MORGAN STANLEY CONTINUES ITS ACQUISITION SPREE WITH $7 BILLION DEAL FOR EATON VANCE
White-shoe Wall Street investment bank Morgan Stanley announced the acquisition of Eaton Vance in a $7 billion cash and stock deal. Under the leadership of CEO James Gorman, who made strengthening the bank’s wealth management division a top strategic priority, Morgan Stanley announced the purchase of the $500 billion AUM investment firm Eaton Vance just three days after it closed the $13 billion acquisition of E*Trade Financial. Once the deal closes, the firm will be managing about $1.2 trillion in assets. Morgan Stanley’s stock was up 0.6% on the news, while Eaton Vance’s shares surged 48.1%.
$80 BILLION FINTECH COMPANY SQUARE INVESTS $50 MILLION INTO BITCOIN
Mere weeks after technology company MicroStrategy invested $425 million of its balance sheet cash into Bitcoin, fintech giant Square bought $50 million worth of the leading cryptocurrency. Square stated that it “believe[s] that bitcoin has the potential to be a more ubiquitous currency in the future.” We continue to see large corporations invest their treasury into Bitcoin and it is only a matter of time before it becomes a default position in most institutional investment portfolios. Bitcoin’s price has rallied over 50% year-to-date.
BUSIEST WEEK IN SPAC HISTORY WITH ELEVEN IPOS RAISING $5 BILLION
Blank check specialist Social Capital Hedosophia capped off a record week in SPAC IPOs by issuing three new special purpose acquisition companies and raising $2.1 billion for technology acquisitions. Social Capital has now launched six blank check companies. It is not even one-third through the month and 22 SPACs have gone public, raising an aggregate $9.5 billion. At this pace, we are likely to break the monthly SPAC IPO record of $10 billion set in July. The tremendous growth in SPAC supply has not been accompanied by a commensurate increase in SPAC investment funds, leading to dislocations in the market. The Accelerate Arbitrage Fund (TSX: ARB) focuses on SPAC arbitrage and currently sees extremely attractive risk-reward opportunities in the market.
VATICAN CARDINAL FORCED TO RESIGN AFTER GETTING CAUGHT TRADING FORBIDDEN CREDIT DERIVATIVES
Is there a scandal brewing in the Vatican as Cardinal Giovanni Angelo Becciu was forced to resign under allegations of financial misappropriation? At the heart of the matter is, under Becciu’s guidance, the Vatican invested some donations that were earmarked for the poor and needy into structured notes containing credit default swaps linked to car rental company Hertz. The bet was that Hertz would not default on its debt by April 2020, and the trade was successful, paying out in full. Pope Francis had previously condemned the use of credit default swaps, claiming the financial instruments “encouraged the growth of a finance of chance and of gambling on the failure of others, which is unacceptable from the ethical point of view.”
Notable Insights, Articles, Podcasts, and Tweets
Listen to Fred Pye of 3iQ talk about the trials and tribulations of launching the Bitcoin Fund on the TSX.
How did Brown University’s endowment earn the best returns in the Ivy League? By investing in startup hedge funds.
The NY Times has a profile of Money Stuff writer, Bloomberg’s Matt Levine. “There are footnotes — lots of footnotes.”
Remember Grexit? It appears that no one does, as yields on Greek 10-year bonds dropped to a record low of 0.88%. During the height of the Grexit crisis less than a decade ago, Greek bond yields soared above 40%.
Another Blockbuster M&A transaction in the semiconductor space as AMD is in talks to buy Xilinx in a deal worth more than $30 billion. The tie-up could be announced as soon as next week.
After Coinbase’s CEO announced that the company would not be taking a stance in the increasingly divisive world of American politics (especially in Silicon Valley), about 5% of the company’s employees chose to take an exit package offered if they did not feel aligned with Coinbase’s culture.
The Canadian economy added 378,000 jobs in September, well ahead of the consensus economist estimate of 156,600. The unemployment rate fell to 9.0%, continuing its decline from a high of 13.7% in May.
Soon everyone will have their own SPAC. This week, retired basketball star Shaquille O’Neal and one of Martin Luther King Jr.’s sons are teaming up with three former Disney executives to launch a blank check company called Forest Road Acquisition Corp. The new issue is seeking to raise $250 million in an upcoming initial public offering.
In more signs of excess in the SPAC market, students at the University of Pennsylvania have created the “Penn Spac” club to invest in blank check companies.
Cannabis-focused SPAC Stable Road Acquisition announced a $1.2 billion merger with space transportation specialist Momentus. It is not unusual to see a blank check firm “pivot” and change their focus based on market dynamics (presently, cannabis is not a sector in which investors are not enthusiastic about).
In a bid to halt an 8-year slide in its share price, tech dinosaur IBM is splitting the company in two, to focus on its growing cloud business.
According to Bank of America, small cap stocks are trading at a 26% discount to large cap peers, which is the widest spread in roughly 20 years. The Accelerate Private Equity Alpha Fund (TSX: ALFA) provides leveraged exposure to small cap value stocks.
Want to chat about M&A, SPACs, arbitrage, long-short equity, private equity or other alternative investment strategies? Book a time with me to speak with me on Monday, October 12th.