What You Need To Know This Week — October 3rd, 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.
FACEBOOK CO-FOUNDER TAKES ASANA PUBLIC WITH DIRECT LISTING WHILE SECRETIVE U.S. DATA ANALYTICS FIRM PALANTIR LISTS ITS STOCK, SKIPPING TRADITIONAL IPO
Project management software company Asana made its stock market debut through a direct listing, in which a stock exchange lists the firm’s shares for free trading without a current equity offering and marketing period. The loss-making startup was valued at approximately $4 billion by public market investors after closing at $25.19, above its so-called reference price of $21.00, which is the “suggestive” price level based on its historical valuation. Seventeen-year-old analytics firm Palantir, backed by venture capitalist Peter Thiel, also went public through a direct listing this week. The company was valued at roughly $20 billion and its $9.20 trading price topping the $7.25 reference level indicated by the NYSE. Asana and Palantir are the third and fourth VC-backed startups to choose the direct listing route, after Spotify completed one in 2018 and Slack followed it in 2019.
DIRECT-TO-CONSUMER STARTUP HIMS TO GO PUBLIC THROUGH BLANK CHECK REVERSE MERGER
Special purpose acquisition company Oaktree Acquisition announced a $1.6 billion merger with telemedicine startup HIMS. The target, best known as an online seller of treatments for erectile dysfunction and hair loss, was founded just three years ago and had $89 million in revenue in 2019. The deal is expected to raise as much as $280 million for HIMS, including up to $205 million from the SPAC and a $75 million concurrent PIPE financing. Oaktree’s stock is up 4.3% since rumours on the deal were leaked in August.
PLAYBOY RETURNING TO PUBLIC MARKETS THROUGH SPAC DEAL
Famed for its formerly popular gentleman’s magazine, Playboy, which has now turned into a diversified media and men’s health company, announced that it is returning to the public markets through a merger with SPAC Mountain Crest Acquisition. The reverse merger values Playboy at $413 million, inclusive of debt. The company has been privately held for the last nine years as it executed a turnaround strategy focused on licensing its brand and expanding into the sexual wellness sector. When the deal is completed, Playboy will trade under the symbol PLBY.
Notable Insights, Articles, Podcasts, and Tweets
Listen to Corey Hoffstein’s latest research paper, Liquidity Cascades: The Coordinated Risk of Uncoordinated Market Participants, on the Flirting with Models podcast.
Barron’s on SPAC Arbitrage: “Canadian investors have had access to the Accelerate Arbitrage Fund (ARB.Canada) since April. It employs an actively managed SPAC merger arbitrage strategy. The ETF has returned about 14% since its debut…”
Accelerate CEO Julian Klymochko: “We are excited to continue to bring essential innovation to the market. In 2019, we launched the first hedge fund and private equity ETFs. In 2020, we are introducing the first alternative model portfolio. OneChoice was designed for advisers and portfolio managers to help lower client portfolio risk through additional diversification and increase efficiency through the automation of portfolio construction, due diligence and implementation.”
Western investors continue to pile into gold ETFs, more than offsetting this year’s decline in Eastern demand for the precious metal. Gold ETFs now make up 35% of global gold demand compared with just 8% a decade ago. “The pandemic has convinced investors that gold belongs in their portfolios as a hedge against frothy equity markets, rock bottom interest rates and a fall in economic output.”
Wealth Professional on creating easy diversification into alternative assets: “Combining that blend of uncorrelated investments with traditional asset classes, Klymochko said, has the advantage of lowering risk while increasing risk-adjusted returns. That, in turn, puts investors on a more stable path to achieving their financial goals.”
Not satisfied with only manufacturing electric vehicles, Tesla plans on getting into the lithium mining business to support its effort to develop its battery technology. Adding a resource extraction component to an auto OEM manufacturing operation makes it more difficult for market participants to view Tesla as a tech company.
U.S President Donald Trump said he would approve a $22 billion railway from Alberta to Alaska, which will create more than 18,000 jobs for Canadian workers and bring in $60 billion to the country’s GDP through 2040.
Global volatility creates arbitrage opportunities for savvy investors: “Returns on arbitrage strategies have been so lucrative this year that Canada-based Accelerate Financial Technologies launched an exchange traded fund called Accelerate Arbitrage Fund on the Toronto Stock Exchange to allow retail traders access to the niche strategy. The ETF is up 13.5% since its listing in early April.”
Market darling Nikola is now immersed in a cloud of controversy, including allegations of fraud and sexual assault against its founder (who just resigned as Chairman of the company). In addition, it was revealed that the former Chairman bought the designs for a Nikola truck from a Croatian college student for a few thousand dollars. Given Nikola does not have even a fully functioning prototype, let alone any sales, the truck design arguably accounts for the majority of its nearly $10 billion valuation.
I despise seeing investors misled, so I have to express caution on the Defiance NextGen SPAC Derived ETF. Despite its naming, it is not a SPAC ETF — it only invests 20% of its fund in SPACs, and 80% in post-SPAC equities, which are a completely different asset class. Post-SPAC equities have had historically horrific results. The Accelerate Arbitrage Fund (TSX: ARB) remains the only ETF with most of its portfolio invested in SPACs.
Popular kids gaming platform Roblox is planning a stock market debut for next year, which would value the company at as much as $8 billion.
Junior oil company Paramount Resources bought a nearly 18% stake in rival NuVista Energy and may make a takeover bid, continuing a trend of consolidation int he oil patch.