GS - The Goldman Sachs Group, Inc.
214.50 -1.28 (-0.59%)
After hours: 5:08PM EST
| Previous close | 217.61 |
| Open | 218.70 |
| Bid | 216.62 x 800 |
| Ask | 215.78 x 1000 |
| Day's range | 214.76 - 220.00 |
| 52-week range | 180.73 - 250.46 |
| Volume | 4,130,143 |
| Avg. volume | 2,730,754 |
| Market cap | 74.589B |
| Beta (5Y monthly) | 1.31 |
| PE ratio (TTM) | 10.26 |
| EPS (TTM) | 21.03 |
| Earnings date | 12 Apr 2020 - 16 Apr 2020 |
| Forward dividend & yield | 5.00 (2.30%) |
| Ex-dividend date | 27 Feb 2020 |
| 1y target est | 268.11 |
- Bloomberg
Goldman Plows More Funding Into No-Code Software Startup
(Bloomberg) -- Unqork, a New York-based software company, raised an additional $51 million from backers including Goldman Sachs Group Inc. to accelerate a global expansion and move into new industries beyond insurance and financial services.The two-year-old startup is an application platform that doesn’t require any coding, allowing big companies, such as Liberty Mutual, John Hancock Life Insurance Co. and Manulife Financial Corp., to create custom software quicker and cheaper than the traditional way. Unqork’s no-code app platform allows developers to build visually, by dragging and dropping components on the screen.“Anything a Java developer or engineer can build using custom code, we can do it 200 times faster,” said Gary Hoberman, founder and chief executive officer, in an interview.The latest cash infusion from Goldman, and new investors Aquiline and World Innovation Lab, adds to the $80 million Unqork raised in October, led by CapitalG, Alphabet Inc’s growth equity investment fund. That brings the total raised in the latest funding round to $131 million. Unqork has raised $158 million to date.The cash influx will help the company expand its sales and marketing teams in the U.S. and abroad and develop partnerships with service firms like Cognizant Technology Solutions Corp., Deloitte LLP and KPMG LLP.(Updates with total funds raised in penultimate paragraph.)To contact the reporter on this story: Nikitha Sattiraju in New York at nsattiraju@bloomberg.netTo contact the editors responsible for this story: Molly Schuetz at mschuetz9@bloomberg.net, Andrew PollackFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
JPMorgan, Goldman Among Banks Vying for Arab Refining IPO
(Bloomberg) -- JPMorgan Chase & Co., Citigroup Inc. and Goldman Sachs Group Inc. are among the banks competing to advise Egypt’s Arab Refining Co. on its initial public offering, a person familiar with the matter said.EFG Hermes Holding Co., HSBC Holdings Plc and Renaissance Capital are also in the running, the person said, asking not to be identified because the talks are confidential. Arab Refining will pick as many as three of the banks in the second quarter of 2020 to advise on details such as the size of stake to offer.HSBC, EFG Hermes, Renaissance Capital, Goldman Sachs and JPMorgan all declined to comment. Citi said no one was available to speak about the matter.The sale of a stake in Arab Refining, a unit of Qalaa Holdings SAE, is one of a number of IPOs planned for this year that could revitalize Egypt’s bourse. After a two-year hiatus, the government is set to resume its own program in March that will offer stakes in three state-run firms, including veteran lender Banque du Caire.Arab Refining is planning to make its stock market debut in the fourth quarter and owns 67% of Egyptian Refining Co., which recently developed a multi-billion dollar refinery in greater Cairo. Qalaa has indicated it wants to keep its controlling stake through an agreement with shareholders.Fellow Qalaa unit, Taqa Arabia Co., is also pressing ahead with its long-held plans for an IPO. The power company that helped build a vast solar farm in Upper Egypt is seeking to sell 30%-40% in the second quarter of 2020.(Updates with Goldman Sachs declining to comment in third paragraph)\--With assistance from Dinesh Nair and Archana Narayanan.To contact the reporter on this story: Mirette Magdy in Cairo at mmagdy1@bloomberg.netTo contact the editors responsible for this story: Nayla Razzouk at nrazzouk2@bloomberg.net, Michael Gunn, Stefania BianchiFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
Blackstone in $6 Billion Deal to Buy U.K. Dorms From Goldman
(Bloomberg) -- Blackstone Group Inc. agreed to buy the iQ Student Accommodation business from Goldman Sachs Group Inc. and the Wellcome Trust in the largest-ever private real estate deal in the U.K.Funds managed by Blackstone will pay 4.66 billion pounds ($6 billion) for the business, which owns and manages properties with more than 28,000 beds in the U.K., according to an emailed statement from Goldman Sachs. The deal is subject to regulatory approval.“This acquisition is a continuation of our strategy to invest in high-quality assets and businesses in the U.K. and testament to our long-term belief in the U.K.,” James Seppala, Blackstone’s head of real estate in Europe, said in the statement.Private-equity firms are betting heavily on U.K. real estate, which has lagged other western European markets since the Brexit referendum in mid-2016. Student housing has been a particularly popular bet, as students vastly outnumber the rooms available in purpose-built accommodation.Blackstone has a long track record in the sector, with iQ the third student-housing business the fund manager has invested in since 2006. It’s also the latest in a series of substantial U.K. real estate investments for the alternative asset manager that include a large portfolio of railway arches and a low-income housing business.Overseas StudentsBlackstone plans to invest heavily in the business, which has a development pipeline of about 4,000 beds. A substantial proportion of the 77 existing properties are also in need of refurbishment, according to a person with knowledge of the matter.About half of the portfolio is located in London, with the remainder spread across cities and university towns that are home to the U.K.’s top academic institutions. The concentration on top universities, particularly in London, means many of iQ’s biggest tenants are overseas students, with just a third coming from the U.K. About half existing residents come from outside the European Union.The U.K. government said last year it aims to increase the number of international students studying in the U.K. by more than 30%.Most of Blackstone’s investment is being made on behalf of its 10 billion-euro Blackstone Real Estate Partners Europe VI fund, said the person, who asked not to be identified because the information is private. The deal could pave the way for an initial public offering of the business at some stage in the next decade, when the fund nears the end of its life, the person said.The Wellcome Trust, a charitable foundation established with the legacies from the pharmaceutical magnate Sir Henry Wellcome, was among the founding investors of iQ in 2006. The business merged with Goldman Sachs’s student housing company in 2016.Goldman Sachs International, Morgan Stanley and Eastdil Secured advised Goldman Sachs’s merchant banking division and the Wellcome Trust on the sale, according to the statement. Bank of America Corp., Citigroup Inc. and Savills Plc represented Blackstone in the acquisition.(Updates with detail on deal starting in sixth paragraph)To contact the reporter on this story: Jack Sidders in London at jsidders@bloomberg.netTo contact the editors responsible for this story: Shelley Robinson at ssmith118@bloomberg.net, Patrick Henry, Marion DakersFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Reuters
Blackstone to buy British student housing group iQ for £4.7 billion
Britain is the second largest market for purpose-built student accommodation outside of North America and rapid growth over the last decade means that the sector is now valued at more than 50 billion pounds, according to Knight Frank. There were 142 universities in the UK in 2017, according to market and consumer data firm Statista, while a report by the Higher Education Statistics Agency showed there were 2.34 million students studying at higher education institutions between 2017 and 2018.
- Reuters - UK Focus
Blackstone to buy British student housing group iQ for $6.06 bln
- Bloomberg
The Coronavirus May Be Worse Than a Natural Disaster
(Bloomberg Opinion) -- Everyone is wondering when China will return to work. While it may be tempting to consider past epidemics or labor strikes to gauge how quickly that could happen, the industrial shutdown from the coronavirus is looking more like a natural disaster than anything else. It may even get worse.Chinese industrial activity remains severely depressed. One tracker shows an even sharper, albeit shorter, drop than the global financial crisis in 2008. Coal consumption at six major power plants is well below normal operating levels this time of year. Already, global suppliers’ delivery times are getting longer, particularly in Germany and Japan, according to Goldman Sachs Group Inc. Companies that have come back online are struggling to return to full capacity. While some government controls have loosened in recent days, strict quarantines in key manufacturing hubs continue to take a toll.Most employees remain at home, and things, in theory, could return to normal when China’s 300 million migrant workers get back to their jobs. But that’s now looking distant. Just 20% to 30% will resume before March, according to Jefferies Financial Group Inc. By the second quarter, that proportion will only reach 60% to 80%.Interruptions from labor strikes, for example, will hit the bottom line and delay shipments for a few weeks, while the economic hit from severe acute respiratory syndrome in 2003 was relatively short-lived. By contrast, events like hurricanes, fires and floods, have a longer-term effect. Factories get destroyed, roads become difficult to traverse and logistics routes are upended by the destruction. Firms eventually run out of inventories. Until reconstruction work is well on its way, it’s hard to get the industrial cogs turning.Hundreds of natural disasters occur globally each year that threaten lives and livelihoods. In the U.S., around 40% to 60% of small businesses never reopen their doors as a result, according to the Federal Emergency Management Agency. The ripple effects can be severe and cascade globally. A study of 41 major U.S. disasters showed that $1 of lost sales for suppliers led to a $2.4 loss for their downstream customers.Consider Japan’s earthquake in March 2011, the fourth-largest ever recorded. Manufacturing output fell 15 percentage points that month and didn’t recover until August. Industrial production of transport equipment tanked, flowing through to exports. Japanese automakers including Toyota Motor Corp. and Honda Motor Co. saw their domestic production slump 63% in March.American companies with a big dependence on Japanese parts suffered, too. It took the better part of a year to get production levels back to where they were before the earthquake; U.S. manufacturing output fell by 1% in April and stayed low for almost six months. The coronavirus’s spread will be even more disruptive. From its large network of ports and industrial parks to the billions of yuan in subsidies, China is the nerve center of global manufacturing. In 2015, the country made up nearly a quarter of the value-added share in global imports. There simply aren’t enough alternative suppliers for the crucial, if basic, parts manufactured by China's thousands of small and medium companies. Even if Beijing provides the cash, businesses are hamstrung with the regulatory burden of reopenings and labor shortages. The network effect will be amplified and prolonged, studies have shown.The trouble is, China Inc. won’t get back to work until these small and medium enterprises do. While the rate of return varies across sectors, manufacturers of so-called intermediate inputs, which are shipped globally, are having the hardest time. A survey of 2,240 such companies showed that more than 90% of respondents had delayed business resumption. A large portion haven’t decided when they will reopen.Even companies like Toyota and Honda are struggling to get fully back online in China, given their dependence on local parts makers. The companies partially restarted operations at some plants as of last week. The longer businesses are closed the higher the likelihood that supply chains start breaking down, as firms run out of inventories and stockpiles. And even when they do return, factories won’t be picking up where they left off. Volkswagen AG’s joint venture with China FAW Group Co., for instance, resumed at four plants last week, but won’t be at full steam until May. It will try to recoup losses by November, according to a production manager cited in state-run China Daily. That looks optimistic.Meanwhile, manufacturers have few choices. Beaten by costs and pricing, companies now depend on lean supply chains. All the advances in manufacturing — such as Toyota’s famed “just-in-time manufacturing” — are premised on minimal inventory and short lead times. That looks like it could backfire. As Toyota’s president Akio Toyoda said last week, “Automobiles have a broad base, and there are various things like the status of parts supplies that you don't know until you put everything in motion again.”It’s only natural to look for comparisons that put a bookend on this crisis. Knowing that SARS cases dwindled after a few months and the economy eventually rebounded can be comforting, to a certain degree. Yet we’re starting to see that the coronavirus outbreak has few precedents. It may only be a matter of time before this episode becomes the benchmark for future disruptions.To contact the author of this story: Anjani Trivedi at atrivedi39@bloomberg.netTo contact the editor responsible for this story: Rachel Rosenthal at rrosenthal21@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Anjani Trivedi is a Bloomberg Opinion columnist covering industrial companies in Asia. She previously worked for the Wall Street Journal. For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
Hedge Funds Ramped Up Leverage in Stocks Just Before Market Rout
(Bloomberg) -- Individual investors weren’t the only ones falling in love with stocks right before they went south. Turns out the savviest of institutions were in equally high spirits.Hedge funds, which use borrowed money to amplify returns, went risk-on in a major way this month. Net leverage, a measure of industry risk appetite that takes into account long versus short positions, rose by about 5 percentage points, one of the fastest expansions in years, according to data compiled by Morgan Stanley’s prime brokerage unit.While positioning like that could still pay off, it adds to a sense that traders got way too confident at a time when the coronavirus threat was showing no sign of subsiding. Bullish investors have been stung over the last four days as stocks posted the biggest drop since 2015.At Goldman Sachs Group Inc., clients have also ramped up their leverage after holding it steady since late 2019. At 48.4% on Thursday, the ratio stood at the 95th percentile over the past year, the firm’s data showed.The burst of optimism is a departure from much of 2019, when hedge fund stock pickers resisted the the rally. It adds to growing evidence that almost everyone was bullish just before the bottom fell out. Prior to last week, small investors were rushing into winners like Tesla Inc. and loading up call options. Money managers in a Bank of America Corp. survey boosted equity holdings while slashing cash levels to a seven-year low.Throw that into a market where valuations are the highest since the dot-com bubble, and it’s a recipe for trouble. Down almost 8% over four sessions through Tuesday, the S&P 500 erased a monthly gain that at one point was poised to be the best February in 20 years.“Any perception of liquidity that the market tends to give you disappears pretty quickly,” Tom Plumb, president of Plumb Funds, said in an interview at Bloomberg’s New York headquarters. “Even these very smart investors can get caught up into the current waves of sentiment.”Morgan Stanley’s hedge fund clients bought the dip Monday, with purchases spreading across sectors. Technology, whose global sales and supply chain are jeopardized by the spread of the coronavirus, saw the highest demand.Despite the sudden turmoil spurred by coronavirus concerns, however, there are signs that hedge funds can withstand pain. Their picks aren’t faring significantly worse than the broader market. A Goldman basket tracking the industry’s most-popular shares fell 8.4% during the rout, just a tad more than the Russell 1000.Break down the index by hedge fund ownership and the pattern holds. On Monday, when the benchmark dropped 3.3%, stocks in the top quantile of hedge fund ownership lagged behind the bottom group by only 0.41 percentage points, data compiled by Bloomberg showed. For perspective, during the October 2018 rout, the group’s most favored stocks fell twice as much as the least favored.That, along with gains from bets against stocks in a down market, limits career risk for managers, lately a top concern in an industry whose performance is under growing scrutiny. Longer-term, their favorite stocks are beating the market. Goldman’s basket of hedge fund VIP stocks is up almost 1% this year, compared with a 3% loss for the S&P 500.“A paper cut on your finger is not fun,” said J.C. O’Hara, chief market technician at MKM Partners LLC. But “for managers to get shaken out of their positions, they need to lose a finger,” he said.Still, it doesn’t mean all is well.One lurking risk, according to Morgan Stanley, is a potential reversal in so-called crowded stocks. Over the past two years, hedge funds have stuck to a troublingly similar script, favoring dividend shares and companies whose sales are seen as resilient amid a slowing economy. They’ve mostly avoided those priced at lower valuations relative to earnings and book value, many of which -- such as energy companies -- are sensitive to economic swings.In the thinking of Morgan Stanley, when everyone is gravitating toward the same kind of stocks, the danger of a reversal grows.The firm’s combined risk metric, which tracks leverage, industry and style preferences, and crowdedness, just peaked and started rolling over. During the past few years, such a pattern has tended to foreshadow a rotation from the most-crowded longs to the most-crowded shorts by a lag of between two to three months, Morgan Stanley found.Last week, the firm’s hedge fund clients sold growth stocks while adding to value and cyclical shares. The selling of momentum on Thursday was the biggest since last September. At Goldman, a retreat from growth companies continued among its clients.“It remains unknown if this the start of a larger reversal,” Morgan Stanley wrote in the note to clients last week. “A rotation might not be imminent, but positioning is now arguably back to some of the most stretched we’ve seenTo contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net;Melissa Karsh in New York at mkarsh@bloomberg.netTo contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Chris Nagi, Richard RichtmyerFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
Why the Coronavirus Isn’t a Buy-the-Dip Opportunity Yet
(Bloomberg Opinion) -- The steep sell-off in stocks related to the coronavirus has intensified focus on the financial implications of the outbreak. Much of the narrative, especially when it comes to economists and market pundits as opposed to companies, has yet to internalize the significant uncertainties concerning both the known knowns and the known unknowns.As the virus has spread into several countries — particularly Iran, Italy and South Korea — and brought with it more sudden economic stops, it has become even harder for companies and economists to ignore the mounting damage to supply-and-demand conditions on the ground, let alone the funding challenges that lie ahead for some of the more financially stressed companies in China. With that, more companies have warned about the immediate outlook for their earnings, and several economists have revised downward their growth projections for the quarter, particularly when it comes to Asia. Meanwhile, doctors are busily collecting data, investigating, consulting and working on vaccines. Yet most seem to feel that they have yet to comfortably get their arms around some of the most important basic elements about this new virus such as transmission rates and incubation periods.No wonder when I look at the year as a whole I find it hard to predict not only how and when demand will recover but also how well-functioning supply chains will be restored. I am also concerned about the financial outlook of highly leveraged companies and countries, as well as the big overhang of triple-B rated companies over the high-yield market. Companies appear to have internalized these uncertainties better than economists and markets. All of that leads to me to continue to question the latter’s comforting notion of a rapid V-shaped recovery as opposed to a U-, W- or L-shaped one.Some companies have suspended their 2020 earnings guidance altogether. By contrast, most economic growth revisions, including the latest from Goldman Sachs on Asia, are holding on to a sharp fall in the first quarter followed by a sharp rebound in the second and beyond. Consistent with this, the majority of market analysts are urging investors to buy the dip in the fear of missing out on yet another leg up in what has been a remarkable record-breaking market run.Given both short- and longer-term uncertainties, the companies’ stance feels more solid than that of most economists and market pundits — and that’s before factoring in conditions that were far from favorable to begin with, such as a fragile global economy and asset prices that have been decoupled from underlying fundamentals.Short-term questions include how the virus will be contained, the process for overcoming the damaging sudden economic stops and the extent to which stressed balance sheets will be supported by others. For markets, the chief question is whether the supply-and-demand shock emanating from China is big enough to shake the faith in central banks and change the deep FOMO/buy-the-dip conditioning.The longer-term issues are even more complex. Will the shock to China derail what has been an unprecedented development process? What will happen to the China brand that was underpinning much of the country’s regional and international expansion and integration? Will the immediate disruption to travel and supply chains fuel a multiyear deglobalization?The hope remains that the coronavirus will be contained quickly and that the cascading sudden economic stops can be reversed rapidly. Even before that happens for sure, the time will come to buy risk assets, focusing on market segments that have underperformed for a while. But there simply isn’t enough evidence at this stage to predict a timetable with any degree of confidence. After all, it is rare for a sudden stop to break out in some of the largest economies in the world. There is still much more unknown than known.To contact the author of this story: Mohamed A. El-Erian at melerian@bloomberg.netTo contact the editor responsible for this story: Daniel Niemi at dniemi1@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Mohamed A. El-Erian is a Bloomberg Opinion columnist. He is the chief economic adviser at Allianz SE, the parent company of Pimco, where he served as CEO and co-CIO. He is president-elect of Queens' College, Cambridge, senior adviser at Gramercy and professor of practice at Wharton. His books include "The Only Game in Town" and "When Markets Collide."For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
S&P 500’s 5% Rout Hammers Mom-and-Pop Investors Who’ve Piled In
(Bloomberg) -- If the source of any of the resilience in U.S. stocks this year has been retail investors fired up by zero-commission trading, markets are about to find out how sturdy that money is.The sell-off stands as the first major test for mom-and-pop investors who, emboldened by a brokerage price-war, have effectively doubled their trades in equities over the last several months. The surge in interest from a group notoriously known for chasing winners has helped fuel a rally in stocks from tech giants to small-caps.The shares they love, from Tesla Inc. to Plug Power Inc., are plunging now, with a Goldman Sachs Group Inc. basket of retail favorites falling the most in nine months.“A lot of that money does tend to be hot money,” said Alec Young, managing director of global markets research at FTSE Russell. “It’s very sensitive to near-term losses.”Global markets buckled Monday, pushing the S&P 500 down almost 5% from its record close five days ago, the bull market’s biggest interruption in six months. Concern about a possible pandemic drove investors out of risky assets and into bonds and gold.Goldman’s basket tracking the 50 most-popular stocks among individual investors fell 3.9%, the biggest retreat since last May. All but two declined as Tesla and Plug Power each sank more than 6%. It’s a decisive turnaround for retail investors, whose picks as tracked by Goldman had surged 13% in 2020 before this week. That’s almost four times as much as the S&P 500.Though impossible to prove, a case exists that individual investors streaming into the market have contributed to the relative buoyancy of equities at a time when fixed-income has sent much more dire signals. The stock market rally that fell apart Monday came against a backdrop of steadily falling yields in Treasury markets that are dominated by institutional traders.Others see a perfectly ordinary bull market occurring in stocks that requires no special influence or agency to drive it and are skeptical individuals have played an outsize role. If anything, it’s bonds, not stocks, that are being boosted by small investors.“A lot of what is happening with bonds has to do with demographics,” said Michael Antonelli, market strategist at Baird. “Baby Boomers are retiring, the world is starved for yields.” The equity market, on the other hand, “is really controlled by institutions. This up-and-down price action, that’s not retail money,” he said.The bull market, which turns 11 years old in two weeks, also predates the recent uptick in small-investor interest. At an all-time high last week, the S&P 500 traded at 19 times forecast earnings, the highest multiple since the dot-com era.Perhaps no other investor group than retail has a greater propensity to chase winners regardless of valuations and company fundamentals. Among retail’s darling stocks, 10 scored year-to-date gains exceeding 20%, including Plug Power, Tesla and Virgin Galactic. Yet only two made profits in 2019.While hardly the only ones to fall into love with megacap tech, their affection for Apple Inc., Amazon.com Inc., Facebook Inc. and Microsoft Corp. has likely contributed to a top-heavy market that some strategists have warned is becoming hard to sustain.It reminds Peter Cecchini of the retail over-involvement in the late 1990s that spelled the golden age of equities and foreshadowed the crash.“While retail involvement in and of itself is not always a sign of frothy markets, when that involvement generally appears to be based on a fear of missing out or otherwise uniformed decision-making, as now, then it is cautionary,” said Cecchini, chief global market strategist at Cantor Fitzgerald LP. “The coronavirus may help demonstrate how quickly it can all come unraveled when fundamentals disconnect from the narrative hype.”Retail money, indifferent participants for much of the 11-year bull market, just made an epic comeback, lured by brokerages slashing commission fees to zero and an equity rally that added $7.5 trillion in market values last year. Daily average trades at E*Trade Financial Corp. and TD Ameritrade Holding Corp. have almost doubled to all-time highs since last September, data compiled by Sundial Research showed.“History has shown that retail investors do respond to near-term volatility, so folks are rather fickle,” said Mike Skillman, chief executive officer of Cadence Capital Management. “If we see an increase in volatility in the next several weeks, flows into the market will slow down, if not reverse.”\--With assistance from Claire Ballentine.To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net;Vildana Hajric in New York at vhajric1@bloomberg.netTo contact the editors responsible for this story: Brad Olesen at bolesen3@bloomberg.net, Chris Nagi, Richard RichtmyerFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Zacks
Why Goldman Sachs (GS) is a Great Dividend Stock Right Now
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Goldman Sachs (GS) have what it takes? Let's find out.
- Bloomberg
European Stocks Slump on Rising Coronavirus Fears
(Bloomberg) -- European equities haven’t had such a bad day since the aftermath of the Brexit vote more than three years ago as increasing concerns over the economic impact of the coronavirus hurt travel and luxury sectors, and volatility spiked.The Stoxx Europe 600 Index closed down 3.8% after falling as much as 4.2% in the sharpest drop since June 27, 2016, led by the travel, mining and auto sectors. Today’s move also wiped out the year-to-date gains for the Stoxx 600. The Euro Stoxx 50 Volatility Index surged as much as 49%, the most since the so-called “Volmageddon” of February 2018 -- when Wall Street was rocked by a surge in volatility and a sell-off in stocks.Luxury companies tumbled on fears that the epidemic will hurt sales, with LVMH Moet Hennessy Louis Vuitton SE losing 4.7% and Roche Holding AG dropping 3.2%. The Stoxx 600 Travel and Leisure Index fell 6%, with Air France-KLM declining 8.7%, EasyJet Plc tumbling 17% and Ryanair Holdings Plc losing 14%.“We believe the coronavirus illness will substantially curtail store traffic in China and neighboring countries, may negatively affect incoming Chinese tourism, and is also likely to disrupt supply chains,” Oliver Chen, a retail analyst at Cowen & Co., wrote in a report on Monday.Money managers are selling stocks and looking for havens after South Korea saw a surge in cases to 763 and the concern about a jump in illnesses in Italy intensified. European equities advanced to a fresh record high last week, which is adding to investor anxiety about possibly stretched positioning and valuations.“Markets are in a risk-off mode amid concerns about the global spread of coronavirus, with a growing number of infections outside of China,” said Ulrich Urbahn, head of multi-asset strategy and research at Joh Berenberg Gossler & Co., which recently cut its exposure to commodities and favors quality European stocks. “Given the strong performance and elevated positioning in equities, the risks are clearly skewed to the downside.”The impact from China’s slowdown due to the coronavirus as well as supply, sales and production disruptions at major firms such as Apple Inc., are a major concern for asset managers. European equities are particularly sensitive as Goldman Sachs Group Inc. says the exposure of the Euro Stoxx 50 Index to China is about twice that of the S&P 500 due to such sectors as banks, automakers and luxury shares.Italy’s FTSE MIB Index led the declines among major European benchmarks, retreating as much as 6.1%, the most since June 2016, after Europe’s biggest surge of the coronavirus prompted the government to impose a lockdown on an area of 50,000 people near Milan, and authorities canceled the remaining days of the Venice Carnival, while universities closed. Some of the biggest Italian companies -- from banks to luxury firms -- were battered. Salvatore Ferragamo SpA declined as much as 10% and Juventus Football Club SpA lost as much as 12%.Goldman’s chief global equity strategist Peter Oppenheimer said last week that a 1% drop in global sales-weighted gross domestic product would cut European earnings by about 10%, turning them negative.The U.S. stock market extended the global slump, with the S&P 500 falling as much as 3.2% and the Nasdaq 100 losing up to 4.4%.However, continuous monetary easing by major global central banks and China’s efforts to support its economy are making some investors optimistic that the sell-off in risk assets won’t last for long. The London-based wealth manager Kingswood is currently neutral on stocks and looking to increase equity positions in case of a significant market correction.“The disruption caused by the virus will hit economic activity significantly in the first quarter, with global growth very likely to grind to a halt,” said Rupert Thompson, chief investment officer at Kingswood, which has about 2.5 billion pounds ($3.2 billion) under management. “But we continue to believe that the outbreak is likely to follow the path of previous such health scares with growth rebounding in the second and third quarters.”To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Jon Menon, Paul JarvisFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
How Strategists and Investors See Coronavirus Playing Out
(Bloomberg) -- A raft of new coronavirus cases in numerous countries outside China over the weekend has ignited fresh concern about the ability of the illness to spread and its potential economic impact.European shares plunged 3.7% as of 11:12 a.m. in London after Italy’s government imposed a lockdown on an area of 50,000 people near Milan and took other measures as infections there exceeded 130. South Korea’s Kospi tumbled 3.9% after the number of cases in the country surged and the government raised its infectious-disease alert to the highest level. Iran reported an eighth death.That’s all on top of the impact in China, where millions of firms face potential collapse if banks don’t act. After meeting on Friday, the nation’s leaders said they will exercise more flexibility in monetary and fiscal policy.Read more: New Cases in Gulf, Italy Boost Fears of PandemicHere’s what market players are saying about the latest developments:Hello TINA“The key risk you’re facing is that this coronavirus now via a lot of these unwanted disruptions will actually lead to negative earnings growth and that will potentially scare investors considering where valuations are,” Christian Mueller-Glissman, managing director of asset allocation at Goldman Sachs Group Inc., said in an interview with Bloomberg TV. “Lower yields obviously make you want to own even more risky assets -- like we always call it TINA, there is no alternative -- so you have people being forced to own something in equities. Secular growth stocks are trading at one of the highest valuation premia in history. The problem is some of those are also exposed to these supply-chain disruptions, think about the big FAANG names. As a result of that we think that this in the near-term will potentially create volatility in them as well. So there’s nothing really completely safe.”A Shallow V“It is difficult to evaluate the impact thus far. High frequency data show very little to no pick-up in activity so far. There may be a risk that a V-shaped recovery of Chinese growth turns out to be shallower than many currently assume,” HSBC Bank Plc strategists led by Max Kettner wrote in a note. “Stick to underweight in equities but close underweight in HY; remain overweight in IG credit and government bonds. Equities seem to have escaped ‘the bad news is bad’ paradigm. Other cyclical assets such as FX or commodities have priced growth risks more appropriately. Equities have also outperformed quite substantially vs HY lately and the global ERP has shrunk. We therefore prefer adding to HY than to equities. We remain cautious on EM asset classes and overweight gold and government bonds.”Normal by July“More near-term panic will weigh on risk, but panic is necessary to increase containment odds. Credit markets appear to recognize that,” said Dennis DeBusschere of Evercore ISI. “EISI’s Survey team asked investors about the impact of the outbreak and the vast majority of respondents see both the risks as understated and expect U.S. Treasury yields were likely to decline by 25 basis points (to about 1.3%). 80% of investors expect supply chains to return to near-normal by July though.” (The survey was published on Feb. 17.)Hard to Pick Bottom“With cases of COVID-19 still rising, it is hard to tell when manufacturing will bottom, potentially setting the stage for prolonged weakness,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “This means that we’re going to see the juxtaposition of more safe-haven demand.” Gold Rally“U.S. real rates have plummeted during the virus scare, with 10y TIPS yields -- already quite low at just 6.5 basis points above zero on January 17 -- are today more than 15 basis points below zero,” and John Velis, FX and macro strategist at BNY Mellon. “Since gold tends to trade inversely to real rates, the rally in gold will probably persist as long as the latter stay under pressure.”‘Intense’ Hunt for Yield“We have been advocating a more balanced position between bonds and equities in recent weeks since we have little clarity on how the outbreak would evolve. It seems like that the number of new cases in China is coming down, with the daily number of recovered patients higher than the new confirmed cases. This may encourage the Chinese authorities to permit more workers to return to work and limit disruption to production,” said Tai Hui, chief market strategist for Asia at JPMorgan Asset Management. “The decline in bond yields also meant investors’ search for yield will remain intense. This underpins our constructive view on EM fixed income and developed market corporate debt.”Risk Aversion“Risk aversion is likely to intensify over the near term given the sharp rise in cases in Korea, Italy and elsewhere,” said Mitul Kotecha, senior emerging markets strategist at TD Securities in Singapore. “Markets are becoming increasingly focused on the risk of more prolonged economic damage than had been previously expected. Supply chains are becoming increasingly exposed, while services and tourism are suffering across many countries.”China Weakness“Policymakers are trying to get the economy going again but we think weakness is likely to persist well into the fourth quarter,” said Win Thin, global head of currency strategy at Brown Brothers Harriman, of China. “Stimulus is in the pipeline but it won’t be enough to totally offset the growing impact of the virus.”Asymmetric Dollar Strength“U.S. dollar strength will likely be asymmetric,” said Citigroup Global Markets Asia-Pacific chief economist Johanna Chua. “Given the low cost of capital globally and comforting commitments from authorities to render further support, high yielding emerging-market FX (Indian rupee, Philippine peso) may not hurt as much and is likely to outperform the low yielding EM FX especially in Asia, where the Singapore dollar, Thai baht, Korean won etc. are also the most impacted on economic activity -- and hurt on their current accounts. In spite of being a high yield FX, the Indonesian rupiah may have some more unwind of stretched long positioning before settling down.”Headline Risk“We view this as headline risk. Our base case view is that coronavirus continues to represent demand delayed and not demand destroyed,” said Steve Chiavarone, a portfolio manager with Federated Investors.(Updates with fresh comments from Goldman Sachs and HSBC.)\--With assistance from Vildana Hajric, Adam Haigh, Lilian Karunungan, Ruth Carson, Francine Lacqua, Cecile Gutscher, April Ma and Amanda Wang.To contact the reporters on this story: Joanna Ossinger in Singapore at jossinger@bloomberg.net;Anchalee Worrachate in London at aworrachate@bloomberg.netTo contact the editors responsible for this story: Christopher Anstey at canstey@bloomberg.net, Sam Potter, Cecile GutscherFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Reuters
Goldman Sachs pleads not guilty in Malaysia over 1MDB bond sales: state media
Three units of Goldman Sachs pleaded not guilty to charges of misleading investors regarding $6.5 billion in bond sales that the U.S. investment bank helped raise for state fund 1Malaysia Development Berhad (1MDB), Bernama state news agency reported on Monday. The U.S. Department of Justice estimates $4.5 billion was misappropriated from Malaysia's 1MDB between 2009 and 2014, including some of the funds that Goldman Sachs helped raise.
- Reuters
Goldman Sachs pleads not guilty in Malaysia over 1MDB bond sales - state media
Three units of Goldman Sachs pleaded not guilty to charges of misleading investors regarding $6.5 billion (5 billlion pounds) in bond sales that the U.S. investment bank helped raise for state fund 1Malaysia Development Berhad (1MDB), Bernama state news agency reported on Monday. The U.S. Department of Justice estimates $4.5 billion was misappropriated from Malaysia's 1MDB between 2009 and 2014, including some of the funds that Goldman Sachs helped raise. Malaysian prosecutors filed charges in December 2018 against the units, based in London, Hong Kong and Singapore, for misleading investors by making untrue statements and omitting key facts in relation to the 1MDB bond issues.
- Bloomberg
China Signals More Easing to Shore Up Virus-Weakened Economy
(Bloomberg) -- China’s top leaders signaled they will increase fiscal and monetary stimulus this year, as the coronavirus outbreak hammers the world’s second-biggest economy.At a Friday meeting chaired by President Xi Jinping, officials pledged to be more “proactive” in using fiscal policy and exercise “more flexibility” in monetary easing. The wording indicates a greater easing bias compared with the stance that was endorsed at a top-level economic meeting in December, where the Communist Party leadership laid out stimulus plans for 2020.In a separate statement from the central bank over the weekend, Deputy Governor Liu Guoqiang said the People’s Bank of China will free up part of the reserves of some commercial lenders to unleash long-term funding to the economy, and consider adjusting the benchmark deposit rate at an appropriate time.The coronavirus has forced officials to keep millions of people at home and away from work, curtailing businesses. The epidemic is weighing on an economy that was already growing at its slowest in three decades, with ratings company S&P Global warning that a prolonged public health crisis could cause the bad loans ratio in China’s banking system to more than triple.“We expect policy loosening to be broad based with the main difference from previous loosening cycles likely to be in the property area,” Song Yu, chief China economist at Beijing Gao Hua Securities Co., Goldman Sachs Group Inc.’s mainland joint-venture partner, wrote in a note.“It appears increasingly likely that the budget deficit will be adjusted, though any adjustment will likely be small, no more than 3.5% as an upper limit,” he said. “But the broader augmented fiscal deficit, which incorporates items such as proceeds from special bond issues, will surely be significantly larger.”A separate teleconference meeting took place on Sunday, with government officials all the way down to the county level, according to state-run news agency Xinhua. Xi told attendees that the outbreak is the “most rapid, widespread and difficult to contain” public health crisis China has faced since the founding of the People’s Republic in 1949.Reserve Ratio DiscountsThe PBOC will soon conduct a financial inclusion review on commercial banks and offer qualified lenders discounts on their reserve ratios, Deputy Governor Liu said on the central bank’s WeChat account. Authorities will keep liquidity sufficient and continue to use targeted re-lending and re-discounting funding to help small firms, he said.Liu also repeated an earlier pledge that the central bank will consider economic and inflation pressures when adjusting the benchmark deposit rate at an appropriate time. China slashed a range of policy rates this month.Asked on the sidelines of a press conference Monday whether such a cut is likely in short term, PBOC Deputy Governor Chen Yulu said the central bank “needs to look at the situation, it’s now under review.”“The rate cut, if rolled out, may not be a big one,” Lu Ting, chief China economist at Nomura International Ltd in Hong Kong wrote in a note. “The current benchmark deposit rates are quite low anyway. Cutting the reserve requirement ratio, using lending facilities like pledged supplementary lending to fund loan extensions, tax cuts, rent cuts and interest payments should be much more effective in the current situation.”Read more: China Benchmark Loan Rate Drops After PBOC Eases PolicyMembers of the party’s Politburo on Friday also pledged to accelerate construction projects and step up efforts to support industries that are involved in making vaccines, bio-medicines and medical equipment, as well as 5G and industrial networks. Officials also urged local governments to shift toward restoring business operations and “actively” helping migrants return to work.“The Politburo employed a more supportive tone in its official release, with stronger and more explicit wording,” Bloomberg economists Qian Wan and David Qu wrote on Saturday. “This reinforces our view that more stimulus is underway to offset the blow to economic activity from the coronavirus.”CHINA REACT: Politburo Shift to Pro Growth From Virus DefenseHere’s an overview of announced upcoming measures:Fiscal EasingMore targeted, phased tax cutsBetter use of idle fundingIncreased local government special bond quotaMore fiscal revenue transfer from central government to local virus-hit regionsMonetary, Credit EasingKeeping liquidity “reasonable and sufficient” and guiding overall borrowing costs lowerOffering discounts to banks’ reserve ratio based on their lending to small and medium-sized firms in 2019To increase re-lending and re-discounting quota for small firms and agriculture sectorTo support commercial lenders to sell financial bonds to raise funding for SME lendingTo boost policy banks’ role in virus relief: China Development Bank to support manufacturers; the Export-Import Bank of China to support export firms; the Agricultural Development Bank of China to support financing along the hog production chainRegulators to allow flexibility in SME non-performing loans’ reporting and classificationOtherTo stabilize exports with greater tax rebates, easier trade financing and insurance policyTo work out targeted policy to facilitate trade with Belt and Road countriesTo convene China International Import Expo to expand imports(Updates with official comments in 10th paragraph, upcoming measures in bullets. An earlier version was corrected to show teleconference meeting was on Sunday)\--With assistance from Dandan Li.To contact Bloomberg News staff for this story: Evelyn Yu in Shanghai at yyu263@bloomberg.net;Yinan Zhao in Beijing at yzhao300@bloomberg.netTo contact the editors responsible for this story: Shamim Adam at sadam2@bloomberg.net, Jeffrey BlackFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Simply Wall St.
The Goldman Sachs Group, Inc. (NYSE:GS)'s Could Be A Buy For Its Upcoming Dividend
The Goldman Sachs Group, Inc. (NYSE:GS) is about to trade ex-dividend in the next 4 days. If you purchase the stock on...
- Reuters - UK Focus
US STOCKS-Coronavirus fears, U.S. business data drag down Wall Street
U.S. stocks sold off and the Nasdaq had its worst daily percentage decline in about three weeks on Friday as a spike in new coronavirus cases and data showing a stall in U.S. business activity in February fueled investors' fears about economic growth. Declines were led by the technology sector for a second straight session. Tech-related heavyweights Microsoft Corp , Amazon.com Inc and Apple Inc were the biggest drags on the S&P 500.
- Reuters - UK Focus
US STOCKS-Wall St drops as coronavirus fears, business activity data weigh
U.S. stocks sold off on Friday as a spike in new coronavirus cases in China and other countries and as data showing U.S. business activity stalled in February fueled investors' fears about the economy. Declines on Friday were led by heavyweights Microsoft Corp , Amazon.com Inc and Apple Inc for a second straight day. Chipmakers, with strong ties to China for revenue, also fell sharply, with the Philadelphia Semiconductor index falling 3%.
- Yahoo Finance
Bernie Sanders possibly running against President Trump is starting to scare investors: strategist
Investors continue to voice concern on a potential president Bernie Sanders.
- Bloomberg
Ex-Goldman Banker’s Little M&A Shop Is Having a Breakout Moment
(Bloomberg) -- When Chris Cole walked away from his post as one of Goldman Sachs Group Inc.’s top investment bankers back in 2016 to co-found a small advisory firm, it wasn’t the best moment. The business his new firm would specialize in -- transactions in the financial services industry -- was sluggish.But after four low-profile years, Cole’s firm, called Ardea Partners, exploded onto the scene this week when it scored back-to-back mandates on marquee Wall Street deals: Franklin Resources Inc.’s agreement to buy asset manager Legg Mason Inc. on Tuesday, and Morgan Stanley’s purchase of E*Trade Financial Corp. on Thursday, which would be the biggest merger in the financial industry since the crisis a decade ago.The deals are a coup for Cole, validation of his bet on financial services M&A. Transactions in that sector are off to a red-hot start in 2020, with credit card company Visa Inc. and auto lender Ally Financial Inc. announcing large deals as well.That suggests that banks, asset managers, specialty lenders and others are back to seeking game-changing acquisitions after a long, post-crisis dealmaking slump across the industry.The E*Trade deal is Ardea’s second largest, according to data compiled by Bloomberg. The firm co-advised insurer XL Group Ltd. on its $15.3 billion sale to Axa SA in 2018.“The consistent thing is that they have a very direct view, which they’re not afraid to give us even when it might not be what we want to hear,” said Martin Flanagan, chief executive officer of Invesco Ltd., which used Ardea for its acquisitions of Oppenheimer Funds and Guggenheim ETFs.Chickens, CowsArdea declined comment, as did Cole, who largely stayed out of the headlines during his 30-year rise at Goldman. The 60-year-old Cole commutes most days to Ardea headquarters in New York City’s Hudson Yards from his home in rural New Jersey where he farms cows, chickens and peacocks, according to a person familiar with his situation.Ardea’s success at the moment is running counter to larger, publicly traded boutique banks whose business is showing signs of stalling as a broader merger boom sputters. Global boutique banks, such as Evercore Inc. and Lazard Ltd., advised on the fewest number of deals last year since 2016, according to data compiled by Bloomberg. That led to the first annual decline in advisory revenue for the six biggest U.S. boutique firms since 2011.Ardea, on the other hand, seems to be benefiting by focusing on a small cluster of industries.Of the four founders, three came directly from Goldman, forfeiting stock to start Ardea. These include James Del Favero, the former head of cross border M&A, and financial institutions banker Donald Truesdale, who both joined in 2017. The fourth, Ivan Ross, spent 19 years at Goldman before a spell at hedge fund Mason Capital.Indeed, the founders wanted to recapture the essence of the Goldman partnership before it went public in 1999: highly focused on advice rather than trying to cross-sell products. All 45 staff members share in deal fees and partners are required to give up their equity upon leaving the firm.Cole came up with the name of the firm. Ardea is taken from the Latin word for heron, a genus of bird that visits his farm.To contact the reporter on this story: Ed Hammond in New York at ehammond12@bloomberg.netTo contact the editors responsible for this story: Liana Baker at lbaker75@bloomberg.net, ;David Papadopoulos at papadopoulos@bloomberg.net, Matthew Monks, Larry ReibsteinFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Investing.com
Gold Hits New 7-Year High as Virus Prompts More Upgrades
Gold prices surged to fresh seven-year highs as portfolio investors flocked to haven assets as the coronavirus spread menacingly outside of China. The number of confirmed cases in South Korea leaped to over 200, putting investors on alert for signs that the virus may be difficult to contain even in countries with advanced health care systems (and reliable data). By 7:45 AM ET (1245 GMT), gold futures for delivery on the Comex exchange were up 1.1% at $1637,65 a troy ounce, only a whisker below the intraday high of $1,639.25.
- Zacks
Goldman Sachs BDC (GSBD) Q4 Earnings Match Estimates
Goldman Sachs BDC (GSBD) delivered earnings and revenue surprises of 0.00% and -5.27%, respectively, for the quarter ended December 2019. Do the numbers hold clues to what lies ahead for the stock?
- Bloomberg
SoftBank’s Son to Pitch U.S. Investors Under Cloud of WeWork
(Bloomberg) -- Masayoshi Son will head to New York next month for the first time since the implosion of WeWork, seeking to persuade hedge funds and institutional investors that the fortunes of SoftBank Group Corp. have turned since the disastrous investment.The Japanese billionaire is scheduled to address investors on March 2. There, he could point to the approved sale of Sprint Corp., a rally in Uber Technologies Inc. shares and Elliott Management Corp.’s purchase of SoftBank stock as signs of progress at his company, said people familiar with the plans. It’s unclear where WeWork will fit into the agenda.Within SoftBank, there’s disagreement about how to convey the company’s strategy. Son, 62, is known for his eccentric financial presentations, which have included a “hypothetical illustration” of WeWork profitability and stock photos of ocean waves and calm waters. One memorable slide from 2014 contained only a drawing of a goose and the words: “SoftBank = Goose.” Many staff at headquarters in Tokyo love the founder’s showmanship, but some senior executives are exasperated and argue a clearer and more sober message is needed, said people familiar with internal discussions who asked not to be identified because the matter is private.Ultimately, Son will decide. He has downplayed any pressure from Elliott, a New York-based activist investor that disclosed a nearly $3 billion stake in SoftBank this month. Son called Elliott an “important partner” and said he’s in broad agreement with the investor’s arguments for buybacks and increasing the stock price. Son has signaled less receptiveness to Elliott’s other suggestions: selling more of the stake in Alibaba Group Holding Ltd. and reining in the Vision Fund, a $100 billion investment vehicle that accounted for more than $10 billion of losses in the past two quarters.In private meetings with SoftBank, Elliott raised issues over the clarity of SoftBank’s strategy, people familiar with the talks said. SoftBank is planning to make hires within its investor relations department to help shape the message to shareholders. SoftBank declined to comment. A spokesperson for Elliott declined to comment.“Right now, serious heat is being applied on Son,” said Justin Tang, head of Asian research at United First Partners in Singapore. “Son has to be seen actually doing something.”Son’s heading into the meeting with one win under his belt: T-Mobile US Inc. and Sprint have agreed to new terms for their pending merger, a key step toward completing a transaction that will unload the loss-making carrier and unlock new capital for SoftBank. Its shares rose as much as 3.3% in Tokyo Friday.T-Mobile, Sprint Renew Deal as Merger Clears Regulatory HurdlesAlthough next month’s event was scheduled before Elliott disclosed its stake and is not designed to specifically address the activist investor’s involvement, it will be a focus for attendees, said people familiar with the preparations. Executives are bracing for questions about Elliott’s intentions and how far the shareholder will go to boost the stock’s value.Goldman Sachs Group Inc. is organizing the March event, the people said. The firm, which helped Japan’s Sony Corp. and Toshiba Corp. in their dealings with activist investors, is vying for the job of advising SoftBank on Elliott, said a different person said. However, SoftBank is likely to manage the relationship in-house, another person said. The job may fall to Marcelo Claure, the chief operating officer who’s helping oversee the WeWork debacle; Katsunori Sago, the chief strategy officer and a former Goldman Sachs executive; or Ron Fisher, a director and trusted adviser to Son. A Goldman representative declined to comment on SoftBank.Dogs and PizzaSoftBank is recovering from a series of stumbles in recent months. WeWork’s plan to go public last year imploded, forcing SoftBank to arrange a rescue financing of $9.5 billion in October. Uber, despite a two-month surge, is still trading about 10% below last year’s offering price. The Vision Fund has suffered other high-profile setbacks, including investments in failed online retailer Brandless Inc., dog-walking app Wag Labs Inc. and pizza robot company Zume Pizza Inc.Elliott has said it took the stake in SoftBank because the Japanese company’s shares are woefully undervalued compared with its assets. Son himself has been pleading the case with increasing frequency. SoftBank’s own sum-of-parts calculation puts its total value at 12,300 yen a share ($111). That’s more than double SoftBank’s actual share price, which values the company at about $104 billion. Elliott has pegged SoftBank’s net asset value at about $230 billion, people familiar with the discussions have said.The disconnect between what SoftBank and Elliott say the company is worth and the market value can be explained by several quirks of how the business is run, according to a report from Pierre Ferragu, an analyst at New Street Research. Many shareholders would like the company to return more capital and improve its governance, he wrote. Risks associated with the Vision Fund and a lack of details about tax liabilities associated with cashing out its investments are other factors.SoftBank recognized the need for more oversight as early as 2018, when it charged Claure with a broad review of operations across SoftBank companies. Claure, the former head of Sprint, spent months assembling a team of about 40 executives. In the end, he was forced to cede control of the so-called SoftBank Operating Group to the man it was supposed to be overseeing: Rajeev Misra, the head of the Vision Fund.Elliott wants SoftBank to set up a special committee to review investment processes at the Vision Fund. Elliott argues the fund has dragged down the share price despite making up a small portion of assets under management, said people familiar with the discussions.Some at SoftBank are resistant to the idea of an oversight committee. Instead, SoftBank is seeking to resolve issues at the Vision Fund with new governance standards for the companies it invests in. The new rules will encompass how the fund approaches the composition of the board of directors, founder and management rights, rights of shareholders, and mitigation of potential conflicts of interest.Son has conceded that missteps with the original fund is making it difficult to raise money for a successor. He said last week that SoftBank may need to invest in startups using solely its own capital for a year or two.‘Black Swan’Elliott is also calling for a buyback of as much as $20 billion. A repurchase of that scale could boost SoftBank’s shares by 40%, Ferragu estimated. SoftBank’s last share repurchase was announced about a year ago, a record 600 billion yen. It sparked a rally that pushed the stock to its highest price in about two decades.Selling Alibaba shares to pay for a buyback, as Elliott has proposed, could be a point of contention with Son. In the past, Son has used the shares as collateral to borrow money for big acquisitions, including the $32 billion purchase of chip designer ARM Holdings. Son said last week during a quarterly financial briefing that he’d prefer to sell as little as possible and that there’s “no rush” to do so.SoftBank said on Wednesday it plans to borrow as much as $4.5 billion against shares of its Japanese telecom unit. The company, which had 3.8 trillion yen of cash and equivalents at the end of December, said it was raising capital for operations. SoftBank’s debt load exceeds $120 billion.Son’s reliance on debt is raising alarms, said Tang, the financial analyst. “He’s going to get wiped out if there is some black swan event,” Tang said. “SoftBank needs to de-leverage, and the best way to do it is to sell the Alibaba stake.”Elliott has a tradition of using strong-arm tactics to get its way with target companies, but there’s little chance of that happening with SoftBank. Elliott’s stake enables it to call an emergency shareholder meeting, but pushing through a proposal without the founder’s backing is a long shot. Son, who often goes by the nickname Masa, controls more than a quarter of SoftBank stock through various vehicles, and the company bylaws require two-thirds of votes to pass any proposal made through the board, according to a person with knowledge of the rules.“Unless everyone is against him,” said Tang, “it’s not possible to dislodge Masa.”(Updates with share action in the seventh paragraph)\--With assistance from Scott Deveau.To contact the reporters on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net;Giles Turner in London at gturner35@bloomberg.net;Takahiko Hyuga in Tokyo at thyuga@bloomberg.netTo contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Mark Milian, Colum MurphyFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
