Finance – Page 5 – shiqiv.com

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+.

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..

「Video of the Week」David Rubenstein Conversation With BlackStone Chairman & CEO Stephen Schwarzman

MIT’s new college of computing was formed on Sep 11 2019, enabled by Schwarzman’s $350 million donation.

And Schwarzman’s new book is out – What It Takes: Lessons in the Pursuit of Excellence

「News of the Week」Japan’s New Internet Giant

WSJ – Yahoo Japan and Chat App Line Agree to Merge

SoftBank’s announcement

As part of the deal, SoftBank Group subsidiary SoftBank Corp. and Naver said they would buy all the shares in Line not already owned by Naver at ¥5,200 ($47.78) a share. Naver owns 72.6% of Line as of Monday. SoftBank Corp. and Naver will pay ¥170 billion ($1.56 billion) each to buy those Line shares, SoftBank said.

Line Pay has 37 million users and PayPay, operated jointly by SoftBank and Yahoo Japan, has 19 million. (Nikkei)

Dots to connect: competitions in ads, e-commerce, payment in Japan, monetization on 82 million Line MAU, Japan moving to cash-less, SoftBank’s consolidated financial performance, new superapp, etc.

「What’s News In China」

Shanghai Green Valley Pharmaceuticals (Green Valley, 绿谷制药) today announced on Nov 2 that China’s National Medical Products Administration (NMPA) has approved Oligomannate (GV-971) as new drug for the treatment of “mild to moderate Alzheimer’s disease (AD) and improving cognitive function.” It is the first novel drug approved for Alzheimer’s disease globally since 2003. The company is also planning a global phase 3 trial with sites in the U.S., Europe and other parts of Asia in early 2020 to support regulatory filings around the world. // prnewswire | fiercepharma

On Nov 5, Nio (NASDAQ: NIO), long being seen as the Tesla in China, announced its partnership with Intel’s Mobileye to build self-driving EVs. Under the planned collaboration, Mobileye will provide NIO with the design of the self-driving system building on the Mobileye AV Series, a L4 AV kit comprised of the Mobileye EyeQ® system-on-chip, hardware, driving policy, safety software and mapping solution. NIO will take on the automotive-grade engineering, integration and mass-production of Mobileye’s system for both consumer automotive markets and for Mobileye’s mobility-as-a-service (MaaS) applications. In addition to integrating the self-driving system into its vehicle lines, NIO will develop a specially configured variant of electric AVs that Mobileye will use as robotaxis, deployed for ride-hailing services in global markets. // TechCrunch| intel

36Kr (NASDAQ: KRKR), a Beijing-based news and data provider, known for tracking fundraising and tech related news in China, raised $20 million in its Friday debut on NASDAQ. The company is similar to TechCrunch or Crunchbase (its affiliated Crunchbase News). // Crunchbase News

Meituan: Fighting Every War

The current Meituan (MeituanDianping) came from a merger between Meituan and Dianping in December 2015.

Once a company invested by Alibaba, Meituan has become more closer with Tencent after the merger.

At the beginning of 2016, MeituanDianping raised $3.3 billion from Tencent, DST Global and Temasek at a $15 billion pre-money valuation; meanwhile, Alibaba sold its stake for ~$900 million in the same month.

Later that year, in April 2016, Alibaba invested the $900 million in Ele.me and Ant Financial invested $350 million.

The war has already changed from Yelp and Groupon to more comprehensive areas – restaurants and other local services.

[Note – in 2014, Priceline (now Booking.com) agreed to buy restaurant booking service OpenTable for about $2.6 billion in cash. But in China, dining is not exactly scheduled by time but by getting a number into the line, determined by how many people are ahead of you.]

However, US and China are similar in the world of food delivery. Meituan and Ele.me are fighting in China while Uber Eats, DoorDash, GrubHub, PostMates are fighting in the US. The difference – China uses e-bikes and US uses cars.

And for other services like movies, Meituan spun-off Maoyan in 2016. Maoyan is competing with Tao Piaopiao, which raised ¥1.7 billion in 2016.

In the US, the market is led by Fandango and Atom Tickets. But the market is not limited to movies – it’s about all kinds of shows, concerts and exhibitions.

Meituan is also offering hotel & travel bookings, fighting in the war with Ctrip.

Going back to Meituan, it raised $4 billion in October 2017 from Tencent, Sequoia, GIC and Tiger Global.

Meituan Dianping introduced its ride-hailing operation Meituan Dache in February 2018.

In April 2018, Alibaba acquired Ele.me for $9.5 billion.

Same week , Meituan acquired mobike for $2.7 billion.

Later that month, Ant Financials led a round of $700 million for Hellobike.

Meituan went for IPO in Hong Kong in September 2018, raising $4.2 billion.

Another OTA, Tongcheng-Elong, with Tencent and Ctrip as major shareholders, went IPO in Hong Kong in November 2018, raising $180 million.

Summing up the wars Meituan is in: