SPAC LANDCADIA HOLDINGS ANNOUNCES MERGER WITH GOLDEN NUGGET ONLINE GAMING
Blank check company Landcadia Holdings II, run by gaming magnate Tilman Fertitta, struck a deal to combine with Golden Nugget Online Gaming for $745 million. The profitable online gambling company is a leader in New Jersey’s burgeoning online gambling market, accounting for 34% of the state’s $86 million gross gaming revenue in May. Once the deal closes, the company will be only the second publicly-traded online gambling company next to DraftKings, whose share price has gone bonkers since it went public through a SPAC (up 209% year-to-date). Will Golden Nugget replicate the market success of DraftKings?
LULULEMON TO ACQUIRE AT-HOME FITNESS STARTUP MIRROR FOR $500 MILLION
In a play to capitalize on the popularity of Peloton and the stay at home dynamic, Athleisure retailer Lululemon announced its first acquisition with a $500 million deal for in-home fitness startup Mirror. The startup offers live classes through its wall-mounted mirror gadget in addition to on-demand workouts and personal training, in which consumers pay a $1,495 upfront fee plus a $39 monthly subscription fee. The three-year-old company has raised $72 million in funding to-date. Lululemon’s shares rallied 4% on the news.
HEDGE FUND MANAGER JOHN PAULSON, WHO IMPLEMENTED THE “GREATEST TRADE EVER”, RETIRES
Legendary hedge fund manager John Paulson is returning external capital and converting his hedge fund into a family office. The retirement is a continuation of a “passing of the guard”, as managers who launched their funds in the 90’s retire, allowing younger up-and-coming firms to take their place. Paulson is noted for the so-called “greatest trade ever,” in which his firm purchased credit-default insurance against billions of dollars of subprime mortgages prior to the market collapse in 2007, banking profits of $15 billion for his fund and nearly $4 billion personally. Paulson’s retirement follows that of other notable managers, including David Tepper, George Soros, Stan Druckenmiller and Louis Bacon.
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Listen to Lauren Taylor Wolfe, co-founder and Managing Partner of Impactive Capital, discuss shareholder activism from a sustainability standpoint on the Capital Allocators podcast.
The U.S economy gained 4.8 million jobs in June, handily beating the consensus estimate of 3 million. The strong jobs numbers brought the unemployment rate down to 11.1%. However, the economy is still working to recoup the 22 million jobs lost during the pandemic.
Softbank-backed insurtech startup Lemonade raised $329 million in its initial public offering. The IPO values the company at $1.6 billion, which is down from its last private market valuation of $2.1 billion. That discounted valuation didn’t last long, as the stock more than doubled in its stock market debut.
Indicative of the speculative fervour currently happening in the market’s story stocks, retail investor favourite Tesla overtook Toyota Motor as the world’s most valuable automaker, despite only producing 4% of the vehicles that Toyota manufactures. If Tesla can get to a $200 billion market cap without a sustainable business model, what’s stopping it from going to $1 trillion?
In the first instance of the U.S. Government taking a position in a publicly-traded company, the Treasury now owns 30% of trucking company YRC Worldwide after it lent the struggling firm $700 million.
Global mergers and acquisitions volume is stuck in a rut. In the second quarter, the tally for global M&A deals was $485 billion, the lowest amount since Q3 2009 and down -50% year-over-year. Typically, there are 60–80 outstanding mergers in the U.S. Given the lack of new deals, currently, there are just 35.
In April, Canada’s economy shrunk by -11.6%, its largest decline on record, following a -7.5% decline in March. However, it wasn’t as bad as the market expected, beating the -13% decline expected by economists.
Value investing has been in the dumps for a long time now. The investing strategy, which has historically outperformed the market by over 3% per year, has seemingly stopped working. The cause of the poor performance is not that it has become known and very popular, in fact, quite the opposite. Value investing is so out of favour, that the valuation spread between value stocks and growth stocks is the widest since the tech bubble of 1999.
Consolidation in the food-delivery business looks to continue as Uber has reportedly bid for competitor Postmates. The ride-sharing pioneer has offered approximately $2.6 billion for its smaller competitor after failing to clinch a deal with rival Grubhub.
Natural gas producer Chesapeake Energy has filed for bankruptcy. The company pioneered shale gas drilling in the U.S., which was a key driver of energy self-sufficiency for the country. Chesapeake was also the poster child for debt-fueled capital expenditure binges and profligate corporate spending, resulting in liabilities of about $50 billion.
Further solidifying celebrity value within consumer brands, publicly-traded cosmetics maker Coty announced the acquisition of 20% of Kim Kardashian West’s cosmetic brand for $200 million. The deal values the 3-year old company at $1 billion.
Soon everyone will have their own SPAC. We can expect a special purpose acquisition company from noted private equity investor (and co-owner of the NHL’s Pittsburgh Penguins) Ron Burkle.