What You Need To Know This Week — August 15th, 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.
BILLION-DOLLAR SOFTWARE COMPANY MICROSTRATEGY ANNOUNCES $250 MILLION INVESTMENT IN BITCOIN
Nasdaq-listed software company MicroStrategy, which sports a $1.4 billion market cap, announced that it invested $250 million of its capital into bitcoin. The company’s CEO stated that the move “reflects our belief that bitcoin, as the world’s most widely adopted cryptocurrency, is a dependable store of value and an attractive investment asset with more long-term appreciation potential than holding cash.” MicroStrategy’s acquisition of over 21,000 bitcoin represents 0.1% of the maximum supply of the cryptocurrency. Its stock was up 18% on the week. I’m sure we’ll see more corporations and institutional investors follow the pioneering investment.
AIRBNB RESTARTS IPO PLANS COULD BE ON THE MARKET BY YEAR END
Airbnb is once again planning to go public in 2020, after recently shelving its plans to IPO earlier this year due to business setbacks during the pandemic. The structure of the rumoured go-public transaction is still up in the air, and the company is considering going public through either a direct listing, a SPAC or a traditional IPO. Morgan Stanley and Goldman Sachs have been engaged to lead the offering. Airbnb was recently valued at $18 billion in a rescue financing involving private equity firm Silver Lake a few months ago, which was down from an earlier valuation of $31 billion.
BARRY DILLER’S IAC MAKES $1 BILLION BET ON CASINO GIANT MGM
Internet and media conglomerate IAC, run by mogul Barry Diller, announced that it bought a nearly $1 billion stake in MGM Resorts. Diller indicated that IAC’s main interest was MGM’s online gaming segment. Both consumers’ and investors’ interest in online gambling has risen dramatically over the pandemic, and shares of online betting companies, such as DraftKings, have surged. Shares of MGM rallied nearly 15% on the news.
Notable Insights, Articles, Podcasts, and Tweets
Listen to famed macro trader, bitcoin investor and Galaxy Digital CEO Mike Novogratz discuss the future of cryptocurrency on The Tim Ferris Show podcast.
YieldStreet, a financial startup that gives everyday investors access to private debt deals, has allegedly exposed investors to as much as $90 million in losses through loan fraud. The democratization of alternatives does not have to include opacity, illiquidity and fraud. Investors should stick with transparent, liquid, low-cost publicly-traded alternative ETFs for their alternative asset class exposure.
Blank check company issuance remains white hot, with year-to-date, with SPACs raising $23.9 billion thus far in 2020, already 70% above last year’s levels. Special purpose acquisition companies now account for $1 of every $5 raised for initial public offerings.
Wealth Professional: “Why investors should consider SPAC arbitrage?”
Shares of Kodak, the company that recently announced an odd pivot from cameras to pharmaceutical manufacturing, crashed -86% from their recent high after the U.S. International Development Corp put its $765 million on hold due to “recent allegations of wrongdoing” at the company. We discussed the Kodak situation in detail, along with a strong sell recommendation, on a recent episode of the Absolute Return Podcast.
Epic Games, the publisher of the wildly popular online game Fortnite, took aim at Apple and Google’s dominant app store by attempting to accept payments outside of the tech giants’ payments systems. Both Apple and Google reacted negatively to the gambit, banning Fornite from their app stores. Subsequently, Epic launched an antitrust lawsuit against Apple, alleging that the company takes anti-competitive actions to “unlawfully maintain its monopoly.” The app store “tax” that the large tech firms charge remains a sore point for developers and a lucrative revenue stream for the platform owners. The outcome of Epic’s lawsuit may have tremendous implications, as anti-trust pressure continues to build against big tech’s dominance.
In another example of horrible corporate governance, Texas frac sand supplier Hi-Crush’s board of directors granted nearly $3 million in bonuses to its four top executives just five days prior to the company filing for bankruptcy.
Aluminum can manufacturer Ball Corp issued a “high-yield” bond with a coupon of just 2.875%. The junk bond issue, raising $1.3 billion with a 10-year term, represented the lowest coupon ever recorded for a non-investment grade issuer.
Former high-flying German tech company Wirecard recently filed for bankruptcy after investigators discovered a multi-billion fraud. Now its former Chief Operating Officer, Jan Marsalek, is on the lam and a global manhunt by federal authorities is underway.
The ownership of shopping malls has been ingrained into the minds of pension fund managers for several years. With the advent of the pandemic and the accompanying challenges that mall-based retailers are facing has questioned this investment dogma. Quebec pension fund Caisse de Depot et Placement du Quebec posted a -2.3% loss in the first half of 2020 due to its exposure to shopping malls. It appears that COVID19 has accelerated the terminal decline of that segment of the commercial real estate asset class.
“Cable Cowboy” John Malone continues his deal streak. His Liberty Global launched a $7.4 billion, all-cash takeover offer for the Swiss telecoms business Sunrise Communications. Liberty has carried out more than 370 M&A transactions since 2005.
One of the most entertaining alternative data sets out there, Robintrack, is shutting down. The service tracked the most popular stock trades by retail speculators on the trading app Robinhood. Robintrack is shutting down because Robinhood removed access to its API, likely because it made Robinhood traders look like unsophisticated investors.
