Why is anyone still buying retailers from private equity firms? On March 9, 2017, private equity firm TowerBrook, the owner of women’s clothing retailer J. Jill, dumped half of its stake via an IPO at a price of $13 a share into the lap of the unsuspecting public, during a time when brick-and-mortar retailers that are owned by private equity firms are heading into bankruptcy court, one after the other. By Wednesday at close, shares of J. Jill had dropped to just over $10. And then after-hours and today during regular trading, they plunged another 51% to $4.86! Why are investors still buying brick-and-mortar retailers – or anything – from PE firms? No one knows. But inexplicably, it’s still happening. By 8:31 PM on Wednesday, shareholder rights law firm Johnson Fistel announced that it is ‘investigating potential violations of the federal securities laws by J. Jill Inc. … and certain of its officers and directors.’ It added, that the investigation ‘seeks to determine whether certain statements regarding J. Jill’s business and prospects were false and misleading when made.’ Other class-action law firms will follow. But at the time of the IPO, Fortune gushed: Founded in 1959, J. Jill is a women’s apparel brand that focuses on customers between the ages of 40 to 65 and relies heavily on catalog- and web-driven sales, which generate 43% of total revenue with the rest relying on brick-and-mortar retail. The company’s strong direct-to-consumer model is linked to J. Jill’s heritage as a catalog company and it circulated 57 million copies of catalogs in 2015 alone. J. Jill contends that those direct channel relationships can also fuel sales at the company’s 275 stores.
This post was published at Wolf Street on Oct 12, 2017.
Saudi King Salman’s decision to appoint his son Mohammed Bin Salman (MBS) as the new crown prince did not come as a surprise. For months, the power struggle between former crown prince Mohammed Bin Nayef (MBN) and MBS happened in plain sight, and a confrontation was imminent. However, King Salman made his own calculations and decided to remove MBN in favor of MBS, providing a continuation of his own family line in the future. Over the last week, the media has been overwhelmed with assessments of the House of Saud and the role MBS will play or has been playing. The family feuds in the House of Saud are notorious, whenever a king dies an internal power struggle will emerge, regardless of what strategies have been implemented before. At present, the Young Prince of Riyadh, Mohammed Bin Salman, has been given the key to power. This has happened at a very difficult time for not only the Kingdom, but also for the whole Gulf region and its neighbors. The choice made by King Salman to promote his son is a remarkable one but could, from a Saudi perspective, be the only viable choice. The need for a 180 degree change in the economic and social policy which keeps Saudi Arabia a strategic regional player is essential. Without radical changes, such as those presented in Vision 2030 or the Aramco IPO project, the Kingdom’s future could be bleak, as the era for ‘Rentier States’ is over. The challenges MBS faces are enormous. Due to lower hydrocarbon revenues, he will need to change an oil-based economy into a more open, liberal and high-tech economy, capable of taking on global competition in these fields. By opening up the Kingdom via Vision 2030 and the expected billions of dollars from IPO revenues, this could become a reality, not a fata morgana. A successful economic transformation and increased participation of Saudi youth (including women) could stabilize the Kingdom in the future. MBS relies on this economic transformation to silence opposition inside the House of Saud, as other princes are vying for the crown. While the Saudi leading ulema have pledged allegiance to the new crown prince, the reality remains complex.
This post was published at Zero Hedge on Jun 28, 2017.
This article recounts key events along a time line that stretches from 1986 to the present. Follow the bouncing ball. Since Facebook went public with an IPO (Initial Public Offering) of stock in 2012, I’ve been following the trail of its stock price. In 2012, I wrote: ‘But now the Facebook stock has tanked. On Friday, August 17 , it weighed in at half its initial IPO price. For the first time since the IPO, venture-capital backers were legally permitted to sell off their shares, and some did, at a loss.’ ‘Articles have begun appearing that question Zuckerberg’s ability to manage his company. ‘Experts’ are saying he should import a professional team to run the business side of things and step away.’ ‘This has the earmarks of classic shakeout and squeeze play… First, [insiders] drive down the price of the stock, then they trade it at low levels that discourage and demoralize public investors, who sell their shares… As the stock continues to tank, the insiders quietly buy up as much of it as they can. Finally, when the price hits a designated rock bottom, they shoot it up all the way to new highs and win big.’ In 2013, I followed up and wrote: ‘Facebook launched its IPO and went public on May 18, 2012. The opening stock price was 42 dollars a share.’
As Trump warned N. Korea, ‘armada’ headed to Australia (Reuters) Threat of Carrier Heading to Koreas Wasn’t All It Seemed (WSJ) Markets Start to Ponder the $13 Trillion Asset Gorilla in the Room (BBG) Investors’ Nightmare Scenario Takes Shape in French Election (WSJ) Venezuelan opposition to hold ‘mother of all marches’ against Maduro (Reuters) U. S. says Iran complies with nuke deal but orders review on lifting sanctions (Reuters) Ryan’s Best Hope to Avoid a Shutdown: Making Friends With Pelosi (BBG) Pence says working with allies to put pressure on North Korea (Reuters) Fox News Is Preparing to Cut Ties With Bill O’Reilly (WSJ) China gathers state-led consortium for Aramco IPO (Reuters) Le Pen Tries to Steer Far-Right Party Into Mainstream (WSJ) Ferrari Roars Back in China as Rich Snub Xi’s Austerity Push (BBG) U. S. states considering alternative execution methods face legal hurdles (Reuters) Homebuilders Could Be Losers in Early Test of Trump Trade Policy (BBG) Missing Billionaire Has Ties to China’s Military (WSJ) China sees higher risk of mass unemployment, pledges more support (Reuters) The Life of an Apple Supplier Is Getting Even Tougher (BBG) Barkindo says OPEC, non-OPEC committed to restore market stability (Reuters) Insurance Customers Will Have to Get Used to Talking to Machines (BBG) Overnight Media Digest WSJ – The Trump administration notified Congress on Tuesday that Iran is compliant with the landmark nuclear agreement reached in 2015, but also cast doubt on the United State’s continued support for the deal. – Fox News is preparing to cut ties with star anchor Bill O’Reilly, according to people close to the situation, after revelations that he and Fox parent 21st Century Fox settled multiple sexual harassment complaints led to an exodus of advertisers from his show and mounting pressure on the network.
This post was published at Zero Hedge on Apr 19, 2017.
Following yesterday’s paradoxical S&P surge catalyzed by a bevy of dreadful economic news, the overnight session has seen some good old “risk off” mood which first hit European shares as a result of the previously reported $14 billion DOJ claim against Deutsche Bank, which sent Europe’s biggest bank tumbling, dragging the banking sector lower, while a continued drop in the price of oil pushed energy companies lower, and then spilling over to US equity futures which were down 10 points at last check. In early trading, DB was trading down around 8%, while Deutsche Bank’s 1.75 billion of 6% additional Tier 1 bonds, the first notes to take losses in a crisis, fell 4 cents to 79 cents. The bank’s 650 million pounds of 7.125% notes dropped 5 pence to 81 pence on the pound on concerns the bank may be forced to shore up billions more in liquidity. ‘The Deutsche Bank news kind of rattled markets,’ said Jasper Lawler, an analyst at CMC Markets in London. ‘It just goes to show that we’re still dealing with the same old headwinds: this low-interest rate environment, which will go on for a while, and the regulatory scrutiny.’ “None of the European banks has settled with the DOJ on RMBS yet so Deutsche Bank is the first to enter negotiations with Barclays, UBS, Credit Suisse and RBS also facing this issue,’ RBC analyst Fiona Swaffield said in note. ‘We would expect Deutsche Bank’s final settlement to be significantly below the starting negotiation amount as seen at other banks although it remains uncertain where the final settlement will end up and the final impact on the capital ratios. Resolving this issue remains key for Deutsche Bank as it will give more clarity on capital, although there are a number of other moving parts – namely the Russian equities investigation and also the IPO of Postbank.’
This post was published at Zero Hedge on Sep 16, 2016.