Breakingviews

“Seller beware” when profiting from market calm

July 10, 2014

Volatility, gauged by indicators like VIX, is ultra-low. While it could be the calm before a storm, investors including Pimco have been selling insurance against price swings. It’s one way to make money amidst shrinking yields, but it’s also a risky bet against the unexpected.

PetSmart activists barking up the right tree

July 9, 2014

Jana Partners was joined by another big shareholder in commanding the $6.8 bln dog food retailer to roll over and sell itself. Management could throw investors a bone with a bigger buyback. The better option is a deal with Petco, the rival controlled by TPG and Leonard Green.

Close presidential race may slow Indonesia reforms

July 9, 2014

Popular Jakarta Governor Joko Widodo faces a tough challenge from ex-general Prabowo Subianto in the country’s presidential poll. While the latter’s nationalistic talk makes investors edgy, a slim win for the former could also dim hopes of strong leadership and lasting change.

Supercharged IPO tax spoils need splitting

July 8, 2014

KKR and Silver Lake are listing web hosting outfit GoDaddy. The use of what’s called an “Up-C” structure means the company will float with big tax deductions. IPO investors and existing owners will both benefit, but other IPOs with Up-Cs have seen more dubious arrangements.

Internet ads add up for China’s party mouthpiece

July 8, 2014

The online arm of state news agency Xinhua is planning an IPO with a near-$1 billion valuation. Booming advertising has brought it success that has eluded the Western media. Xinhuanet’s fortunes aren’t built on headlines or scoops, but a lucrative monopoly on the PRC’s PR.

Gowex collapse leaves egg on many faces

July 7, 2014

The Spanish wifi provider has said its CEO admitted falsifying the accounts, days after short-seller Gotham City attacked the company. Gowex’s status as a poster child for Spanish entrepreneurialism means the fallout will go beyond increased risk aversion to junior listed stocks.

Beijing Motor IPO lifts bonnet on China carmakers

July 7, 2014

The automaker hopes a Hong Kong listing will help it cash in on China’s yearning for luxury vehicles. But its own marques lose money. Earnings depend on joint ventures with foreign groups like Hyundai and part-owner Daimler. It’s a reminder that China’s car market has two speeds.

Chinese internet stocks deserve their discount

July 4, 2014

Groups like Tencent and Baidu are growing faster than their U.S. counterparts, but American dotcom shares fetch a higher multiple. Corporate governance worries and legal risks are partly to blame. So are doubts about international expansion. The valuation gap is warranted.

Quickie stock sales toy with Volcker Rule spirit

July 3, 2014

Wall Street has used block trades to move $23 bln of equity for public companies this year, almost as much as IPOs have raised. They’re a handy tool and easy way for banks to gain league-table credit. But at times the line blurs between capital-raising and banned prop trading.

Cash calls misstate likely EU bank equity deficit

July 3, 2014

The first half of 2014 saw a spate of European bank share sales ahead of stress test results this autumn. It would be wrong to conclude that all the new equity will go to plug a capital hole. Some lenders are being preemptive, some are just cautious.