What You Need To Know This Week — May 16th, 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.
BITCOIN GOES THROUGH A HALVING
Cryptocurrency bitcoin went through its third “halving” on Monday. The halving refers to the 50% reduction of the reward earned by bitcoin miners who successfully process transactions through intensive “proof of work” computations on the bitcoin blockchain. After the most recent halving, the miners’ reward declined from 12.5 to 6.25 bitcoins. The effect of halving is that the growth in bitcoin supply decreases and is thus disinflationary, which many bitcoin bulls believe makes it superior to the inflationary nature of fiat currency.
UBER MAKES PLAY FOR GRUBHUB
Ride-sharing company Uber is reportedly trying to merge with subsidiary Uber Eats rival Grubhub in a potential all-stock, $6.9 billion deal. According to sources, Grubhub is requesting a 2.15 Uber shares consideration, while Uber is only willing to offer a 1.9 share exchange ratio. The situation remains fluid, however, the deal would bring significant anti-trust concerns given it consolidates a three-player market down to two, with the pro-forma entity having a gargantuan 55% market share.
GRAN COLOMBIA REVEALS UNSOLICITED BID FOR GUYANA GOLDFIELDS
Gold miner Gran Colombia revealed an unsolicited proposal to acquire Guyana Goldfields for $100 million, potentially kicking off a bidding war for the company against friendly acquiror Silvercorp. Gran Colombia’s all-share proposal, worth $0.90 per share on announcement, came in at a 114% premium to Guyana’s unaffected price and a 29% premium to Silvercorp’s friendly bid. Despite the higher price, thus far Guyana’s board of directors has rejected the unsolicited proposal, blaming some of the attached conditions. This is the first potential bidding war and hostile M&A proposal since the coronavirus crash.
Notable Insights, Articles, Podcasts, and Tweets
Listen to renowned investor Howard Marks discuss investing in the age of COVID-19 on the Tim Ferriss Show.
Special Purpose Acquisition Companies (SPACs) are quickly becoming one of the most popular asset classes of 2020. In April, 80% of all money raised for U.S. initial public offerings went to SPACs, up significantly from the 10-year average of 9%. The growth of blank-check companies is a trend that will likely continue.
Billionaire real estate executive Barry Sternlicht’s special purpose acquisition company Jaws Acquisition Corp. went public this week in a $600 million IPO.
Shopify overtook RBC as the most valuable publicly-traded company in Canada. The companies that previously attained this milestone, including Nortel, Blackberry and Valeant Pharmaceuticals, went on to underperform dramatically. “One common factor among the companies that overtook RBC was “an overarching narrative that tried to justify the valuation.”
SSR mining and Alacer Gold announced a friendly merger of equals as the bull market in the yellow metal continues.
As the equity market window continues to open, online car seller Vroom filed for an initial public offering. The company previously raised $250 million in a private financing round in December that valued the company at $1.5 billion.
The U.S. government moved to restrict the shipment of semiconductors to China’s Huawei Technologies. Huawei has continued to use U.S. software and technology to design its semiconductors, despite being placed on the U.S. economic blacklist last year. This move by the U.S. Commerce Department will cause a rise in tensions between the countries at an inopportune time and have potential blow-back for companies including Apple and Cisco.
U.S. retail sales dropped 16.4% in April, while industrial production had a record drop of 11.2%. With economies beginning to open up in May, last month is expected to show the worst of the coronavirus recession data.
U.S. core CPI, a measure of inflation, fell its most on record in April. Leading the decline was the collapse in travel and apparel spending.
Facebook announced the acquisition of animated-picture platform Giphy for $400 million. This deal is likely to increase the risk appetite of start-up investors.
Media mogul Jeffrey Katzenberg’s streaming startup Quibi, which raised nearly $1.8 billion, is off to a slow start. It dropped out of the list of the 50 most downloaded free iPhone apps. The founders blame the coronavirus for the slow consumer uptake.
Value investing hasn’t worked for a long time and the pandemic has compounded the pain. In this day and age, does value investing still make sense?
Entrepreneur and NYU Stern School of Business professor Scott Galloway reveals the secret to happiness.
Against government regulations, Tesla chief Elon Musk has resumed operations at its vehicle manufacturing plant. Thus far, there have been no negative repercussions. Despite the recession and decline in vehicle demand, Tesla’s stock remains near an all-time high.