The afternoon deal: Being Goldman
Getting raked over the coals for allegedly shady trading practices does nothing for the public’s trust in a company. But if the bottom line is affected, then it gets real serious.
Goldman’s top brass, along with other executives, are scurrying around the globe to meet with jittery corporate clients. They are holding phone calls with anxious customers and taking hedge fund trading partners out to sushi lunches, all in a bid to prevent business from going to one of its competitors.
For our special report on the impact on Goldman, and the companies response to the SEC’s civil fraud charges, click here. Find a graphic of Goldman’s share price and significant events here, or a look at Goldman’s shrinking U.S. IPO proceeds here.
The afternoon deal: Weak markets + big IPO = ?
Kuwait has confirmed its investment in the China Agbank IPO and others are expected to step forward shortly.
The driving force behind Agbank public offering is Vice President Pan Gongsheng. The IPO is being hammered out in a classroom and attendance is monitored. Find out more of how this deal looks and feels here.
Here are some key facts about the bank and its cornerstone investors.
The IPO, expected to raise $23 billion, has faced serious global headwinds. Specific to the region, the main Shanghai index has fallen 21 percent this year, making it one of the worst performers in the world.
The afternoon deal: Yuan politics
The markets cheered China’s move on the yuan but its not all good news reports Scott Malone. Risks abound.
For the corporate winners and losers here is a quick breakdown. WSJ has graphics on winners and losers here.
Chinese policy is often viewed with a healthy dose of skepticism but on this occasion the distrust is unwarranted, Forbes reports. A firmer yuan is beneficial to China and the new policy sends a signal that the country is confident in it prospects going forward.
Some currency traders were caught off guard with China’s move on the yuan. The crisis in Europe and the lingering economic downturn in the U.S. had some investors thinking China would not change its policy, the WSJ reports.
A stronger yuan may boost domestic demand, making consumers a key driver of growth, Bloomberg reports. A stronger currency will make foreign goods cheaper for both consumers and companies. From the contrarian point of view, yes a cheaper dollar against the yuan looks like it may boost U.S. exports, but it will not. The Chinese will be buying domestic goods.
The afternoon deal: Regulation overdrive
A joint Senate-House of Representatives conference committee convened at 2:15 p.m. EDT to begin merging competing bills from each chamber into what will be the biggest overhaul of the financial rules since the 1930s. Columnist John Kemp explains the simple conference process and the not so simple reality of merging the House of Representatives and Senate versions of the financial reform bill. The “base text” for the regulatory bill is here.
Not to be overshadowed by the financial regulation bill, the Commodity Futures Trading Commission said it plans to boost scrutiny of high-frequency trading, which now accounts for as much as half of all U.S. futures volume, and was fingered for its role in the May 6 stock market “flash crash.” Get the details of the co-location proposal here.
The SEC approved new so-called circuit breakers. The rules will require the exchanges to pause trading in certain stocks across U.S. equities markets if the price moves 10 percent or more in a five-minute period.
Also on the regulatory front is news of the SEC hunting for fresh dirt on Goldman Sachs, hoping to bolster their lawsuit against the bank and perhaps force it to settle on terms more to the regulators’ liking. Read the FT article here.
Following is a collection of regulatory factboxes:
The afternoon deal: A Neuberger Berman IPO?
AgBank and its IPO price guessing game coupled with an exclusive interview with Neuberger Berman President Joseph Amato are the highlights of the day.
* Even as Neuberger Berman celebrates its first year as a private and independent firm, the money manager’s executives are moving toward an initial public offering. Reuters
* AgBank is getting closer to nailing down the size of its IPO. See Reuters profile of the bank’s chairman here. Reuters
* Take a look at Carly Fiorina and Meg Whitman’s dealmaking abilities. WSJ
* Spanish bank Santander shrugged off concerns over a debt crisis at home with the buyout of its Mexican division. Analysts said the deal was no surprise and strategically smart. Reuters
* Healthcare IT company Allscripts plans to buy rival Eclipsys in a $1.3 billion deal. The deal better positions the company to win access to $30 billion of federal funds for the adoption of electronic healthcare records. Reuters
* Survey: “Global investors support U.S. legislation that would raise capital requirements for banks and strengthen consumer financial protection, even as they oppose the so-called Volcker Rule to ban proprietary trading by financial institutions…” Bloomberg
The afternoon deal: Regulation overdrive
It’s been a busy day on the regulatory front. The New York Attorney General’s office is investigating eight banks for possibly misleading ratings agencies on the quality of mortgage securities, a source says. The Fed is conducting a broad criminal investigation into whether major Wall Street financial firms misled investors on mortgage bond deals, another source says.
Adding to the mix: –the Senate voted to impose tighter regulations on credit-rating agencies. –Federal Reserve Chairman Ben Bernanke is concerned about a Senate proposal that could force banks to spin off their swaps business –the White House and two state attorneys general said they don’t like an amendment to the Wall Steet reform bill that would give the federal government more power than states to regulate banks
From the Web:
Goldman, BofA, Citigroup….Did Prosecutors Leave Anybody Out - WSJ “It’s Thursday, and one thing is clear from this morning’s headlines: Pretty much all of Wall Street is under investigation.”
Analysts Not Sweating Probe Of Morgan Stanley – WSJ “They’re surely no worse than others, and maybe they’ll even come out ahead.”
Reduced competition juices banks’ trading records - Reuters “Four major banks generated trading profits every day in the first quarter, an almost unheard of event that signals how competition has abated since the financial crisis began.”
Rigged-Market Theory Scores a Perfect Quarter – Bloomberg “The intrigue is high. If a too-big-to-fail bank’s traders were able to make money every day of a quarter, were they really trading in any normal sense of the word? Or would vacuuming be a more accurate term? What kinds of risks do such incredible profits entail, for the banks and the rest of us taxpayers? And are results such as these too good to be true?”
The afternoon deal: UAL-Continental ripples
The UAL-Continental merger will, no doubt, have a big impact on the two companies involved, but will the merger affect the industry, airline share prices or the experience of travelers? That’s up for debate. Here are some facts and opinions on the deal:
Factbox: Continental, United plane orders worth $22 billion – Reuters
Factbox: The new United Airlines – Reuters
Timeline: United/Continental would create largest airline – Reuters
Continental Name Change: So Long, Proud Bird – WSJ
Then There Were Three – The Huffington Post “Will it help the industry overcome a trail of losses dating back to the Reagan era? I doubt it. Why? Because airline deregulation was based on a flawed premise, and mergers don’t change conditions enough to remove the fallacy.”
Fantastic web. Keep on rockin, Radu Prisacaru – UK Internet Marketer & Web Developer
The afternoon deal: Criminally inclined
Pay-to-play, pump-and-dump schemes and plain old bribery are on the plate today. Rising above the muck is Quadrangle, which is now looking at starting up a new fund after settling an SEC investigation, a source tells Reuters. Steve Rattner, Quadrangle’s co-founder, is still under scrutiny.
From the Web:
Quadrangle, Cuomo in kickback accord; Rattner eyed (Reuters) Quadrangle did not admit wrongdoing in agreeing to settle. In a joint statement with Cuomo, it said the principals involved in the alleged improper conduct have left the firm.
Quadrangle’s Anti-Love Letter To Steve Rattner (WSJ) “If there was any doubt that Steven Rattner parted from Quadrangle Group LLC on less than amicable terms, let that doubt now be laid to rest.”
Germans target nine suspects in HP bribery probe (Reuters)
Goldman Director in Probe (WSJ) “Wall Street’s most powerful firm is being drawn into the government’s sprawling insider-trading investigation.”
Special Report: Sweethearts in crime (Reuters) “At one time, the idea of a husband and wife team like the Stones working in tandem to orchestrate a securities fraud might seem like a Wall Street novelty act. But that’s not the case any more.”
The afternoon deal: Plane and simple?
Their shares are up, so the market is saying a merger between United Airlines and US Airways would be a good thing, right? A tie-up could run into strong headwinds from unhappy pilots and tougher antitrust enforcement, industry experts told Reuters. The feeling on the Web is that a deal is inevitable… but it’s a painful road to be on.
From the Web:
Why the United- US Airways connection might not fly (Time) “…you can’t fault the logic of a merger that would increase fares, since these guys really need the money. Wait a minute, watch me.”
United Is in Merger Talks With US Airways (NYT) “But mergers in the airline industry have been difficult to pull off, in part because complex labor contracts can offset the promised cost savings.”
Airline Mergers: Necessary, Inevitable and Painful (WSJ) “In the end, whether it happens voluntarily now or involuntarily when an airline or two ends up in dire financial straits again, I still think we’ll boil down to three international carriers and three major discounters. It just may be really painful to get there.”
US Airways and United in Merger Talks (The Atlantic) “…what else are they supposed to do? It’s all very well to say that they need to manage their business better, but the business they’re in isn’t a particularly good one…”
The afternoon deal: Citi spinoff rings up strong debut
Another day, another sign of renewal for initial public offerings. Primerica co-CEOs John Addison and Rick Williams capped the day off by ringing the closing bell after the Citigroup life insurance spinoff’s shares soared in their April Fool’s Day debut on the New York Stock Exchange.
Appetite for the company’s stock remained strong throughout the day, with shares jumping more than 30 percent above the initial offering price in afternoon trade as investors bet that the life insurer will reap rewards as the economy continues to mend.
Primerica priced at $15 a day earlier, above the $12 to $14 range that was expected. Citigroup sold 21.3 million shares in the offering and raised a total of $320 million in the deal. The bank will retain up to a 43 percent stake in the insurer, with plans to reduce it over time.
Earlier in the day, Japanese life insurer Dai-ichi Life also fared well in its trading debut, leaping as much as 14 percent above its initial public offering price on the Tokyo Stock Exchange. The $11 billion IPO marks the world’s largest since Visa’s $19.7 billion offering two years ago.
More on Primerica’s IPO and other stories around the Web:
Citigroup’s Vikram Pandit ends Weill’s Primerica dream (Telegraph)
“The initial public offering of the insurance sales and advisory network is part of Mr Pandit’s plan to refocus Citigroup’s on banking and to reduce its overall balance sheet.”
