Wall Street Breakfast: IPO Revival

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The market for initial public offerings looked like it might finally be recovering from the WeWork (WE) debacle before COVID-19 brought IPOs to a halt over the past two months, but there are now signs of life as capital markets recover. Online used car seller Vroom (VRM) is set to price shares between $15 to $17, aiming to raise about $318.8M at the top end of the range with a market cap of $1.92B. Shift4 Payments (FOUR) has also set terms for its initial public offering of common stock, while Warner Music (WMG) will price shares in what could become the largest New York IPO so far in 2020.

Heating back up

Hong Kong is seeing its first $1B+ listing in more than six months as Chinese internet company NetEase (NTES) launched a second listing that could raise as much as $2.8B. The financial hub hasn't had a hiatus of billion-dollar initial public offerings last this long since the financial crisis, when there were no such deals for almost a year. Only $3.47B has been raised through IPOs in Hong Kong this year, putting it behind both New York and mainland China.

Equities continue ascent

U.S. stock index futures are ahead by 0.7%, erasing an earlier loss following President Trump's promise to deploy the military if states and cities fail to quell the violence swelling across the nation. "The main focus once again appears on the longer-term prospects of the easing of lockdowns across the world, though if the violence on U.S. streets continues for much longer, U.S. investors might have to cope with a lockdown of a different kind, imposed by the National Guard," said Michael Hewson, an analyst at CMC Markets.

Gun demand expected to stay strong

Shares of American Outdoor (AOBC) and Sturm Ruger (RGR) jumped nearly 10% on Monday as gun background checks rose 75% in May - on an adjusted basis - to follow on strong months in March (+80%) and April (+62%). KeyBanc expects another gain in background checks for June. "People are watching the news," added Steve Sosnick, chief strategist at Interactive Brokers. "The market is anticipating that there will be increased interest and demand for firearms as a result of what’s going on in the world right now."

Trade deal in spotlight

State-owned Chinese firms bought at least three cargos of U.S. soybeans on Monday despite reports suggesting Beijing had ordered a freeze on American farm good purchases due to an escalation with the U.S. over Hong Kong. Sources also suggested that state purchases of U.S. pork, corn and cotton were put on hold. In jeopardy? Any sustained halt in buying would threaten progress in meeting goals set in the Phase One trade agreement signed in January.

Walkout at Facebook

Hundreds of Facebook (FB) employees, including some top managers, walked away from their work-from-home desks on Monday to accuse Mark Zuckerberg of inadequately policing President Trump's posts as strictly as Twitter (TWTR). "Facebook’s recent decision to not act on posts that incite violence ignores other options to keep our community safe. We implore the Facebook leadership to #TakeAction," they said in a joint statement. Reports suggest CEO Zuckerberg's weekly Friday Q&A session will be rescheduled for today in response.

Back in court

If Bayer (OTCPK:BAYRY) wants to keep its total Roundup liability capped at $10B, a problem inherited when it acquired Monsanto in 2018, it will be crucial to get a 2018 California court verdict overturned. The German chemical giant will ask the state appeals court today to throw out a jury conclusion that the herbicide product caused grounds keeper Lee Johnson's cancer. While he was awarded $289M before a judge cut the damages to $78.5M, Bayer has been reaching settlements in thousands of other cases that range from a few thousand dollars to several million per claim.

New business partners

Boeing (BA) has taken former partner Embraer (ERJ) to arbitration over a failed $4.2B transaction after a similar move by the Brazilian planemaker. The collapsed deal in April left Embraer scrambling for a plan B as its market value deteriorated due to the coronavirus pandemic. The company is now looking at China and India as potential business partners, following reports last week that said those two countries and Russia were interested in the planemaker's commercial jets division.

What else is happening...

Uber (UBER), Lyft (LYFT) suspend some service during curfews.

Seadrill (SDRL) to delist in NY; books $1.2B impairment.

Visa (V) reports U.S. payments volume recovery in May.

Sony (SNE) postpones reveal of PlayStation 5.

Zynga (ZNGA) buys Turkish mobile-game studio Peak for $1.8B.

Today's Markets

In Asia, Japan +1.2%. Hong Kong +1.1%. China +0.2%. India +1.6%.
In Europe, at midday, London +1%. Paris +1.8%. Frankfurt +3.5%.
Futures at 6:20, Dow +0.7%. S&P +0.7%. Nasdaq +0.7%. Crude +2.9% to $36.46. Gold flat at $1750. Bitcoin +5.8% to $10097.
Ten-year Treasury Yield +2 bps to 0.68%

Today's Economic Calendar

Auto Sales
8:55 Redbook Chain Store Sales

Companies reporting earnings today »

Comments

[WWG1_WGA_Q]

Banking sector doing pretty good today, as the biotech's take it on the chin. The REIT's are holding up nicely also, as for my REIT portfolio holdings, SPG, SLG , O & FRT all up substantially. Great day for my holdings.

[SB Pirate]

QQQ & Stuff: Lat post due to bike ride this morning.

Short Term: Volume yesterday was lite but the markets continue up and again are approaching their upper B-band which is where it is usually a good spot to try a hedge. Also, by Wednesday close the end of month monies going into 401ks should be over. EEM already punched up through it's upper Bband so watching there for a reversal. Also IWM appears to be setting up for a failing rally near the 200ema.

Medium Term: QQQ, wobbling around, No real direction. IWM and EEM still in buy the dip mode but flat lining. As in my last market post lots of conflicting signals.

Long Term: QQQ, up; IWM, still down but now about 10pts away from up. EEM, still down but now about 3 pts away from turning up.

UUP broke down long term several days ago. Don't see any direct stock market correlation but weaker dollar and 0% percent interest rates may make stocks more attractive as well as cryptos, commodities and necessities where the US$ price is expected to rise.

All a good day!

[probalduttaroy]

kramer & Kudlow were right. It's a buying opportunity!!!!!

[blueline]

"The market is anticipating that there will be increased interest and demand for firearms as a result of what’s going on in the world right now."

Ya think? The argument that "no one needs an AR-15" just collapsed, died, and got buried.

Gun sales plummeted at the beginning of the virus scare. Gun stores were open in most areas but people just didn't want to go out and shop. They're shopping now!

[WWG1_WGA_Q]

I live in ' big sky country' Montana & just about everyone owns a gun or two or three or four.....most of us hunt. Beautiful State. Lots of wide open spaces for miles & miles.

[newfruit]

So tell us @blueline who does need an AR-15?

Maybe you could tell us who should use an AR-15 and what it should be used for while you're at it.

Should the police use an AR-15 on American citizens? Or maybe you think some citizens should use an AR-15 on some other citizens? What exactly are you advocating, I'd like to know.

[belz]

Five police rushed-in an apartment unit in Toronto. A young women fell out of a window 5 floors to her death. What really happened? Manifestations in Toronto and cities across Canada are taking place.

But nobody is rushing gun stores and AR15s. Why the h**l do we need to do that here? It certainly not because we want more casualties.

[blueline]

"though if the violence on U.S. streets continues for much longer"

It won't. The riots and protests will fizzle out or be stomped out soon, just like the Corona.

[tewright2012]

Just like the Corona? You are joking right? Cases rising in 20 states as I post this.

[WWG1_WGA_Q]

If the 'weak' Governor's did their job instead of the higher command doing it for them, the protest's would have been short lived.

[Romank1990]

Its allowed to happen its a election season and trump has tendencies to say what everyone else is wanting to say and thinking about saying he says it and II just wish that they would stop making trump take bait and then tell everyone how bad it is when honestly if I was at my store and a gang of thugs are going to put my life and livelihood in danger and feared for my life I would defend myself and I hope every one else would black or white we bleed red and breath the same air and the Reparations for slavery made by that guy on national news well who alive owns slaves in America or even has a living relative who was a slave they deserve the money did we forget the holocaust which was just as bad in my opinion. And they had white slaves owned by blacks or can Egypt have to pay for the Israelites their ancestors that they never met enslaved Jews its not just black life’s its all life matters saying black lives matter is offending because it states only our lives matter and I have black friends brown friends and ironically the only person that got killed by police was a white kid they-beat him with flashlights To death but that didn’t make the news but his mother still felt the same pain

[Chris Lau]

Today’s stock pick: https://bit.ly/2AyupkM

Events in the US Today (EDT):

• ⁠8:55am - Redbook (MoM & YoY) [1/3 Volatility]
• ⁠9:45am - ISM NY Index (May) [1/3 Volatility]
⁠• ⁠ISM NY Business Conditions (May) [1/3 Volatility]
• ⁠4:30pm - API Weekly Crude Stock [2/3 Volatility]
• ⁠7:00pm - Total Vehicle Sales [1/3 Volatility
• ⁠7 states & Washington, D.C. head to polls as former Vice President Joe Biden could be set to officially become the Democratic presidential nominee
• ⁠The Senate will convene at 10 a.m. to resume consideration of the nomination of Victor Mercado to be an assistant secretary of Defense
• ⁠Carole Baskin awarded the zoo once owned by 'Tiger King' Joe Exotic

Events in Australia Today (EDT):

• ⁠12:30am - RBA Interest Rate Decision (Jun) [3/3 Volatility]
• ⁠9:30pm - GDP (QoQ-Q1) [3/3 Volatility]

Events in the World Today:

• ⁠Tropical Depression Three is forecast to become Tropical Storm Cristobal.
• ⁠The German government is set to approve a new fiscal stimulus package worth an estimated 80 billion euros.
• ⁠Russian Gov't is set to meet to discuss extending their output restraint agreement with OPEC.

Earnings Before Open:

• ⁠Dick's Sporting Goods
• ⁠Cracker Barrel
• ⁠Bao Zun
• ⁠Donaldson

Earnings After Close:

• ⁠Zoom
• ⁠Crowd Strike
• ⁠Digital Turbine
• ⁠Health Equity
• ⁠Ambarella
• ⁠Evero
• ⁠Medallia

[deercreekvols]

@Chris Lau - I look forward to your posts.

Thank you.

[WWG1_WGA_Q]

Damn! With all of Bayer's Roundup lawsuits out there, they're still selling that 'weed killer' in many hardware stores. I used Roundup quite a few times myself, that stuff really doe's kill everything it comes in contact with. Hmmm...I wonder if I could..... ?

[blueline]

Yes Roundup is still being sold and used throughout the world.

I have used Roundup/Glyphosate for decades and I still use it. It is extremely safe when used properly.

The law suits are scams to extort money out of a large corporation.

[rungrandpa]

"Yes Roundup is still being sold"
It's not safe to ingest. Oat growers use it to ensure uniform harvest. A trace stays in the oats until consumption.
I wrote Quaker about this. They responded that they do not add glyphosate to their product during milling.
We have switched to organically grown product for breakfast.
I use Roundup on our three acres for weed control.

[Frankj78]

It is safe when used in accordance with the label. The label is actually a legal document -- I learned that a long time ago in a herbicide training course.

Also, "if you don't want it IN you, don't get it ON you."

Wear the right clothing. Don't spray when it is windy. And don't add "just a little extra" chemical to the mix to make sure it works.

[Invader from Earth]

Ok. Not a peep about the completion of the M&A of $VTIQ and Nikola Motors at 11 am.

[WWG1_WGA_Q]

With online used car seller Vroom ( VRM ) set to go public, they should buy all of bankrupt Hertz Global Holdings, Inc.. used cars, as that would bring in some needed $$ for Hertz to pay creditors. Just a thought.

[WWG1_WGA_Q]

I don't know about you, but Twitter is biased, the proof is out there if you just look. Zuckerberg is siding with President Trump but doesn't condone some of his tweets. Any one looking for a new job at Facebook? They have many positions to fill if the "walkout" continues. I know of many unemployed people that would love a nice paying job at this current time.

[SayItWithLyrics]

Everyone is biased. You are biased, I am biased, everyone and every entity is biased. Media outlets have been biased for as long as there have been media outlets. Town Criers chose what to "cry" and "how to cry about it". That was their bias.

Twitter, Facebook, etc have a different problem. They have to decide if they are a publisher or a platform. The difference is that publishers can be as biased as they'd like, but they are accountable for what gets published. Platforms don't interfere with the use of their technology, and so have no accountability for the content others put on it.

Twitter is heading toward being a publisher. Zuckerberg is trying to steer FB toward being a platform. It is an important business choice. And employees who are wannabe activists don't yet realize that their first mistake as a publisher will get them fired.

[WWG1_WGA_Q]

@SayItWithLyrics great post...agree.

[smr36]

Platform vs. Publisher- the line blurs, like editorial vs. news reporting.

[Basit Saliu]

If Zynga is buying Peak, Take-Two should by ZeniMax.

[WWG1_WGA_Q]

One likely "winner' amid the COVID-19 crisis, Zoom will report earnings today after the closing bell. Zoom is up 198% so far in 2020 &added $20 billion in market cap since its last earnings report in March. I'm expecting a solid earnings beat aided by record subscription's during the last QTR & the shares should Zoom higher after hours imhoo.
(edited)

[SayItWithLyrics]

As the Eagles said:

They stabbed it with their steely knives, but they just can't kill the beast

I can't think of a more apt investing comment this AM.

[WWG1_WGA_Q]

The Market is greedy & has much more ground to make up if it wants to recover all that it lost during the selloff. Ignoring all events along the way as of late. DOW 29 K is just within reach, why stop now??

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[deercreekvols]

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