What You Need To Know This Week — March 7th, 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 IMPLEMENTS EMERGENCY RATE CUT IN RESPONSE TO CORONAVIRUS PANIC
The U.S. Federal Reserve executed an emergency 0.50% rate cut in response to the market panic and potential economic impact of the coronavirus epidemic. The Fed lowered the federal funds rate to 1.00% — 1.25%, which the market classified as an “emergency cut” given that it occurred outside of the Fed’s regularly scheduled policy meetings. The Bank of Canada followed its southern neighbor and cut its own benchmark interest rate 50bps. Stock markets failed to be impressed and fell anyway.
INTEREST RATES PLUNGE TO RECORD LOWS AS GLOBAL MARKETS FEAR RECESSION
Following the Federal Reserve’s emergency rate cut, the U.S. 10-year treasury bond yield dropped below 1% for the first time in history. The Fed’s seemingly desperate move led to increased panic in the market as investors bid up bond prices, causing yields to plummet. The 10-year bond finished the week at a yield of 0.76%.
XEROX LAUNCHES HOSTILE TAKEOVER OFFER FOR RIVAL HP AS M&A ACTIVITY CONTINUES DESPITE MARKET ROUT
After a protracted back and forth in the media over the past 10 months, Xerox officially launched its hostile tender offer for all the outstanding shares of rival HP Inc. The offer values HP, a maker of printers, printer supplies and personal computers, at nearly $35 billion. HP wasted no time in rejecting the offer, stating that it “meaningfully undervalues HP and disproportionately benefits Xerox shareholders.”
HEDGE FUND ELLIOTT MANAGEMENT UNVEILS SHAREHOLDER ACTIVIST CAMPAIGN AT TWITTER
Feared activist investor Elliot has taken a $1 billion stake in social networking company Twitter with the goal of ousting its Chief Executive Jack Dorsey, claiming he’s too distracted. The activist’s main concerns regarding Dorsey are twofold: he only works part-time at Twitter given his other job as CEO of Square, and he recently announced plans to move to Africa.
Recommended Articles, Podcasts, Books and Tweets
Listen to Danielle DiMartino Booth, author of “Fed Up: An Insider’s Take on Why the Federal Reserve Is Bad for America”, discuss what’s wrong with the Fed on the Masters in Business podcast.
The bidding war for Cincinnati Bell continues, with private equity firms Brookfield and Macquarie competing for the now-prized asset, pushing its price up nearly 50% since the first bid.
An anonymous shortseller caused panic for arbitrageurs in the ongoing Cineplex acquisition. My thoughts? “Every short report I’ve seen on a Canadian M&A situation has been wrong, and the deals have closed.”
Banks, transports and small cap stocks have entered a bear market, down more than -20%.
The price of oil fell nearly -10% on Friday as Russia rejected OPEC’s calls to cut oil production. Due to the effect of the coronavirus in China oil demand fell by -3% in the first quarter.
Warren Buffett’s Berkshire Hathaway backed out of a $4 billion investment in a Quebec liquefied natural gas plant due to the “current Canadian political context.”
Clearwater Seafoods, a Nova Scotia-based seafood company, has put itself up for sale. It’s been in-play multiple times in recent history, with a failed leveraged buyout in 2008 and a failed hostile takeover in 2011.
Hedge fund billionaire Steve Cohen is raising his first private-markets fund, which will follow a hybrid venture capital and private equity strategy.
“The recent (and violent) outperformance of low-vol, growth momentum stocks has even the most fundamental of stock-pickers wondering if there is any point to visiting companies or building models.”
Despite panicking public equity and bond markets, a private equity consortium just announced a €17.2bn buyout of industrial company Thyssenkrupp at a lofty valuation of 14x adjusted EBITDA.
The U.S. economy added 273,000 jobs in February compared to economist estimates of 175,000.
The Canadian economy also produced more jobs than expected last month, adding 30,000 jobs compared to analyst forecasts of 11,000.
Potential further consolidation in the U.S. regional TV sector as Gray Television made an $8.5 billion unsolicited offer for rival Tegna.
Calgary-based optometry company FYidoctors received a more-than $100 million growth equity investment from U.S. private equity firm L Catterton.
Self-driving car software company Waymo raised $2.25 billion in its first external financing round outside of Google.
Electric vehicle manufacturer Nikola Corp announced that it is going public through a special purpose acquisition company at a $3.3 billion valuation.
