Tag: Finance

REITs Coronavirus Responses Roundup

Park Hotels & Resorts (PK)

    • March 9 – Withdraws 2020 Outlook
    • March 16 – Business Update
      • Withdraw guidance
      • Suspend and scale down operations
      • Draw $350 million from revolving credit facility
      • Pay one consistent dividend ($0.45/share), suspend all other dividends until year-end
      • Cancel / defer $130 million of $200 million CapEx
    • March 26 – Additional Update
      • Draw $650 million revolving credit facility
      • Alternative sources of revenue from applicable government authorities and hospitals such as providing temporary lodging for first responders, other medical personnel, military personnel, displaced guests and residents of communities where Park’s hotels are located
    • 2019 Q4 Presentation

Starwood Property Trust (STWD)

    • March 13 – Update
      • withdrawn its full year 2020 outlook
    • March 20 – Actions to Mitigate Impact of COVID-19
      • Currently all of Apple Hospitality’s hotels remain open and operational; implemented cost elimination and efficiency initiatives at each of the Company’s hotels by reducing labor costs and tempering certain services and amenities.
      • Postpone all non-essential capital improvement projects planned for 2020; a reduction of approximately $50 million in capital improvements
      • Suspend monthly distributions
      • Has recently drawn on its credit facility and currently has approximately $300 million of cash on hand. Current availability on the Company’s revolving credit facility is $145 million. The Company has no scheduled debt maturities for the remainder of the year and approximately $34 million in scheduled maturities in 2021.
      • Executive pay cut
    • 2020 Feb Presentation

Apollo Commercial Real Estate Finance (ARI)

    • March 25 – Open letter to stockholders & Investor Presentation
      • Pay one consistent dividend ($0.4/share)
      • ARI has secured borrowing facilities with six counter-parties with remaining terms ranging from six months to over three years, assuming the exercise of our extension options
      • ARI holds only two positions in commercial real estate securities totaling $68 million, neither of which are financed
    • 2019 Q4 Presentation

TPG Real Estate Finance Trust (TRTX)

    • March 18 – Declare Cash Dividend and Company Update
      • Consistent dividend ($0.43/share)
      • More than half of liabilities are comprised of term financings, including CLO’s
      • Less exposure to hotel (13%) and retail (0.6%), less than the 22% average of mREIT peers
    • March 23 – Update
      • Postpone previously announced Q1 dividend for one quarter, payable on July 14, 2020 to stockholders of record as of June 15, 2020
      • CRE debt securities portfolio – as of March 22, 2020, has an aggregate face amount of approximately $960 million, pledged as collateral under daily mark-to-market secured revolving repurchase facilities in the amount of approximately $760 million. Fluctuations in the value of CRE debt securities portfolio, including as a result of changes in credit spreads, have resulted in the Company being required to post cash collateral with its lenders under such facilities
      • If the requirements to post additional cash collateral continue to be material, there is no certainty that the Company will be in a position to continue to fund such payments.
    • 2019 Q4 Presentation

KKR Real Estate Finance Trust (KREF)

「News of the Week」Stock Market Worst Week Following Fed’s Zero Interest Rate Move

The worst week for Dow Jones Industrial Average and S&P 500 since 2008 financial crisis (Oct 2008).

Fed cut rates to near-zero the weekend before, lowering federal-funds rate to a range between 0% and 0.25%.

Dots to connect: QE, easing from central banks around the world, inflation on the way, bond issuing in low-interest-rate environment, another round of asset bubble(?) when recover, etc.

From TD Ameritrade To E-Trade: A Wave Of Consolidation

Following the underlying trend of growing Fintech companies grabbing more customers & market shares (also discussed in a previous post about job cuts in banks), traditional financial service providers such as brokerage firms are thinking about their future.

And one answer is to consolidate the industry with mega M&As.

Charles Schwab x TD Ameritrade

In November 2019, Charles Schwab agreed to buy smaller rival TD Ameritrade in a stock-swap transaction valued at about $26 billion. Schwab will issue 1.0837 shares for each TD Ameritrade share.

The deal will create a company with more than $5 trillion in assets under management. TD Ameritrade will contribute approximately 12 million client accounts, $1.3 trillion in client assets.

The press release also says, “on expenses, current estimates are for approximately $1.8 to $2 billion run-rate expense synergies, which represents approximately 18-20% of the combined cost base” – a $2 billion cut in headcount and operating budget.

TD Ameritrade had a LTM revenue of $5.665B as of 2019Q3, thus receiving a roughly 4.6x revenue multiple. Or taking the revenue declines into account, it represents a 5.0x NTM revenue ($5.2 billion) multiple. Also, it’s around $2,167 per client account.

Morgan Stanley x E*Trade

On Feb 20, 2020, Morgan Stanley said it agreed to buy discount brokerage pioneer E*Trade for $13 billion. Also an all stock deal, E*Trade stockholders will receive 1.0432 Morgan Stanley shares for each E*Trade share, which represents per share consideration of $58.74.

Combined platforms will have $3.1tn client assets, 8.2 million retail client relationships and accounts, and 4.6 million stock plan participants. E*TRADE has over 5.2 million client accounts with over $360 billion of retail client assets.

Similarly, the acquisition price represents a 4.5x LTM revenue multiple. Also, it’s $2,500 per retail client account.

Non-stopping Cybersecurity Acquisitions: 3 Deals Over One Billion In 2020 So Far

Following up on a previous post of M&As in the cybersecurity space – interests and activities are still strong.

RSA for $2.1bn

Another private equity firm Symphony Technology Group (STG) just announced the acquisition of RSA from Dell for $2.075 billion in cash. STG partnered with Ontario Teachers’ Pension Plan Board and AlpInvest Partners in the deal.

Dell acquired RSA when it bought EMC in 2015. RSA has over 12,500 customers according to the statement.

Forescout for $1.9bn

Earlier this month, Forescout was to be acquired by Apax and its partner Crosspoint Capital for $33 per share in an all-cash transaction valued at $1.9 billion.

The purchase price represents a premium of approximately 30% over Forescout’s closing share price of $25.45 on October 18, 2019, the last full trading day prior to the release of the 13-D filings by Corvex Management L.P. and Jericho Capital Asset Management L.P. on October 21, 2019, which disclosed they had formed a partnership to approach Forescout and accumulated a combined 14.5% ownership in the company.

Forescout recorded fourth quarter revenue of $91.3 million, compared to $84.7 million in the fourth quarter of 2018 (+8% growth); full year revenue of $336.8 million, compared to $297.7 million in the full year 2019 (+13% growth).

Armis Security for $1.1bn

In January, Israeli IoT security firm Armis Security announced that it agreed to be acquired by NY-based Insight Partners at a valuation of $1.1 billion.

Insight will pay cash for the cybersecurity company, with participation from CapitalG for $100 million and rollover from some existing stockholders.

 

Banking Headcount Cut

HSBC recently surprised the outsiders with a 35,000 job cut plan in three years.

The largest bank by asset in Europe, London-based HSBC does most of its business in Asia.

Financial Times reported last year in October that HSBC has embarked on a cost-cutting drive that threatens up to 10,000 jobs, as its new interim chief executive Noel Quinn seeks to make his mark on the bank.

It will now cut the headcount from 235,000 to about 200,000 in 2022.

It is also not a surprise as fintech companies are becoming more compelling and providing more superior services efficiently.

The long-term trend is inevitable. For example, in retail banking, every major bank is shutting down branches. The previous “comparative advantage” of having more footprint in the last century has become a liability. The bigger they were, the more pain they were feeling.

In a Jan 2017 report, The Guardian said HSBC “will be left with 625 branches by the end of the year [2017], which means it will have more than halved its high street presence since June 2011 when it had 1,301 branches.”

And in today’s report, HSBC US said the bank will close about 80 branches this year in the U.S. alone, a reduction of about 30%.

Other retail banking services such as trading and wealth management are also shifting online + automation. Younger generations just don’t need much face-to-face financial services and digital infrastructure has become more potent than ever. The industry’s reduction in cost structure leads to lowering fees and squeezes every player who couldn’t adapt (fast).

Many Institution services are also digitalized/automated.

Not surprisingly, many parts of the investment banking world such as trading are cutting headcount as well.

Last August, Financial Times reported that

Almost 30,000 lay-offs have been announced since April at banks including HSBC, Barclays, Société Générale, Citigroup and Deutsche Bank. Most of the cuts have come in Europe, with Deutsche accounting for more than half the total, while trading desks have been hit hardest.

A graphic with no description
Source: FT

A CBInsights Report: The Most Well-Funded Tech Startups In Europe

Read the original report here.

  • The top-funded startup in Europe is global communications company OneWeb in the UK, with almost $3.5B in total disclosed equity funding.
  • Rounding out the top 3 most well-funded startups in the region are online payments service provider Klarna in Sweden ($1.1B in disclosed equity funding) and mobile banking platform N26 in Germany ($683M).
  • Eight of the 37 companies featured in our map are unicorns, with disclosed valuations of $1B+ (all tracked in real time on the CB Insights global unicorn club tracker). These unicorns are: Klarna ($5.5B valuation, Sweden), N26 ($3.5B, Germany), BlaBlaCar ($1.6B, France), Vinted ($1.1B, Lithuania), Acronis ($1B, Switzerland), Glovo ($1B, Spain), OutSystems ($1B, Portugal), and Bolt ($1B, Estonia).
  • The region is home to 16 countries whose most well-funded tech startup has raised over $100M in equity funding. Only OneWeb and Klarna have raised more than $1B+ in equity funding.
  • The least well-funded startup on the map is Serbia-based data analysis tool Content Insights, which has raised $3.6M.
  • Since our last update of this map in April, only 1 featured startup has exited: Switzerland-based Veeam Software, which was acquired by VC firm Insight Partners in January 2020 at a valuation of $5B+.
Source: CBInsights
STARTUP CONTINENT: THE MOST WELL-FUNDED TECH STARTUPS IN EUROPE
Company Country  Total Equity Funding ($M)
OneWeb United Kingdom 3469
Klarna Sweden 1122
N26 Germany 683
Glovo Spain 513
BlaBlaCar France 449
OutSystems Portugal 422
Picnic Netherlands 329
Vinted Lithuania 260
RELEX Solutions Finland 222
AMCS Group Ireland 202
Trustpilot Denmark 179
Acronis Switzerland 178
Bolt Estonia 177
Tricentis Austria 174
DocPlanner Group Poland 137
Odoo Belgium 104
Job Today Luxembourg 81
ivi Russian Federation 81
Kolonial.no Norway 61
AImotive Hungary 51
Satispay Italy 50
Mews Systems Czech Republic 42
PDFfiler Ukraine 30
Lidyana Turkey 25.17
Capital.com Cyprus 25
Netdata Greece 21
Software Group Bulgaria 17
FintechOS Romania 16
Gambling.com Group Malta 16
Banuba Belarus 12
Minit Slovakia 11
TripCreator Iceland 10
Gjirafa Albania 8.7
Mintos Latvia 7.8
Gideon Brothers Croatia 5.7
Eligma Slovenia 4.4
Content Insights Serbia 3.6

「News of the Week」Tesla, $968.99/share

Financial Times – Tesla shares surge again despite Saudi Arabian exit

  • Tesla made the company the world’s second-largest carmaker by market value.
  • The stock rose as much as 24.2 per cent to $968.99 about 12 minutes out from the closing bell, closing at $887.06.
  • The stock has more than doubled since the start of the year.
  • The stock notched their most actively traded day on Feb 4, with ~61 million volume.
  • Tesla reported a $105 million profit for 19Q4 the week before
  • Short squeeze – On top of the record dollar loss of $5.8bn in January, short-sellers lost a further $3.2bn as the extraordinary share price rally accelerated on the first day’s trading of the new month.
  • Tesla’s recent delivery from its Shanghai factory to the China market added to the enthusiasm. It is the first fully foreign-owned car plant in the country.

「News of the Week」China’s Amended Securities Law

Reuters – China sets out move to liberalize IPO rules to streamline listings

Caixin – China Approves New Securities Law with Registration-Based IPO System

The amended legislation, due to take effect from March 1, removes complex and time-consuming watchdog scrutiny before listings and is designed to expand registration-based IPOs.

Th requirement for a company to qualify for a new listing is lowered to being “capable of sustainable business operations,” from the previous more stringent “capable of sustained profitability.”

The revised law adds a new chapter on information disclosure.

it also contains provision for heavier punishment on stocks violations and pledges better protection for investors in general.

Dots to connect: fees for investment banks, stock performance for financial services companies, increasing power of exchanges, dropping value of “shell companies”, growing value of indexes, etc..