Wall Street Breakfast

Author: bmotrader   |   Latest post: Thu, 2 Jul 2020, 7:42 AM


Wall Street Breakfast: IPO Revival

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The market for initial public offerings looked like it might finally be recovering from the WeWork (WE) debacle before COVID-19 brought IPOs to a halt over the past two months, but there are now signs of life as capital markets recover. Online used car seller Vroom (VRM) is set to price shares between $15 to $17, aiming to raise about $318.8M at the top end of the range with a market cap of $1.92B. Shift4 Payments (FOUR) has also set terms for its initial public offering of common stock, while Warner Music (WMG) will price shares in what could become the largest New York IPO so far in 2020.

Heating back up

Hong Kong is seeing its first $1B+ listing in more than six months as Chinese internet company NetEase (NASDAQ:NTES) launched a second listing that could raise as much as $2.8B. The financial hub hasn't had a hiatus of billion-dollar initial public offerings last this long since the financial crisis, when there were no such deals for almost a year. Only $3.47B has been raised through IPOs in Hong Kong this year, putting it behind both New York and mainland China.

Equities continue ascent

U.S. stock index futures are ahead by 0.7%, erasing an earlier loss following President Trump's promise to deploy the military if states and cities fail to quell the violence swelling across the nation. "The main focus once again appears on the longer-term prospects of the easing of lockdowns across the world, though if the violence on U.S. streets continues for much longer, U.S. investors might have to cope with a lockdown of a different kind, imposed by the National Guard," said Michael Hewson, an analyst at CMC Markets.

Gun demand expected to stay strong

Shares of American Outdoor (NASDAQ:AOBC) and Sturm Ruger (NYSE:RGR) jumped nearly 10% on Monday as gun background checks rose 75% in May - on an adjusted basis - to follow on strong months in March (+80%) and April (+62%). KeyBanc expects another gain in background checks for June. "People are watching the news," added Steve Sosnick, chief strategist at Interactive Brokers. "The market is anticipating that there will be increased interest and demand for firearms as a result of what’s going on in the world right now."

Trade deal in spotlight

State-owned Chinese firms bought at least three cargos of U.S. soybeans on Monday despite reports suggesting Beijing had ordered a freeze on American farm good purchases due to an escalation with the U.S. over Hong Kong. Sources also suggested that state purchases of U.S. pork, corn and cotton were put on hold. In jeopardy? Any sustained halt in buying would threaten progress in meeting goals set in the Phase One trade agreement signed in January.

Walkout at Facebook

Hundreds of Facebook (NASDAQ:FB) employees, including some top managers, walked away from their work-from-home desks on Monday to accuse Mark Zuckerberg of inadequately policing President Trump's posts as strictly as Twitter (NYSE:TWTR). "Facebook’s recent decision to not act on posts that incite violence ignores other options to keep our community safe. We implore the Facebook leadership to #TakeAction," they said in a joint statement. Reports suggest CEO Zuckerberg's weekly Friday Q&A session will be rescheduled for today in response.

Back in court

If Bayer (OTCPK:BAYRY) wants to keep its total Roundup liability capped at $10B, a problem inherited when it acquired Monsanto in 2018, it will be crucial to get a 2018 California court verdict overturned. The German chemical giant will ask the state appeals court today to throw out a jury conclusion that the herbicide product caused grounds keeper Lee Johnson's cancer. While he was awarded $289M before a judge cut the damages to $78.5M, Bayer has been reaching settlements in thousands of other cases that range from a few thousand dollars to several million per claim.

New business partners

Boeing (NYSE:BA) has taken former partner Embraer (NYSE:ERJ) to arbitration over a failed $4.2B transaction after a similar move by the Brazilian planemaker. The collapsed deal in April left Embraer scrambling for a plan B as its market value deteriorated due to the coronavirus pandemic. The company is now looking at China and India as potential business partners, following reports last week that said those two countries and Russia were interested in the planemaker's commercial jets division.

Today's Markets

In Asia, Japan +1.2%. Hong Kong +1.1%. China +0.2%. India +1.6%.
In Europe, at midday, London +1%. Paris +1.8%. Frankfurt +3.5%.
Futures at 6:20, Dow +0.7%. S&P +0.7%. Nasdaq +0.7%. Crude +2.9% to $36.46. Gold flat at $1750. Bitcoin +5.8% to $10097.
Ten-year Treasury Yield +2 bps to 0.68%

Today's Economic Calendar

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