from the activity of their corporate clients.Morgan Stanley tapped Senad Prusac, who had risen up through the FX options unit, to lead global macro trading and find the bank’s niche in that world. Prusac left Morgan Stanley this year and was recently replaced by Jakob Horder, IFRE reported in September. Overseeing the operation was fixed-income head Sam Kellie-Smith, whose LinkedIn profile also cites a background in FX options trading.The strategy has largely paid off, with Morgan Stanley gaining market share even while it cut headcount and reduced capital dedicated to the fixed-income business. Analysts expect Morgan Stanley to end 2019 with 10% more fixed-income trading revenue than in 2015, while rival Goldman Sachs’s total is set to drop about 20% in the same period.FX options, a small corner of the $6.6-trillion-per-day currency market, provided some of the growth. In early 2016, Morgan Stanley had fewer of the securities than any other major Wall Street bank, according to a Bloomberg analysis of U.S. Federal Reserve filings. By last year, the firm had eclipsed Goldman Sachs and Bank of America Corp. and trailed only Citigroup Inc. and JPMorgan Chase & Co., the filings show.FX options can be a flexible and cheap way to speculate on currencies and hedge against losses, according to Beat Nussbaumer, who helped lead foreign-exchange businesses at firms including Commerzbank AG and UniCredit SpA. Daily trading volume has climbed 16% since 2016 to about $294 billion, according to the Bank for International Settlements.But the instruments can be hard to value and can magnify losses. The trades now in question were tied to the Turkish lira, a currency that whipsawed investors in 2018 and earlier in 2019 amid mounting political tensions, the people said. Those swings roiled a number of firms and Morgan Stanley is grappling with how its losses happened and whether there were efforts to cover them up. At least four traders have been swept up in the probe, including 27-year-old associate Scott Eisner in London, Bloomberg has reported. Morgan Stanley declined to comment on the matter.Investment banks tailor FX options based on client requests and they’re traded directly between parties, or over-the-counter, rather than through exchanges. While this makes them more opaque, it also makes them more lucrative, according to Nussbaumer.The biggest investment banks shared about $2.9 billion in revenue from FX options in 2018, a 40% increase from 2017, only to see income fall this year, according to data from Coalition Development Ltd.Even before the Morgan Stanley episode, sudden moves in currencies have triggered blowups. Citigroup lost more than $150 million in 2015 when the Swiss central bank let the franc trade freely against the euro, Bloomberg reported at the time. In 2016, Taiwanese banks were fined after selling leveraged structured products that bet on a rising Chinese yuan, which saddled clients with losses after the currency plunged.Morgan Stanley purchased FX option trades with a notional amount of about $718 billion at the end of September, according to the Fed filings. That compares with $512 billion in the same period in 2017 and $320 billion in 2016, the filings show. At the end of the first half of 2019, the firm’s FX options purchased, net of those it sold, was $48 billion, three times that of any other U.S. bank, according to Javier Paz, an analyst with Forex Datasource, an independent consulting firm.“They’re punching above their weight,” said Paz. “This is the repurposing of their expertise in equity options into currency markets.”\--With assistance from Sridhar Natarajan.To contact the reporters on this story: Donal Griffin in London at email@example.com;Stefania Spezzati in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Ambereen Choudhury at email@example.com, James Hertling, Michael J. MooreFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Investing.com – Etsy fell on Thursday after Morgan Stanley downgraded its outlook on the company on worries that recently introduced sales-tax legislation in some U.S. states and a decision to cut advertising investment may hurt growth.
(Bloomberg) -- JFrog Inc., a technology company that makes tools for software developers, has hired Morgan Stanley and JPMorgan Chase & Co. to lead its initial public offering next year, according to people familiar with the matter.JFrog could seek a valuation of $2 billion or more in a U.S. listing, said the people, who asked not to be identified because the matter is private.Plans for an IPO aren’t final and JFrog could decide to remain private, the people said.Representatives for JFrog, Morgan Stanley and JPMorgan declined to comment.JFrog was co-founded in 2008 by former Israeli Air Force Major Shlomi Ben Haim, who remains its chief executive officer, according to the company’s website. The Sunnyvale, California-based company raised $165 million in a funding round last year that included investors Insight Venture Partners, Spark Capital, Battery Ventures and Dell Technologies Capital, according to a statement.Software companies have delivered some of this year’s best IPO returns thanks to their steady business models. Globally, shares of companies such as Zoom Video Communications Inc., Crowdstrike Holdings Inc. and Datadog Inc. have risen an average of 38% from their IPO offer prices this year, according to data compiled by Bloomberg.IPOs this year by consumer-facing internet-related companies including Uber Technologies Inc. and Lyft Inc. haven’t fared as well. Shares of those companies have fallen an average of 7.5% from their offer prices, the data show.To contact the reporter on this story: Crystal Tse in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Liana Baker at email@example.com, Michael Hytha, Matthew MonksFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- When two Irish brothers started Stripe Inc. together in 2010, there was little question about where they should put their headquarters. It had to be California.Now, though, Stripe is leaving the tech mecca of San Francisco, awash in tech talent and investor cash, and is in the process of moving its main office about 10 miles to neighboring South San Francisco. What’s more, the company—whose $35 billion valuation makes it one of the world’s most valuable startups—is currently building up its staff in another state altogether: New York.In September, Stripe opened an office near Wall Street the company told Bloomberg, and plans to add several hundred employees there in the coming years. The startup’s planned New York growth is on track to outpace its headquarters’.The city has long been a hub for finance, and more recently for tech. “New York is a global leader,’’ said David Singleton, Stripe’s chief technology officer. “It’s just an important market for entrepreneurialism and startups.”Stripe is one of many Bay Area-based fintech companies now building up a New York presence. Plaid Technologies Inc., which connects various apps to customers’ bank accounts, has relocated or hired more than 100 people in the city over the last year, or about a quarter of its staff. Affirm Inc., the lending startup founded by former PayPal Holdings Inc. co-founder Max Levchin, also recently opened up a Manhattan office that has about 50 employees, the company said. And Brex Inc., the business credit card startup most recently valued at $2.6 billion, has permanently relocated its chief financial officer to Midtown, according to a person familiar with the matter who asked not to be identified discussing information that’s not yet public.In some ways, the moves are natural for tech startups with financial ambitions. Despite the growing success of fintech upstarts hailing from San Francisco, Wall Street institutions remain on top of the financial world, and New York offers an appealing pool of potential hires. Uber Technologies Inc., for example, announced the creation of a new unit called Uber Money in October, and will be shopping for fintech talent in and around Manhattan, according to a CNBC report. At Affirm, the company’s New York employees’ resumes are littered with names like Morgan Stanley and Goldman Sachs Group Inc.Often, financial technology companies that are just getting started set up shop in San Francisco to be close to tech workers with experience designing products at big companies, said Mark Goldberg, a partner at Index Ventures. San Francisco's resident tech giant include Uber, Lyft Inc., Twitter Inc. and Airbnb Inc. But “what they don’t understand is the industry,” he said, adding that eventually, many fintech companies look eastward for hiring. “What I think happens is that companies that start on the West Coast end up recognizing that they want to compliment that DNA with capital market expertise, and with people that have been in and around banks.”Meanwhile, tech epicenter San Francisco has become less hospitable for some companies. Last year, voters passed a new tax on businesses that will go to fund homelessness relief efforts, and taxes financial services companies at a higher rate than other types of businesses. Stripe’s decision to leave the city was widely regarded by local officials as related to the passage of the new tax. The company, which strongly opposed the measure, denied that taxes were a major factor in the decision to move.Stripe instead pointed to the limited office space in San Francisco. The city’s asking prices for commercial rent, which are the highest in the nation, climbed 7% over the last year to record levels in the third quarter, according to real estate firm Cushman & Wakefield. And adding to the region’s woes: In recent months fires caused widespread power outages in homes around the Bay Area.Still, none of fintech unicorns Bloomberg spoke to have plans to move their headquarters away from the West Coast. Stripe, while hiring a few hundred people in New York, currently has more than 1,000 employees in Silicon Valley. Affirm’s San Francisco office is many times larger than its Manhattan outpost. And New York-based financial services startups tend to have stubbornly lower valuations than their high-flying West Coast counterparts.For Plaid, New York is a homecoming of sorts. The startup left the city in 2013 after winning TechCrunch’s Disrupt New York Hackathon, and, seeking proximity to engineers and investors, moved its headquarters to San Francisco. “Us coming back and building a really big presence is a strong signal for NYC tech, which has made huge strides in terms of client base, talent, and funding,’’ said Charley Ma, Plaid’s New York City growth manager, who moved from the West Coast for the job last fall. Plaid’s chief executive officer, however, will remain in San Francisco.(Corrects location of early headquarters in first paragraph.)To contact the author of this story: Julie Verhage in New York at firstname.lastname@example.orgTo contact the editor responsible for this story: Anne VanderMey at email@example.com, Mark MilianFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- You’ve just witnessed the semi-annual Roku Inc. sell-off. It’s the time of year when investors come to the abrupt realization that they’ve probably paid too much to own shares of the high-flying streaming-TV company, as if valuing anything at 300 times Ebitda were ever rational. Here’s how it usually goes down: An equity analyst downgrades Roku, sending the stock into a tailspin, which leaves onlookers wondering what terribly bad thing occurred at the company — or what a Roku even is. This time, that analyst was Benjamin Swinburne of Morgan Stanley. He cut his rating to the equivalent of a “sell,” and oh, did the market listen: Roku plunged 15% on Monday for one of the Nasdaq’s worst post-Thanksgiving showings.But what changed the last few days between carving the turkey and putting up the Christmas tree? Nothing, really. In fact, Roku’s stock price is still up 344% for the year, and it’s still the most popular streaming-TV device. As of last week, the company was valued at a whopping 322 times analysts’ forward 12-month Ebitda forecasts. Swinburne’s report explained that while Roku’s strategy is sound, its sky-high valuation is unjustified given that revenue growth is projected to slow.When several other analysts gave a similar word of caution in April, it sparked a sell-off then, too. But just as I noted at the time, it’s not that Roku’s business prospects were suddenly and dramatically altered; it’s more a function of an overheated stock price. If you think a perpetual cash-burner like Netflix Inc. is pricey, keep in mind that Roku’s own Ebitda multiple is still almost 10 times higher, even after Monday’s drop:Part of the problem is that in the bewildering market for streaming-TV services, it’s difficult to grasp what Roku does and to hedge what its role will be in the streaming wars. And certainly the $1.7 billion of short interest in Roku shares (per S3 Partners data) adds a degree of pressure to its trading price.Roku is fighting the giants of the streaming world on two fronts. It sells hardware and provides software that’s pre-installed on certain television sets, all of which allow users to access their video-app subscriptions, such as Netflix, Disney+ and CBS All Access in one place. Roku is also competing for advertising dollars through the ad-supported Roku Channel, which is less of a channel in the traditional cable-TV sense and more of a hodgepodge of free movies and shows for cord-cutters looking to save money. Roku devices accounted for 44% of all connected-TV viewing hours in the latest quarter, while Amazon.com Inc.’s Fire TV is in a distant second place with a 20% share, according to Conviva, an industry analytics firm. That’s a strong lead, but competition will intensify. The next frontier in streaming is offering bundles that help solve the consumer pain point of needing to pay for multiple apps individually. Eventually, users will gravitate to platforms with this capability. Comcast Corp.’s Flex platform, I argued last month, may be a step toward bundling streaming services in the way the cable giant packages traditional TV channels and its other services. Apple Inc.’s Apple TV Channels already allows users to subscribe to select apps on an a-la-carte basis through their Apple IDs. But the warnings about the growth outlook require a bit of context: We’re talking about a business that increased revenue by 50% in the third quarter and is projected to do so again this quarter. A slowdown from that level would still be a dream for many corporations its size. “Roku reported a strong quarter for just about any company but Roku,” is how Alan Gould, an analyst for Loop Capital Markets, put it in a note to clients last month. Roku also added 1.7 million active accounts — that’s almost the same number of people who quit traditional pay-TV services such as Comcast’s Xfinity, AT&T Inc.’s DirecTV and Charter Communications Inc.’s Spectrum in the same period. And if Roku’s $16 billion market value shrank enough, an acquirer might just swoop in for the company and all those users and TV-manufacturer relationships.So things aren’t quite as bad for Roku as one might infer from Monday’s plunge. They really aren’t bad at all. But Roku’s the small fry in a land of giants, and even if it doesn’t get trampled, its lavish stock price will keep taking hits.To contact the author of this story: Tara Lachapelle at firstname.lastname@example.orgTo contact the editor responsible for this story: Beth Williams at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Investing.com – Roku (NASDAQ:ROKU) shares fell sharply on Monday after Morgan Stanley sounded the alarm on the streaming media platform's valuation amid rising competition and slowing growth.
(Bloomberg) -- The trades at the heart of a probe that’s now rocking Morgan Stanley’s currency desks were bets linked to the Turkish lira managed by a 27-year-old trader.The firm is investigating suspected mismarking of securities to conceal losses of as much as $140 million in a portfolio handled day-to-day by London-based Scott Eisner, a 2014 Yale University graduate and associate at the firm, according to people with knowledge of the matter. Morgan Stanley has already fired or placed on leave a handful of traders in connection with the incident, said the people, who asked not to be named discussing confidential information.The wager was tied to the Turkish lira, the people said, a currency that whipsawed investors in 2018 and earlier in 2019 amid mounting political tensions. Those swings caused issues for a number of firms across the financial industry, and now Morgan Stanley is grappling with how its losses happened and whether there were efforts to cover them up.At least three other traders have been swept up in the probe, including foreign-exchange options trader Rodrigo Jolig, also based in London. Two senior colleagues, Thiago Melzer and Mitchell Nadel, are based in New York. Their ultimate employment status isn’t yet clear, but at least some of them are leaving the bank, the people said. Eisner declined to comment, as did Nadel. The other traders didn’t return calls seeking comment.Morgan Stanley’s internal probe is ongoing and it’s unclear what the ultimate findings will be. It’s also uncertain how much autonomy Eisner had on the trades or if he was following directives from superiors. A spokesman for Morgan Stanley declined to comment.The Turkish lira has tripped up Wall Street traders in the last couple of years as the currency fluctuated with the country’s volatile politics. BNP Paribas SA and Barclays Plc were among lenders that lost tens of millions of dollars last year amid wild swings in prices on Turkish assets while Citigroup Inc. faced losses of up to $180 million on a loan to a client that had made wrong-way bets linked to the currency.Traders were caught again in March amid uncertainty in the days running up to an election that tested support for President Recep Tayyip Erdogan, and the cost of borrowing liras overnight soared past 1,000 percent. Volatility in the currency has since calmed to its lowest in more than a year.In so-called mismarking, the value placed on securities doesn’t reflect their actual worth. The scope of the probe at Morgan Stanley includes currency options that give buyers the right to trade at a set price in the future, enabling them to both speculate and hedge against potential losses, the people said. Dealing in foreign-exchange options surged 16% to $294 billion per day in April, according to the most recent data from the Bank for International Settlements.Morgan Stanley’s currency options desk has struggled this year amid a slump in the volatility that generates profits for traders, even in the more unruly emerging markets, according to a person with knowledge of the performance. The JPMorgan Global FX volatility index trades at the lowest since the summer of 2014.It has been a turbulent week for securities firms in London and New York after Citigroup was fined 44 million pounds ($57 million) by the Bank of England for years of inaccurate reporting to regulators about the lender’s capital and liquidity levels. The incidents point to weak internal controls at investment banks a decade on since the financial crisis.Natixis SA, the French lender roiled by risk-management problems since last year, has suspended a senior trader at a subsidiary in New York pending an internal investigation, Bloomberg News reported this week.Officials at the French bank are reviewing issues around how some of the senior trader’s transactions have been recorded, the people said. The bank is also examining how he managed his portfolio of trades, they said, requesting anonymity as the details aren’t public.\--With assistance from Silla Brush and Michelle F. Davis.To contact the reporters on this story: Stefania Spezzati in London at firstname.lastname@example.org;Donal Griffin in London at email@example.com;Viren Vaghela in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Ambereen Choudhury at email@example.com, ;Michael J. Moore at firstname.lastname@example.org, Sree Vidya BhaktavatsalamFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Morgan Stanley fired or placed on leave at least four traders over an alleged mismarking of securities that concealed losses of between $100 million and $140 million, according to people with knowledge of the matter.The firm is investigating the suspected mismarking, which was linked to emerging-market currencies, said the people, who asked not to be identified as the details are private. Tom Walton, a spokesman for the New York-based bank, declined to comment.The traders who have been identified as part of the probe include Scott Eisner and Rodrigo Jolig, both based in London, and two senior New York-based colleagues, Thiago Melzer and Mitchell Nadel, the people said. Eisner, Jolig, Melzer and Nadel didn’t respond to requests for comment. Their ultimate employment status isn’t yet clear, but at least some of them are leaving the bank, the people said.Melzer was given responsibility for foreign exchange and emerging-markets Americas trading in March, while Nadel runs macro trading in the Americas, including rates and currencies. Eisner was managing orders for the Central and Eastern Europe, Middle East and Africa currency book, known as CEEMEA, according to his LinkedIn profile.In so-called mismarking, the value placed on securities doesn’t reflect their actual worth. The scope of the probe at Morgan Stanley includes currency options that give buyers the right to trade at a set price in the future, enabling them to both speculate and hedge against potential losses. Dealing in foreign-exchange options surged 16% to $294 billion per day in April, according to the most recent data from the Bank for International Settlements.Morgan Stanley’s currency options desk has struggled this year amid a slump in the volatility that generates profits for traders, even in the more unruly emerging markets, according to a person with knowledge of the performance. The JPMorgan Global FX volatility index trades at the lowest since the summer of 2014.Third QuarterThe Wall Street firm booked some of the losses in the third quarter, one of the people said. Morgan Stanley reported a 21% increase in overall fixed-income trading revenue, a result that was “partially offset by a decline in foreign exchange,” according to its third-quarter earnings presentation.The probe shows “the amount of effort still needed in these large organizations to reduce episodes of misconduct,” said Angela Gallo, a finance lecturer at Cass Business School. “The frequency of misconduct cases in the U.S. and Europe in recent years speaks very loudly that more fundamental changes are required.”It has been a turbulent week for securities firms in London and New York after Citigroup Inc. was fined 44 million pounds ($57 million) by the Bank of England for years of inaccurate reporting to regulators about the lender’s capital and liquidity levels. The incidents point to weak internal controls at investment banks a decade on since the financial crisis.Natixis SA, the French lender roiled by risk-management problems since last year, has suspended a senior trader at a subsidiary in New York pending an internal investigation, Bloomberg News reported this week.Officials at the French bank are reviewing issues around how some of the senior trader’s transactions have been recorded, the people said. The bank is also examining how he managed his portfolio of trades, they said, requesting anonymity as the details aren’t public.(Updates with additional details in final paragraph.)\--With assistance from Silla Brush.To contact the reporters on this story: Stefania Spezzati in London at email@example.com;Donal Griffin in London at firstname.lastname@example.org;Viren Vaghela in London at email@example.comTo contact the editors responsible for this story: Ambereen Choudhury at firstname.lastname@example.org, Dale CroftsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
The Morgan Stanley Infrastructure Partners (MSIP) fund has extended its offer to buy German renewable firm PNE AG by two weeks to Dec. 12, it said on Thursday. MSIP's bid of 4.00 euros per PNE share, valuing the group at 306 million euros, has been rejected by top-10 shareholders ENKRAFT and Active Ownership Corporation. ENKRAFT, which holds more than 2.9% of PNE, has said that a fair offer would be 6.90-7.10 euros per PNE share, valuing the firm at up to 544 million euros.
(Bloomberg) -- China has ordered local governments to speed up the issuance of debt earmarked for infrastructure projects, so that the proceeds can be invested early in 2020 to help shore up the slowing economy.All localities are required to allocate the recently issued “special bond” quota of 1 trillion yuan ($142 billion) “as soon as possible” to specific projects, the Ministry of Finance said in a statement late Wednesday. There were no details on when the sales will actually begin, or what the total quota for 2020 will be. Analysts disagreed on whether the statement implies issuance will start as soon as December.Until this year, sales of the bonds began in March, after the legislature formally approved the annual budget. In 2019 bond issuance began in January so that the money could be spent earlier and faster on infrastructure projects to boost demand. The announcement on Wednesday shows that the government is trying to jump-start that process even earlier next year.The decision indicates a willingness among policy makers to inject more stimulus into the economy, according to a note from Bloomberg Economist Qian Wan. “The front loading of special bond issuance will also ensure funding for infrastructure projects at the beginning of next year” and the size suggest the quote may exceed the 2.15 trillion yuan one this year, she wrote.The yield on benchmark 10-year government bonds briefly rose about 2 basis points to near 3.2% following Wednesday’s announcement. It then fell Thursday to 3.18%. Shanghai rebar futures were down 0.1% at 10:08 a.m. Thursday.So-called special bonds have mostly been used for infrastructure spending. The State Council, China’s cabinet, in June expanded the sectors that funds raised via the special bonds can be put toward. For 2020, they will include transport, energy, agriculture and forestry, vocational education and medical care.“This move echoes our view of a supportive policy stance,” Morgan Stanley economists led by Robin Xing wrote in a note. “The issuance could start as early as next month, and focus on infrastructure projects in Southern China which could operate smoothly during winter.”Analysts at Tianfeng Securities Co. were more conservative on the timing, predicting issuance will likely only start early next year.“Now the chance of issuing quota by the end of this year is very low,” analysts led by Sun Binbin wrote in a note. “The beginning of next year could be more likely.”(Adds market prices in fifth paragraph, quote in eighth paragraph)\--With assistance from Crystal Chui.To contact Bloomberg News staff for this story: James Mayger in Beijing at email@example.com;Claire Che in Beijing at firstname.lastname@example.orgTo contact the editors responsible for this story: Jeffrey Black at email@example.com, Sofia Horta e CostaFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.Activist investor Elliott Management Corp. said that Capgemini SE’s offer for Altran Technologies SA is inadequate and called the sales process flawed.Elliott, which has built up a position of more than 10% in Altran, believes that a fair value for the company is more than 20 euros a share, based on analysts’ estimates for the company’s future earnings, it said in a statement on Wednesday. The firm had said in an earlier filing that Capgemini’s current offer of 14-euros-a-share, or 3.6 billion euros ($4 billion) excluding debt, undervalues the company.“Altran shareholders are offered an inadequate premium to forgo the company’s promising standalone prospects, despite the huge value-creation potential of the combination,’’ Elliott said in the statement.Altran shares rose 0.2% to 14.07 euros at 10:25 a.m. in Paris. The stock’s gained about 23% since Capgemini’s offer in June.Capgemini’s incoming CEO Aiman Ezzat said at the Morgan Stanley European Technology, Media & Telecom Conference in Barcelona this month that the company’s bid for Altran isn’t going up. The deal was supposed to close this year, but has likely been delayed until 2020 after a shareholder lobby raised objections in a French court.A spokesman for Capgemini said the company doesn’t have any further comment. A spokeswoman for Altran said that they’ve been in touch with Elliott and is aware of its concerns, and that the company believes that the sales process has followed regulations.Read more about the shareholder lawsuit here.The Altran deal will help address an engineering shortage in Europe and the U.S. that’s left tech companies short on employees, Ezzat said. When combined Capgemini and Altran -- also based in Paris -- will be able to help clients in areas such as cloud computing, the internet of things, 5G, and artificial intelligence software, Capgemini’s current CEO Paul Hermelin said in a statement in June when the deal was announced.“There’s much more demand for engineers than there is capacity in the western world,” Ezzat said in Barcelona. “There’s no alternative unless we find a way to automate all the engineering work.”The deal announced in June requires that 50.1% of Altran shares be tendered for the transaction to proceed. Under French law, Capgemini would need 90% of shares to squeeze out the minority holders, making Elliott raising its stake to more than 10% a pivotal consideration.(Updates with Elliott quote in third paragraph. A previous version corrected the timing of an earlier Elliott statement.)To contact the reporter on this story: Amy Thomson in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Giles Turner at email@example.com, Amy ThomsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- One day after Uber Technologies Inc.’s future in London was cast in doubt, rival Ola said it had started signing up drivers in London on Tuesday and will start service in the city within weeks.Ola had been expected to begin its London business before the end of the year, but the company now expects a January launch, according to a person with direct knowledge of the matter who didn’t want to be named discussing private plans.The Indian ride-hailing company, backed by SoftBank Group Corp., said it already served “millions” of customers in other U.K. cities since its rollout last year, including Liverpool, Birmingham and Bristol.The company held “constructive conversations” with local authorities and would be “fully compliant” with rules set by transit authority Transport for London, Simon Smith, Ola’s international head, said in a statement Tuesday.Market leader Uber was banned from London on Monday by TfL over concerns about customer safety, after its app was shown to be vulnerable to drivers faking their identities. The company said it will appeal, but the decision gave competitors an opportunity to muscle in on the negative attention.In its statement, Ola said it would launch in London with driver facial recognition technology and systems to “eliminate misrepresentation.” Uber said Monday it would also bring a facial recognition system to London, but didn’t say when. Ola, owned by ANI Technologies Pvt, is also Uber’s biggest rival in India.The company won’t be short of competition for riders in the lucrative U.K. market. Daimler AG-backed Bolt, formerly known as Taxify, relaunched in London in June around the same time French private-hire limousine operator Kapten started service in the British capital. Rival Wheely relocated its headquarters from Moscow to London earlier in the year.Still, Ola should be Uber’s biggest concern, according to analysts at Morgan Stanley. If reports are accurate, Bolt has only raised around $190 million to $280 million in funding so far, compared with the $3.8 billion Ola is said to have racked up, analysts led by Brian Nowak said in June.“We believe Ola is arguably a greater threat if media reports of Ola’s entry into London at the end of the year prove accurate,” the analysts said at the time.To contact the reporter on this story: Nate Lanxon in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Giles Turner at email@example.com, Amy ThomsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Morgan Stanley Infrastructure Partners' offer for PNE which values the German renewable firm at 306 million euros (262.67 million pounds) is too low, small shareholders group SdK said on Tuesday. Morgan Stanley had secured a 21.9% stake as of Nov. 15. "The cash compensation seems inadequate in our view," SdK said in a statement.
Morgan Stanley today announced that it will redeem in whole its outstanding 6.625% Non-Cumulative Preferred Stock, Series G, liquidation preference $25,000 per share (61762V408) (the "Series G Preferred Stock"), and the depositary shares, each representing a 1/1,000th ownership interest in a share of Series G Preferred Stock (CUSIP 61762V507; NYSE: MS PrG) (the "Series G Depositary Shares"), on January 15, 2020 pursuant to the optional redemption provisions provided in the documents governing such Series G Preferred Stock and Series G Depositary Shares. The redemption price per Series G Depositary Share will be $25. Such redemption price does not include the dividend payment that, if declared, will be payable on the redemption date in the ordinary course to holders of record on the record date for such dividend payment.
Here's why we are starting to see some big deals like LVMH buying Tiffany and Charles Schwab buying TD Ameritrade in the world of finance.
(Bloomberg) -- Explore what’s moving the global economy in the new season of the Stephanomics podcast. Subscribe via Apple Podcast, Spotify or Pocket Cast.The International Monetary Fund called on Japan’s government and the Bank of Japan to cooperate more in support of the economy as it cut its 2019 growth forecast for the third time this year amid heightened global risks.Speaking at the conclusion of the fund’s annual mission to review Japan’s economy, IMF Managing Director Kristalina Georgieva essentially gave a green light for Prime Minister Shinzo Abe’s planned stimulus package as she called for continued spending to prop up growth and prices.Japan’s Abe Calls for Extra Spending for Disaster Relief, GrowthThe fund also made several recommendations to make Bank of Japan policy more sustainable, including the targeting of shorter-term bonds, while reiterating its call for more ambitious structural reforms to boost growth.The IMF recommendations come as Abe’s administration mulls the scale of planned stimulus to support growth in the face of a sales tax hike, damage from recent typhoons and a decelerating world economy. Economists and policy makers see a greater need for the government to step in to keep the economy ticking over as the BOJ runs short of additional ammunition.“The IMF’s comments add support to Abe’s fiscal stance. He wants to do a speedy and substantial stimulus in case there’s an economic slowdown after the sales tax hike just as existing public spending peaks out,” said Hiroshi Miyazaki, a senior economist at Mitsubishi UFJ Morgan Stanley.Georgieva said the resilience of Japan’s domestic demand would be tested by a synchronized global slowdown in the near future and by the country’s own demographics in the longer term.“Fiscal policy should be supportive to protect near-term growth and promote inflation momentum,” Georgieva said while reminding policy makers in Japan that eventually they would still need to rein in the country’s towering public debt. “Beyond the short-run, a clear commitment to long-term fiscal sustainability is essential.”Read More: World Economy Chiefs Flirt With FiscalThe IMF trimmed its growth forecast for the world’s third-largest economy this year to 0.8% from 0.9%, and forecast a slowing to 0.5% next year, matching the country’s potential growth rate.The fund said Japan should not tighten its spending stance for now, suggesting that measures aimed at supporting growth through the sales tax hike should be extended. Those measures, including rebates for cashless payments and tax breaks on housing and car purchases, had already helped smooth out demand, the fund said.Public money could also be used to raise pay for workers in the health care sector, offer incentives for firms to raise wages, and widen the availability of childcare facilities, the fund added.Among pressing structural reforms to improve labor market flexibility and corporate governance, the fund flagged the importance of addressing the duality of Japan’s job market. Breaking the wall that separates secure lifetime employees from contracted workers by giving them equal working conditions would improve productivity, it said.Easing SustainabilityThe IMF called on the BOJ to maintain its support for the economy while honing its policy measures to make them more sustainable.The central bank could reduce the side effects of its prolonged easing on financial institutions by shifting its 0% yield target on 10-year Japanese government bonds to a shorter maturity and by cutting back its buying of longer-term JGBs. Such actions should steepen the JGB yield curve, which would help financial institutions’ profitability.The BOJ could also consider adopting an inflation target range to give it more flexibility on policy, while making its decisions more closely linked to forecasting by its staff, rather than the views of board members.What Bloomberg’s Economist Says“The IMF’s Article IV consultation for Japan points to fiscal policy taking the driver’s sheet for now, while suggesting a more simplified monetary policy framework focusing on the yield curve rather than the quantity of asset buying. While that approach may offer more clarity and consistency, it’s a combination that could also push up the yen, an outcome the Bank of Japan surely wants to avoid.”\--Yuki Masujima, economist(Adds more comments from IMF’s Georgieva)\--With assistance from Emi Urabe.To contact the reporter on this story: Yoshiaki Nohara in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Malcolm Scott at email@example.com, Paul Jackson, Jason ClenfieldFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Investors and strategists in the bond markets rarely, if ever, come out firmly against their own asset class. Rather, they opt to use language like “be selective,” “move up in credit quality” or “clean up portfolios.”This is what’s happening now in the once red-hot market for collateralized loan obligations. In October, while U.S. stocks soared to records and high-yield bonds posted their fifth consecutive monthly gain, the pools of leveraged loans quietly faced something of a reckoning. Prices on double-B CLOs tumbled to the lowest in more than three years, according to data from Palmer Square Capital Management. In the span of about six weeks, their yields shot higher by 110 basis points while those on double-B corporate bonds dropped by 43 basis points, creating the widest spread between the two similarly rated assets since March 2016. Double-B leveraged loans themselves barely budged.At first glance, this would seem to be an obvious buying opportunity. A double-B rating is below investment grade but doesn’t signal inevitable distress, after all. Of course, there’s a catch — and it’s a big one. The same capital structure that has long been cited as an appealing attribute of CLOs is now seen as a looming hazard for investors. The weakest leveraged loans are looking more vulnerable to default. If enough did so, that would threaten portions of the CLO debt stack, often starting with the double-B segment.“Loans, as a whole, absorbed much of the public market lending excesses in recent years,” Citigroup Inc. strategists led by Michael Anderson wrote in a Nov. 15 report. “Loans financed over the past few years during extremely loose lending standards are beginning to season and reveal fundamental cracks. We expect that trend to continue. Consequently, we recommend investors focus on clean portfolios from stronger managers.”Morgan Stanley, in a Nov. 19 report, drew a similar conclusion. “Our Leveraged Finance Strategy team is calling for leveraged loan defaults to double next year and for downgrade pressures to continue. Higher default rates will likely be accompanied by lower recoveries resulting from an increase in loan-only structures and weakening covenant quality.” In the bank’s base-case scenario for 2020, top-rated CLOs will outperform double-B rated debt. There’s still a ways to go before those who have long predicted doom for CLOs are proved right. In many ways, this is all just another side of the consensus story in credit markets. The lowest-rated corporate debt has stumbled in 2019 as investors increasingly fret that slowing global growth will spell trouble for teetering companies. If a larger number of weak leveraged loans fail to pay, that would first choke off payments to holders of CLO equity, followed by the single-B CLO tranche (if there is one), then the double-B tranche, and so on.The pressing question for CLO investors is the magnitude of any shakeout. By Morgan Stanley’s calculations, it would take a so-called constant default rate within the pool of 11.5% over the life of the deal for the double-B tranche to take a principal writedown. By contrast, it would take a whopping 80.8% default rate for top-rated CLOs to take a hit. That huge buffer is why they famously never defaulted, even during the financial crisis.I hesitate to draw parallels between weak leveraged loan covenants and poor underwriting standards for subprime mortgages in the mid-2000s because calling CLOs the next CDOs is too neat a comparison and unlikely to play out in reality. And CLOs are certainly nothing like the toxic “CDO-squared” structures, which created all sorts of now-obvious contagion risks. Plus, financial regulators are well aware of the boom in leveraged lending, and everyone from the Financial Stability Board to the International Monetary Fund to the Bank for International Settlements has said they’re monitoring the risks. If loan defaults start to pile up, few can feign ignorance.However, subprime mortgage default rates are a stark reminder of what a true worst-case scenario looks like. According to a 2010 report from the Federal Reserve Bank of Chicago, 23.4% of subprime mortgage loans originated in 2004 defaulted within the first 21 months. That figure jumped to 31.7% for 2005 and 43.8% for 2006 before coming down to 32.2% for 2007.Unless the U.S. falls into a deep and long-lasting recession, it seems highly unlikely that leveraged loans could even come close to reaching such lofty default figures. I buy the argument that the corporate debt is less concentrated in one specific area and therefore less prone to widespread collapse. And there’s obviously a difference between weaker loan covenants and some of the outright fraud perpetuated during the subprime crisis.And yet a low-double-digit default rate doesn’t feel impossible, which helps explain the sell-off in double-B CLOs. Fitch Ratings said in a note this month that loans on its troubled-loan watchlist made up 6.2% of the overall CLO portfolio at the end of the third quarter, up from less than 5% three months earlier. In at least some pockets of the leveraged-loan market, things are starting to become dicey. Morgan Stanley’s report makes clear what’s at stake for investors in the coming year. The bank’s base case calls for a modest 0.75% excess return in 2020 for double-B CLOs. However, its bullish case sees a 25.75% gain for the debt, while the bearish case would produce a 9.25% loss. That’s a wide range of outcomes. “If sentiment on corporate credit materially improves, we think high-beta CLO BBs offer more upside than any other investment in the securitized products space,” the strategists wrote.Is that a risk worth taking? Judging by last week, at least some investors are betting the sell-off went too far, with the yield on double-B CLOs falling by the most since May.But nothing has changed fundamentally as of late. Bond investors are still shying away from the riskiest credits, even with the widest spreads in 11 months. The economic outlook calls for slow, unspectacular growth, and news that “phase one” of a U.S.-China trade deal could be pushed off until next year doesn’t help matters. It’s not exactly a robust environment for shaky companies.So in that sense, it’s understandable why CLO investors are getting picky. It’s not time to bail on the structures entirely, but seeking higher ground might not be such a bad idea when the potential wave of defaults is just starting to form.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
(Bloomberg) -- The ultra-secret world of ultra-wealthy investors is becoming slightly more transparent.Addepar Inc., whose investors include billionaire Peter Thiel and Palantir Technologies co-founder Joe Lonsdale, is working with hundreds of money managers to give a better sense of where their clients invest. Assets linked to the firm’s technology are growing at an average of $10 billion a week and have reached $1.7 trillion, Addepar Chief Executive Officer Eric Poirier said.It doesn’t handle the money. Addepar helps manage data for firms like Morgan Stanley, Jefferies Financial Group Inc. and an array of registered investment advisers, poring over complex information that for many years had been hard to aggregate. That includes data for hard-to-value private assets like hedge funds, artwork and real estate held by wealthy clients.“We’ve effectively built industrial-strength plumbing” to securely allow investors to put all of their holdings online in one place, Poirier said in a phone interview.Mountain View, California-based Addepar now has more than 400 clients, including family offices, banks and registered investment advisers. Its growth comes as private equity and debt firms have been raising record sums of cash and investors seek yield away from more easily tracked public markets.Lonsdale started Addepar in 2009 upon leaving Palantir, and by 2012 the firm had just a couple dozen customers and was composed of mostly young, male engineers. Since then it has hired industry veterans including David Lessing -- a former executive at Morgan Stanley’s wealth manager. Ex-Blackstone Group Inc. executive Laurence Tosi joined the board.Tosi said he believes Addepar will grow faster as markets get tougher because more clients will want control over their assets in times of heightened volatility.“It’s quite cumbersome in crisis if you don’t have, what I call, eyes on the battlefield,” Tosi said. Given that most wealth managers have oversight for only a portion of clients’ total assets, he said Addepar’s “innovation curve has been faster.”Addepar isn’t alone in collecting data in the opaque world of private assets. Financial-technology firm iCapital Network has been working with banks and RIAs and has added $42.3 billion of assets to its platform since its 2013 founding, according to its website.To contact the reporter on this story: Sonali Basak in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Michael J. Moore at email@example.com, Dan Reichl, Peter EichenbaumFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg) -- Saudi Aramco’s bankers are seeing sufficient early demand to pull off the state oil giant’s initial public offering just three days after launching the deal, people with knowledge of the matter said.The IPO arrangers are indicating in private discussions that they already have nearly enough orders to cover the institutional portion of the deal, the people said, asking not to be identified because the information is private. They still have more than two weeks to go, as fund managers can subscribe to the stock until Dec. 4, according to Aramco’s prospectus.Building early momentum is important in large equity offerings, as investors are encouraged to jump in when they see other institutions rushing to buy shares. The precise amount of real demand will only become clear later once underwriters compare the orders they’ve received, the people said.Saudi authorities have been pulling several levers to try and make the deal a success, pressuring the kingdom’s richest families to invest and loosening margin lending rules for banks. They’ve been negotiating commitments from the billionaire Olayan family, who own a major stake in Credit Suisse Group AG, and Saudi Prince Alwaleed Bin Talal, Bloomberg News reported earlier this month.Domestic PitchAramco representatives have also been seeking investments from the Almajdouie family, who distribute Hyundai Motor Co. vehicles in the kingdom, and members of the Al-Turki clan, people with knowledge of the matter have said. Saudi Arabia is seeking to sell about a 1.5% stake in Aramco at a valuation of as much as $1.71 trillion, with proceeds going to the country’s sovereign wealth fund. About a third of the offering has been set aside for retail investors. Aramco, officially known as Saudi Arabian Oil Co., declined to comment.The Wall Street banks working on the transaction are set to lose out on a highly anticipated fee windfall after the deal was pared back from a record global offering to a mainly domestic affair. The foreign underwriters will be compensated for costs but may not be paid enough to make a meaningful profit from the deal, people with knowledge of the matter said.Goldman Sachs Group Inc. and Morgan Stanley are among the banks that may miss out on the payday. Aramco was initially expected to pay $350 million to $450 million to the more than two dozen advisers on the deal, including banks, lawyers, marketing firms and advertising agencies, Bloomberg News reported in October.After senior bankers delivered pitches that Aramco would be able to the achieve Crown Prince Mohammed bin Salman’s $2 trillion target with a 5% sale, the Saudi government and Aramco management are frustrated Wall Street’s biggest names were unable to deliver on those ambitions.(Updates with chart.)To contact the reporters on this story: Archana Narayanan in Dubai at firstname.lastname@example.org;Matthew Martin in Dubai at email@example.com;Dinesh Nair in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Ben Scent at email@example.com, ;Stefania Bianchi at firstname.lastname@example.org, Matthew MonksFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.