This post originally appeared in Money Stuff.I am going to tell you a story about a random company doing a random trade that is close to my heart, not for any particularly important reason but just because sometimes the world is interesting. Intrexon Corp. is a $1.9 billion market-cap biotech company that issued $200 million of convertible bonds last week. The way convertible bonds work is that they are bonds that can be converted into stock: You sell them for $1,000, and at the end of (in this case) five years investors either get a fixed number of shares of stock (if the stock is up more than a certain amount over those five years) or just get their $1,000 back. They are sold to a mix of investors, many of whom are “convertible arbitrageurs” who buy the bonds and sell short some of the underlying stock. The arbitrageurs aren’t betting on your stock price; they’re hedging out the stock risk and betting, essentially, that your stock will be … [Read more...] about Company Lends Stock to Bank. Bank Shorts Stock to Company’s CEO. Any Questions?
People are worried about stock buybacks.One strain of thinking that I see a lot of these days is a sort of crypto-gig-utopianism. The idea here is that some modern technologies—the internet, which allows people all over the world to come together to do stuff; smartphones, which allow you to access that stuff instantly wherever you are; blockchain and cryptocurrencies, which allow distributed coordination among independent agents without a central coordinator who owns the results—have reduced transaction costs to the point that traditional firms are unnecessary. You don’t need a big corporation with a chief executive officer and layers of middle management and a human-resources department and stock options and a permanent headquarters to centrally plan and coordinate projects. People who want a project to happen can form an ad hoc team to do the project, and raise money from people who want it done, and do it, and receive the rewards, and move on to the … [Read more...] about Companies Keep Buying Back Stock
European stocks just can’t catch up with the U.S. The main reason: Most of investors’ favorite millennial tech stocks are listed on Wall Street.With the likes of Twitter Inc. and Netflix Inc. up more than 80 percent this year, New York’s outperformance of Europe in 2018 is easily explained. It’s also hard to change.“It’s the cool tech stocks that Europe is lacking,” said Max Kettner, a cross-asset strategist at Commerzbank AG in London. “It’s tough to see Europe outperforming the U.S.”A look at the performance of the regions’ main equity benchmarks shows what a difference the imbalance makes. While the S&P 500 is up about 2 percent this year, the Stoxx Europe 600 is down more than 2 percent. But if you exclude tech and telecom services shares from the S&P 500, the gap shrinks significantly, with the U.S. gauge falling 0.6 percent.And even though European tech stocks are one of the region’s best-performing … [Read more...] about Europe’s Lack of ‘Cool’ Stocks Dooms Race Against Wall Street
Insider Barometer When green energy spin-off Innogy cut its profit forecast, stock in parent company RWE also took a hit. Yet the future remains bright for Germany’s largest power generator. Published on January 22, 2018 1:36 pm It’s been more than a month since stock in Innogy, the green power subsidiary of German utility RWE, bumped sharply lower after a profit warning. Despite spinning off its renewables business in 2016, RWE still holds a 77 percent stake in Innogy. So whenever the latter comes out with bad news, it becomes a problem for its erstwhile parent, too. On December 13, then-boss Peter Terium announced that Innogy was cutting its operating profit forecast for 2017 to €2.8 billion ($3.42 billion) – a drop of €100 million. If that wasn’t enough to unsettle investors, his pronouncement that 2018 earnings would soften further sealed Mr. Terium’s fate. Just days after the warning, the beleaguered CEO left the company. The … [Read more...] about Why stock in energy giant RWE will shrug off Innogy’s woes
However, so far 2018 has delivered a softer economy, rising inflation, potential trade wars and numerous geopolitical scares. At half-time in 2018, the riskier asset classes have outperformed cash and bonds, but this has come with something of a struggle. For the rest of the year, the global economy will be key for investors. Compared to the very strong growth picture in 2017, global economic momentum has eased. The eurozone's slowdown was the most visible example of this but the Chinese economy also appears to have lost impetus. In contrast, the US economy is still growing strongly and last year's tax cuts should extend this recovery further. Overall, the global economic outlook remains positive and recession risks are low - consequently, equities still look capable of outperforming deposits and government bonds over the next year or so. The 15pc growth in stock market profits forecast for 2018 is another clear reminder that the market backdrop is still supportive. However the … [Read more...] about The end of the stock market’s Goldilocks era could well be nigh