Wall Street Breakfast: Winds Of Change In The IPO Market

by: Wall Street Breakfast
Wall Street Breakfast
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Ding-dong! The IPOs aren't dead, as Dong Energy prepares to launch Europe's biggest offering so far this year, listing its stock on Nasdaq OMX in Copenhagen. The world's largest offshore wind energy operator has sold 17.4% of its shares to raise 17.1B kroner ($2.6B), giving the company a market value of 98.2B kroner ($15B). Along with the Danish government, which holds over 50% of Dong, a Goldman-controlled (NYSE:GS) entity owns 14.7%, although that stake has been subject to heated controversy.


Markets in Asia got off to a downbeat start despite a solid session stateside which saw the Dow close above 18,000. Consumer inflation in China eased for the first time in eight months, rising an annual 2% in May, while the Nikkei fell under pressure due to a strengthening yen and Japanese machine orders that plunged 11% M/M. While some of the decline can be attributed to the Kumamoto earthquakes, the figure likely means the nation's business investment will remain weak for most of 2016.

The New Zealand dollar surged to a one-year high overnight after the Reserve Bank of New Zealand kept interest rates unchanged at 2.25%, surprising some investors who had been betting on a rate cut. The kiwi was up 1.7% at $0.7140 and climbed to $0.7148 at one point, reaching a high not seen since June 2015. RBNZ Governor Graeme Wheeler said later at a media conference the bank would not hesitate to adjust interest rates if needed.

Europe is at risk of suffering lasting economic damage from weak productivity and low growth, ECB President Mario Draghi told the Brussels Economic Forum, underscoring his argument that monetary policy alone cannot end the bloc's problems. In a plea for help, Draghi outlined three policy priorities to achieve higher productivity levels: 1) Consolidating the EU's single market 2) instituting reforms that allow firms to scale up quickly, and 3) improving human capital through education and training schemes.

A Fed rate hike looking even less likely? The dollar has hit a five-week low against the yen, hurt by falling Treasury yields amid waning expectations the FOMC will lift interest rates anytime soon. The outlook also sent German 10-year Bund yields to a new record low of 0.034%, not far from the negative territory at which trillions of dollars worth of global bonds already trade, and is pushing world equities into the red.

Legislation helping Puerto Rico dig out of its $70B debt crisis is set for a vote in the House today after a panel fended off attempts to open the bill to a series of controversial amendments. Supporters hope to get it enacted into law before July 1, when the island faces a deadline for making a $1.9B debt payment that it might not be able to fulfill.


After a long hiatus, George Soros has returned to trading, lured by opportunities to profit from what he sees as coming economic troubles. Soros Fund Management, which manages $30B for the billionaire and his family, sold stocks and bought gold and shares of gold miners, anticipating weakness in various markets. In an interview with the WSJ, Soros noted particular concerns over China, Greek challenges and a potential Brexit that could lead to the EU's collapse.

Lenders are rebelling against their central banks' negative interest rate policies, with reports suggesting Commerzbank (OTCPK:CRZBY) going so far as to weigh storing billions of euros in vaults rather than keeping them with the ECB. Some savings banks in Bavaria are also exploring storing physical notes and Munich Re said this year it would experiment with holding at least €10M of reserves in cash to see whether or not it was practical.

Speaking at a BofA Merrill Lynch conference, Verizon (NYSE:VZ) CFO Fran Shammo said the recently resolved seven-week labor strike is expected to impact the company's Q2 bottom line to the tune of $0.05-$0.07 per share. The costs are coming from overtime paid to management employees, hiring contract workers and a decrease in new business installations. Full-year financial results may also get hit.

As the world's biggest telecoms continue to pivot toward TV and online video, Britain's Vodafone (NASDAQ:VOD) has agreed to a combine its New Zealand operations through a $2.4B merger with the local unit of Sky Network (OTC:SKKTY). "This is a significant and positive step in Sky's evolution," CEO John Fellet said in a statement. Vodafone NZ has 2.35M mobile connections and more than 500K fixed-line connections in the country, while Sky has over 830K subscribers. VOD -1.5% premarket.

Nike is sticking with star Maria Sharapova after the International Tennis Federation suspended her for two years for using a performance-enhancing substance. Her 2010 deal with the sportswear maker was said to be worth $70M over eight years. In the past, Nike (NYSE:NKE) has endorsed athletes following the completion of a drug ban, most notably sprinter Justin Gatlin, who ran for the company in the early 2000s.

A few hours after it was disclosed that Apple (NASDAQ:AAPL) plans to take only a 15% cut on App Store subscription revenue (down from a current 30%) following the first year of a subscription, Re/code reported Google (GOOG, GOOGL) was planning to lower its Google Play subscription cut to 15% from the start of a subscription. Apple will also begin showing search ads for apps across the App Store, similar to Google, which already shows app ads in the Play Store and within search.

MegaBrew is getting closer to a reality as AB InBev (NYSE:BUD) nears Chinese approval for its $107B takeover of SABMiller (OTCPK:SBMRY). As part of the tie-up, the companies have agreed to divest the maker of Snow beer, the world's top-selling brand. Approvals for both transactions could come as soon as this month, clearing one of the final hurdles for the largest beer deal in history.

Gasoline profit margins have fallen to their narrowest seasonal levels since 2010, dropping by $5/bbl in slightly more than two weeks, as high imports keep U.S. inventories elevated even as gasoline demand rises. "We're seeing the economics change to the point that many refiners along the coast are looking at maximizing jet fuel and diesel at the expense of gasoline," analyst Andy Lipow told Bloomberg. Related tickers: WNR, HFC, CVRR, VLO, TSO, NTI, ALJ

Despite shooting down battery rumors related to the Model 3, Tesla (NASDAQ:TSLA) may still use Samsung SDI (OTC:SSDIY) to supply cells for its energy division. Samsung shares have been on a roller coaster ride in response to Elon Musk's tweets (falling 8% on Wednesday and rebounding 3% early this morning). The company launched Tesla Energy last year to expand its business beyond EVs into supplying energy for homes and businesses.

Russia has unveiled a medium-range passenger plane called the MC-21, which is still undergoing testing but is due to enter serial production in 2017. During the glitzy Siberian ceremony, Prime Minister Dmitry Medvedev described the airliner as "cool" and stressed the importance of Russia remaining in the top league of planemakers despite the high costs involved. Boeing's 737 (NYSE:BA) and Airbus's A320 (OTCPK:EADSY) are on the lookout.

The NHTSA plans to release documents that will serve as the foundation for national regulations regarding autonomous vehicles next month, but the framework won't bar states from setting additional standards. The news is a blow to auto companies, which are seeing a potential patchwork of state laws beginning to pop up around the country. California, for example, has proposed barring self-driving cars that don't have steering wheels, pedals and a driver, and New Jersey wants to establish a special autonomous driver's license.

Wednesday's Key Earnings

Lululemon (NASDAQ:LULU) +4.9% increasing comparable-store sales.

Today's Markets

In Asia, Japan -1% to 16668. Hong Kong closed. China closed. India -1% to 26763.
In Europe, at midday, London -0.9%. Paris -0.9%. Frankfurt -1.3%.
Futures at 6:20, Dow -0.3%. S&P -0.4%. Nasdaq -0.4%. Crude -0.8% to $50.81. Gold -0.1% to $1261.10.
Ten-year Treasury Yield -2 bps to 1.68%

Today's Economic Calendar

8:30 Initial Jobless Claims
9:45 Bloomberg Consumer Comfort Index
10:00 Wholesale Trade
10:30 EIA Natural Gas Inventory
1:00 PM Results of $12B, 30-Year Note Auction
4:30 PM Money Supply
4:30 PM Fed Balance Sheet

Companies reporting earnings today »