What You Need To Know This Week — September 12th, 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.
WARREN BUFFETT’S BERKSHIRE HATHAWAY SUBSCRIBES TO IPO OF LOSS-MAKING CLOUD DATA COMPANY SNOWFLAKE
Warren Buffett’s Berkshire Hathaway, long a bastion of value investing, has perhaps finally thrown in the towel on the strategy as it disclosed a $250 million share subscription in the initial public offering of cloud data company Snowflake. The tech company’s $2.38 billion IPO will be one of the largest stock market debuts of the year, valuing the company at over $20 billion and nearly double its previous valuation from February. Given Berkshire’s modus operandi has been to opportunistically invest in highly profitable companies at low valuations, the Snowflake investment comes as a surprise given the company lost nearly $350 million last year. Snowflake plans to start trading in New York under the ticker symbol “SNOW.”
LVMH LAUNCHES RISKY GAMBIT IN A BID TO REPRICE TIFFANY DEAL
After months of speculation in the media that LVMH was having second thoughts on the price of its Tiffany acquisition, which was struck at a high price pre-COVID, the would be acquiror unveiled a risky gambit to try to extract a price concession from the target’s board of directors. This gambit included a call from LVMH’s CEO, Bernard Arnault (who is Europe’s richest man with a net worth of $86.5 billion), to French officials for help to scuttle the merger. In addition, LVMH has allegedly been dragging its feet on filing for the requisite anti-trust approvals. Tiffany is suing LVMH and the deal is now heading to court. What does Julian think? “It’s become clear that LVMH has been consistently looking for a price cut over the past number of months, and looking to apply pressure in any way it can get it in order to rehash the deal at a lower price.” Tiffany stock was down -6.9% this week on the news.
TESLA’S STOCK TUMBLES AS ITS SNUBBED FOR S&P 500 INDEX INCLUSION
Stock market darling Tesla, whose shares are up over 330% this year, was widely expected to join the S&P 500 in the Standard & Poor’s Index Committee’s announcement last week. S&P shocked the market by snubbing the electric vehicle maker, whose market cap is nearly $350 billion, and including much smaller companies Etsy, Teradyne and Catalent. The surprise came as Tesla is the largest company not in the benchmark index, plus it meets all of the listed requirements, however, S&P did not give a reason for the exclusion. Tesla’s stock dropped a record -21% on the S&P 500 snub.
Notable Insights, Articles, Podcasts, and Tweets
Listen to Kelly Driscoll, one of the founders of the SPAC Fusion Acquisition Corp, discuss why SPACs are the hottest asset class out there right now on the Bloomberg Odd Lots Podcast.
Hear Accelerate CEO Julian Klymochko discuss “Alternative Investments and Your Investment Portfolio” on the TSX ETF Exchange fireside chat. Investment advisors can register here.
Wealth Professional: “With low interest rates and ongoing market volatility challenging returns for the traditional 60–40 balanced portfolio, investment professionals are increasingly looking to provide clients with diversification to alternative investments. One liquid-alternative ETF provider aims to make that job easier with a new one-stop investment solution. The OneChoice Alternative Model Portfolio, newly introduced by Accelerate Financial Technologies, aims to provide portfolio managers and advisors with a simple and efficient way to gain exposure to a diversified sleeve of alternative investment strategies to complement core portfolio holdings.”
The epic bidding war continues for junior gold explorer Cardinal Resources. Shandong Gold bumped its bid for Cardinal by 43%, increasing it from $0.70 to $1.00, trumping Nord Gold’s $0.90 hostile bid. The Accelerate Arbitrage Fund is long Cardinal Resources.
A short report has taken some of the wind out of the sails of hot EV stock and Tesla-wannabe Nikola. Short seller Hindenburg Research called Nikola an “intricate fraud” that exaggerates its technology and has faked product launches. The stock fell -8% on the hit piece, however, the shares are still up over 200% year-to-date.
The average trailing multiple on the top 10 U.S. tech companies was 75x, heading into this latest bout of market turbulence. According to market strategist David Rosenberg, the next big winners won’t be in the large cap names, but will likely come from the small cap segment.