What You Need To Know This Week — April 11th, 2020
What You Need To Know This Week
A weekly recap to keep you informed on the most important events this week impacting markets, business, tech and the global economy.
THE FED ANNOUNCES UNPRECEDENTED $2.3 TRILLION IN LOANS TO SUPPORT LOCAL BUSINESSES AND GOVERNMENTS
The Federal Reserve launched another round of stimulus as it combats the coronavirus-led recession. The latest stimulus effort from the Fed amounts to $2.3 trillion in funds to support the economy, of which $600 billion will be used to fund loans made to small and medium-sized businesses. In addition, the Fed can now buy municipal bonds, high-yield bonds and junk bond ETFs, which were previously off-limits. Investors quickly bid up stocks and bonds after the announcement, with junk bonds being amongst the largest gainers. The massive Fed stimulus program came on the back of dismal jobs numbers, as the U.S. reported 6.6 million in unemployment claims last week.
AIRBNB IN TROUBLE AS IT WITHDRAWS IPO PLANS AND COMPLETES A DISTRESSED FINANCING
In what was supposed to be the hottest initial public offering of 2020 at a valuation of more than $50 billion, Airbnb has suffered a dramatic turn of events that puts its survival potentially in jeopardy. The coronavirus pandemic has upended the company’s business model, leading to a dramatic decline in revenue and causing spiralling expected losses of over $1 billion in the first half of the year. In order to address its liquidity issues, Airbnb tapped private equity firms Silver Lake and Sixth Street Partners for a rescue financing that included a $1 billion loan at a rate of LIBOR + 10% in addition to equity warrants struck at a fractional of its previous valuation.
JACK DORSEY PLEDGES $1 BILLION IN FIGHT FOR CORONAVIRUS CURE
Jack Dorsey, the co-founder of both Twitter and Square, pledged $1 billion of his Square stock to help fund the coronavirus relief effort. The historic pledge represents over a quarter of his net worth. Once the pandemic is resolved, the capital will focus on improving girl’s health and education in addition to advancing universal basic income.
Recommended Articles, Podcasts, Books and Tweets
Listen to Tom Barrack, CEO of Colony Capital, discuss the crisis in which the commercial real estate market is facing on the Bloomberg Odd Lots Podcast.
Missed our Webinar, “Merger Arbitrage: A Strategy for Consistent Returns”? No worries! We have the recording for you right here.
Fintech firm SoFi is acquiring private global payments company Galileo for $1.2 billion. The market is still open for strategic M&A.
Insider stock purchases by executives and directors hit $1.1 billion in March, the largest since October 2013. There are many reasons why an insider would sell. But there’s only one reason for them to buy.
If the Department of Justice sues to stop a merger, it needs to defend it in court, which may find the merger to not actually be anti-competitive. Sabre recently won its court case against the Justice Department over its Farelogix acquisition, in which the DoJ attempted to block.
Morgan Stanley CEO James Gorman has fully recovered from COVID-19. It was never disclosed that he had contracted the virus.
In a survey from the Wall Street Journal, economists forecast the U.S. economy to grow by 6.2% in the third quarter followed by 6.6% in Q4.
The world’s largest “passive” equity indices went full active, as the S&P Dow Jones Index Committee dismissed their rules and decided to postpone the quarterly rebalance for their flagship S&P 500 and Dow Jones Industrial Average indices. A change in mandate should be a red flag for investors.
The Japanese government approved a nearly $1-billion stimulus package to help cushion the pandemic’s impact on the world’s third-largest economy.
With short-sale bans proliferating in Europe, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) continue to support short-selling given its benefit to public markets. “There is no evidence that short selling activity has been the driver of recent market declines.”
In a classic “Texas hedge”, which exposes an investor to even more of the original risk that they faced, Saudi Arabia invested $1 billion buying shares of European oil companies including Equinor, Royal Dutch Shell, Total SA and Eni.
One of the biggest beneficiaries of the Fed’s bailout program? The private equity industry.
In March, investors redeemed more than 1/8th of the total asset under management in leveraged loan funds. Now bank loans are yielding more than 10% on average.
Yes, we’re in a recession. However, it’s not the Great Depression, not even close.
European nations including France, Spain, Belgium and Finland, have begun preparations to end their lock-downs and reopen their economies as they recover from the coronavirus pandemic.
Some private equity firms are marking down their portfolio values more slowly in order to smooth the returns.
Softbank’s Masayoshi Son discusses his mistakes with his WeWork investment and the future of the Vision Fund: “We paid too much valuation for WeWork, and we did too much believe in the entrepreneur. But I think even with WeWork, we’re now confident that we put in new management, a new plan, and we’re going to turn it around and make a decent return.”
We hope you are staying safe and healthy in these challenging times.
