Archive

Reuters blog archive

from Breakingviews:

Spreadsheet bungles alive and well in high finance

By Richard Beales

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

There’s no rule about Excel’s infallibility. Yet obvious spreadsheet errors still occur, even in the citadels of high finance. No less a practitioner than Goldman Sachs double-counted some of Tibco’s shares in calculating the business software company’s value in a sale worth $4.3 billion – oops, make that $4.2 billion. Both the firm and its client must have been distracted.

Mistakes happen. And this one didn’t affect the $24 per share that Vista Equity Partners agreed to pay for Tibco, or the thrust of Goldman’s analysis on whether the deal last month was fair. What happened was that someone counted a small number of restricted shares separately when they were already included in the much bigger total of common stock outstanding.

The result, once the agreed price per share was multiplied by the number of shares, was an inflated dollar valuation for Tibco, to the tune of about $100 million or a little over 2 percent. That’s not enough to change anyone’s mind about the deal, and certainly nothing remotely on the scale of the calculation errors that featured in JPMorgan’s $6 billion “London whale” losses in 2012.

from Alison Frankel:

Sneaky new trend in IPOs: Make shareholders pay if they sue and lose

If you bought Alibaba shares last month when the Chinese mobile commerce company went public, you participated in the biggest-ever initial public offering. Alibaba raised $25 billion from investors when its shares began to trade on the New York Stock Exchange. Its price has dropped a bit from its record high of more than $99 on the first day of trading, but as of Thursday afternoon Alibaba was swinging back up toward $90 a share.

You'd better hope that the stock price is as solidly based as it seems, because if Alibaba's officers and directors are engaged in fraud, shareholders will have a very tough time suing for their losses. That's certainly what the company intends. On the very last page of its 38-page articles of association, Alibaba includes a provision stating that any shareholder who initiates or assists in a claim against the company must pay the company's defense fees and costs unless shareholders win a judgment on the merits. This sort of "loser pays" fee-shifting is an exception to the general rule in the United States that each side bears its own costs of litigating - and it effectively precludes shareholder class actions suits because investors and their law firms don't want to risk paying defendants' legal fees.

from Breakingviews:

European IPO wobble is about more than volatility

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Europe’s IPO wobble is about more than volatility. With initial public offerings in France and Italy being pulled, companies and advisers are, as ever, blaming choppy markets. There’s some truth in this old bromide. But the misfiring of two big internet debuts also matters. Europe’s economy is faltering. And a busy year for new deals has made investors both less flush and more discriminating.

from Breakingviews:

Jumbo $6 bln bank IPO shows Saudi too big to miss

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Saudi Arabia’s jumbo bank offering shows the soon-to-open emerging market is too good to miss. The kingdom’s top lender by assets is planning to sell shares worth $6 billion, making it the biggest-ever initial public offering in the Middle East and second only to China’s Alibaba in the world this year. For most outsiders, it’s a reminder of the opportunities that will open up when foreign investors are granted direct access to the country’s $584 billion stock market next year.

from Breakingviews:

Rocket and Zalando call top of Europe’s IPO market

By Olaf Storbeck

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Highflying hopes of a renewed surge in European new issues have been hit by two rockets. Weak market debuts for internet fashion retailer Zalando and tech company incubator Rocket Internet appear to mark an early zenith for initial public offerings in the region.

from Breakingviews:

Alibaba IPO highlights SoftBank’s value dilemma

By Una Galani

The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Alibaba’s runaway initial public offering has turned the spotlight back onto SoftBank’s valuation dilemma. Following the Chinese e-commerce group’s successful New York listing, the Japanese conglomerate’s 32 percent stake eclipses the value of its other businesses. The 5 percent drop in SoftBank’s shares on the morning of Sept. 22 is a reminder the investment is both blessing and burden.

from Counterparties:

MORNING BID – The Forty Thieves Await

Reading the tea leaves on what’s likely to happen with the debut of Alibaba Group Holdings isn’t an easy task given a few of the weird quirks of this IPO that come into play. Shares will start trading in an hour or so after the open of trading on the New York Stock Exchange, and while it’s tempting to think the various wrinkles that come with the stock will prevent it from being as volatile as first-day activity is in hot deals, it’s hard to see how it doesn’t turn out any other way than the usual crazy way.

The company has made a show of saying it wants most of the shares to end up allocated to the fewest of large shareholders possible – the big active managers (since index funds can’t get in there just yet) and sovereign wealth funds that see this as a long-term play to appreciate over a period of time. Fund managers are in the midst of finding out how well they did (and with about 40 institutions requesting $1 billion allocations on a $22 billion deal, a lot of people are going to walk away from the table hungry), and the dynamic it creates after the open is sure to create a lot of activity.

from Breakingviews:

Bayer’s plastic float sows seeds for one more sale

By Quentin Webb

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Bayer’s plastic float could sow the seeds for another sale. Investors added more than $5 billion to the German blue-chip’s $114 billion market capitalisation on Sept. 18, after it unveiled plans to float MaterialScience, its capital-intensive plastics and polymers business. Once again, investors are rewarding a company for adopting a sharper focus. A logical follow-up for Bayer Chief Executive Marijn Dekkers would be to quit agrochemicals and create a pure healthcare business.

from Breakingviews:

Alibaba’s small IPO hike leaves room for believers

By Peter Thal Larsen

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Pricing initial public offerings is an inexact science. Predicting how investors will value a large, fast-growing Chinese e-commerce group involves even more guesswork. That makes Alibaba’s decision to lift the maximum price for its upcoming stock market debut by just $2 a share to $68 puzzling.

from Breakingviews:

RBS puts lipstick on Citizens for $14 bln IPO

By Antony Currie

The author is a Reuters Breakingviews columnist. The opinions expressed are his own. 

Royal Bank of Scotland is applying a fair amount of lipstick to its U.S. unit ahead of a planned initial public offering. Citizens Financial is worth up to $14 billion, based on the price range of $23 to $25 a share set on Sept. 8. Like the leaders of its home nation, RBS is painting too pretty a picture of life after independence.

  •