Market & Corporate Update - 2020.10.28 Davide F. Li Gambi & Maxim Mokhonko
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Market & Corporate Update 2020.10.28 Davide F. Li Gambi & Maxim Mokhonko Oct. 28th 2020 BSFS Committee Meeting
Market (1/3)
US Market
● After a slightly negative week, markets tanked on Monday:
o Markets were on a tight range last week, with stimulus headlines offsetting mixed quarterly results
○ All three major indices down on Monday, with the Dow recording its worst week since September
(DOW -2.29 %, S&P 500 -1.86 %, NASDAQ -1.64%)
○ Concerns about COVID-19 infection rates and faint hopes for a pre-election stimulus deal behind the
decrease, despite House Speaker Nancy Pelosi suggesting a potential breakthrough this week
● The clock is ticking for US Elections:
o A Biden victory seems likely, with investors pivoting for the possibility of a Blue wave
o Still, investors are hedging the short-term uncertainty: put options in S&P 500 have increased by 50% in price
● Big Tech, among others, reports earnings this week:
○ Tuesday: Microsoft, Pfizer, JetBlue
○ Wednesday: Boeing, General Electric, Twitter,
○ Thursday: Amazon, Google, Apple, Facebook
○ Friday: Exxon Mobil, Chevron
Market (2/3)
European Markets
● EU stocks posted biggest weekly drop in a month, and are still declining:
o On Monday, new lockdown measures in Italy and Spain dragged markets down (Stoxx 600 -1.8%, FTSE 100 -
1.1%, Dax -0.9%, CAC 40 -1.8%)
o Europe’s Stoxx Tech index opens with the largest one-day loss since March: -6.3%
● Focus on Thursday’s ECB meeting for clues on monetary policy
o Macro forecasts will not be updated before December 10, but the
deteriorating outlook will need to be acknowledged
o Q3 Eurozone GDP, inflation and unemployment data to be published
on Friday
● Turkish Lira sank to the symbolic level of 8.3211 to the Dollar
o After losing about a quarter of its value this year, the lira dropped
about 2% after the Central Bank ignored calls from investor to raise
its main interest rate
Market (3/3)
Asian Markets & Commodities
● Equities in the Asia-Pacific region followed suit from Western counterparts, with China an outlier
o Kospi -0.6%, S&P/ASX 200 -1.7% and Hang Seng -0.5%. China’s CSI 300 +0.2%, as investors look ahead for
China’s latest 5-year policy plan, determining economic policies and goals in next 5 years
● Oil traders are cautious about US Elections
o November 3 vote seems to hide a nuanced outcome for
investors. Iran deal, OPEC+ relationships and
deregulation policies are the deciding factors
● Last week, Copper traded at $7,000 a tonne, the highest
level in more than 2 years
o Good proxy for investors to gain exposure to solar,
wind, batteries and electric cars
o Commodity consumption in automotive and power sector
is set to grow by 2.3m tonnes over next five years
Corporate (1/3)
China’s Ant Group to raise $34+ billion in record IPO
Shanghai’s
Shanghai’sSTAR
STARMarket
Market Hong Kong Stock Exchange
1.67bn
1.67bnshares
shares@
@¥68.8
¥68.8 1.67bn shares @ HK$80
● Price represents a ● Very strong demand: book
multiple of 31.4x 2021 to close this Wednesday (1
earnings forecast ➔ $313 billion day earlier than planned)
valuation (pre
● Up to 15% additional ● Joint sponsors (HK leg):
shares available as a
greenshoe) Citigroup, JPMorgan Chase,
greenshoe or over- Morgan Stanley; joint global
allotment option co-ordinator: Credit Suisse.
➔ ~33% stake to be 25 institutions in total working
on the sale.
● Coordinated by 6 maintained by
institutions with CICC and
China Securities Co. as Alibaba ● Trading starts on 5th Nov
joint sponsors
Corporate (2/3)
AMD agrees to buy Xilinx for $35bn, all stock
● Advanced Micro Devices has agreed to buy rival US chipmaker
Semiconductor Xilinx in a $35bn all-stock transaction, which will become AMD’s
$100+ bn
dealmaking in 2020 largest acquisition to date
AMD’s (combined) ● AMD will pay 1.72 shares of common stock for each Xilinx share,
annual R&D spending $2.7bn implying $143 PPS for Xilinx, or a 24.8% premium on Monday’s close
projection
● AMD shareholders’ stake in combined company will amount to 74%
Engineers employed
13,000
(combined) ● The two companies’ combined customer base presents a $110+ bn
revenue opportunity
$300M in
Cost savings ● Other notable M&A deals in this sector (2020):
18m
$40bn for Arm (stock + cash) $20bn for Maxim Integrated Products
(all equity)
Corporate (3/3)
Restaurant holding Dunkin’ Brands to go private
21,000 locations,
$12bn system sales
$8.8 billion
● Dunkin’ key facts: ● (Potential) Transaction details: ● Inspire key facts:
o Runs more than 13,000 o An offer of $106.5 a share o 4th largest restaurant chain
Dunkin’ and 8,000 Baskin- commands a 20% premium group in the US, backed by
Robbins outlets over last week’s close PE firm Roark Capital Group
o Shares closed @ $88.79 last o Equity value + $3 in net long- o Owner and franchisor of
week (ATH), +16% YTD term debt results in a x26 Arby’s and Buffalo Wild
o Demonstrated strong recovery forward EV/EBITDA multiple Wings, among others
trends, drive-through facilities o For comparison, Krispy Kreme o Controls ~11,000 restaurants
at 70% of outlets - big factor in 2016 was acquired for x19 and $14.6bn in annual sales
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