What You Need To Know This Week — May 2nd, 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.
EQUITY FINANCING WINDOWS OPENS UP WITH $200 MILLION BOYD GROUP FINANCING AND OVER $800 MILLION OF SPAC IPOS
In a positive sign that market participants are regaining confidence and risk appetite, autobody shop consolidator Boyd Group Services announced a $200 million bought deal equity financing. The deal was the first large Canadian equity financing completed since the coronavirus pandemic emerged. The company earmarked the funds for acquisition opportunities. In addition, three special purpose acquisition companies completed their initial public offerings this week, raising over $800 million in aggregate.
MERGERS RE-EMERGE AS SILVERCORP ANNOUNCES $105 MILLION ACQUISITION OF GUYANA GOLDFIELDS
In the only Canadian M&A deal announced in April, Silvercorp Metals announced the friendly acquisition of Guyana Goldfields in a cash-and-share transaction worth $105 million. As for strategic rationale, the deal diversifies Silvercorp’s asset base by combining its two underground silver mining operations in China with Guyana Goldfields’ Aurora gold mining operation in Guyana. There have been three announced public mergers in Canada since the crisis began in late February and all were in the precious metals sector.
SHORT SELLER LAUNCHES ATTACK AGAINST MERGER TARGET FORESCOUT TECHNOLOGIES
Activist short seller Spruce Point Capital released a short thesis report on Forescout Technologies, which is currently set to be acquired by buyout firm Advent International in a friendly, all-cash $1.9 billion deal. The crux of the report indicates that the market has gone down, therefore the acquiror overpaid for the acquisition and should either terminate the deal or pursue a reduction in the consideration paid. Unfortunately for the short seller, an acquiror cannot negotiate for a lower price after the shareholders have voted on a deal (which occurred April 23rd), nor can an acquiror readily walk away from a definitive deal. The acquisition is expected to close on May 18th.
Recommended Articles, Podcasts, Books and Tweets
Listen to Shane Parrish interview activist hedge fund manager Bill Ackman and hear the details on how he made $2.1 billion from a coronavirus hedge.
In a shocking decision, Finance Minister Bill Morneau has appointed Tiff Macklem as the new Governor of the Bank of Canada. Macklem is currently the dean of the Rotman School of Management in Toronto. In selecting Macklem, the government passed over current Governor Stephen Poloz’s top deputy, Carolyn Wilkins, who was widely expected to get the nod.
The much-maligned United States Oil Fund ETF (USO) disclosed that it can now invest in a whole host of assets aside from WTI crude oil futures, including diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels. What’s next, Pokemon cards?
Nearly 60% of the equity capital financings in April were in the form of convertible bonds, significantly higher than the historical average of 18% of the total.
The outcome of the court case for the $25 million Rifco deal, whose acquiror CanCap Group has tried to bail on the deal claiming a Material Adverse Change, will be precedent-setting for the coronavirus era.
Claiming a Material Adverse Change to get out of a definitive deal presents an uphill battle, as this has only worked once successfully in the history of M&A. “Courts are going to be very reluctant to provide a loophole to buyers, especially when” the deals carve out pandemics. “I expect many of the deals to close on the terms agreed upon in the original contract.”
The leading developer of a coronavirus vaccine, the laboratory at Oxford University, expects the first few million doses of their vaccine could be available by September.
The leveraged loan market for financing M&A is back to functioning as banks used the market recovery to unload the last of the $4 billion loan used to fund T-Mobile’s acquisition of Sprint.
Advisors aim for a 10% allocation of their clients’ portfolios to liquid alternatives. However, considering that pension funds often push the allocation to alternatives up to 50%, investors can quite comfortably move the size of alternative allocations up.
Tesla CEO Elon Musk’s odd Twitter tirade on Friday: “Tesla stock price is too high imo,” as the stock dropped over -10%.
Pension manager AIMCo acknowledged its recent $2.1 billion trading loss. Market participants indicate the loss was related to the selling of uncapped variance swaps, in which Institutional Investor claimed was an “amateurish” strategy.
Tail-risk funds, also known as “black swan” funds, proved their worth this year as they have gained 57.2% on average year-to-date.
To avoid a government bailout, Boeing announced a $25 billion debt financing, which would be one of the largest on record. The deal was substantially oversubscribed.
Fintech app Stash raised $112 million in a new round of funding that values the startup at over $800 million.
U.S. GDP shrank by -4.8% on an annualized basis in the first quarter, its worst economic decline since 2008.