The week in investor relations is taking a break for the holidays. See you in 2022!
– Investors are ‘closely watching’ the latest data on the rapidly spreading Omicron variant for signs of how much the virus could impact the US economy and earnings ‘as the market heads into what has historically been a strong time of year for equities,’ said Reuters on December 23. The news agency noted that, at the time of the story’s publication, the S&P 500 was down only 0.1 percent since the Omicron variant was identified on November 24. Reuters said it remained unclear what effect Omicron would ultimately have on markets but noted that a South African study on the variant’s apparent lower severity ‘bodes well’ for a ‘Santa rally’. Historically, US stocks have risen during the last five trading days of December and the first two days of January in 56 out of 75 years since 1945, said the news agency, citing data from CFRA Research.
However, CityWire reported that the FTSE 100 had ‘eked out a modest rise’ at the start of the year’s last full day of trading on December 23, but ‘failed to deliver the Santa rally investors like to see,’ despite research showing the omicron coronavirus variant may be less severe than the delta strain.
– Tencent announced it will be giving most of its shares in Chinese e-commerce giant JD.com away to its shareholders, reported CNBC – a move that it said resulted in JD.com’s shares ‘plummeting’. Tencent said it will declare a one-time dividend in which it will distribute more than 457 mn Class A ordinary shares of JD.com to shareholders, with a total value of approximately HKD127.7 bn Hong Kong dollars ($16.37 bn).
– US stock exchanges are pursuing listings from companies in South East Asia and India to counteract a sudden slowdown in business from China, reported the Financial Times (paywall). Asian companies based outside China have been largely absent from the US stock market, it said, but they are getting a closer look as ‘Sino-US tensions cause new Chinese listings to dry up and threaten revenue for the NYSE and Nasdaq stock market’. Bob McCooey, Nasdaq’s Asia-Pacific chair, told the paper: ‘We think the entire region is ripe for IPO activity. The pipeline has grown from a handful of companies, if you asked me a year ago, into a few dozen today.’
– In related news, Nikkei Asia reported the news that the Indonesia Stock Exchange (IDX) has relaxed rules for new listings in a bid to attract more IPOs, including of those in the country’s ‘booming tech sector’. The decision comes less than a month after the Financial Services Authority, or OJK, announced a new regulation that allows tech companies to issue multiple voting shares – with varying levels of voting rights – when going public on the exchange. Efforts to attract local tech companies to the IDX are gaining urgency as Western bourses eye Southeast Asian businesses for overseas listings, added Nikkei Asia.
– Bloomberg (paywall) said more than half of this year’s 481 US IPOs are trading below their offer prices, according to data compiled by the news agency. These deals, excluding an even longer list of special purpose acquisition companies (Spacs), collectively set a record of about $167 bn, easily beating 2020. Bloomberg said volatility and lackluster performances meant ‘enthusiasm for IPOs has waned’ at the back end of the year. It warned that although the first quarter of 2022 looks to be busy, ‘expect a volatile year ahead’.
– ‘Companies are gearing up for another banner year for deal making,’ according to The Wall Street Journal (paywall). M&A hit a record in 2021, fueled by low interest rates, a surge in private-equity fundraising and companies’ efforts to respond to broader shifts in their industries, it said, noting that the total value of global M&A transactions to December 21 was $5.7 tn. That is a 64 percent increase on the same period a year before, according to data provider Refinitiv. The total number of deals, meanwhile, rose 22 percent during that period, to 59,748, Refinitiv told the paper. The WSJ said that while ‘many of the factors that propelled deal making in 2021 are expected to continue into next year,’ policy changes on the horizon ‘could damp the pace of corporate tie-ups’.
– The chair of Third Point Investors Ltd, a London-based investment fund connected to Dan Loeb’s activist group, has stepped down after he received ‘personal threats’ amid an escalating fight with rebel investors, according to the FT. The paper said that Steve Bates, a former US equity analyst and JPMorgan executive who had been chair since 2019, decided that ‘circumstances have rendered his continued service as a director of the company untenable’, according to a statement from the board. The decision follows meetings between TPIL and activist investors Asset Value Investors and Staude Capital. The FT described Bates’s exit as ‘the latest twist in a spat that has pitted Loeb, one of the world’s toughest activists, against a group of dissenting shareholders’. On Thursday, Loeb called the activists a ‘stain on institutional investors’ and said that their ‘juvenile antics smack of desperation and inexperience’.
– Artificial intelligence firm SenseTime saw its Hong Kong IPO oversubscribed, after ‘global investors – minus those from the US – shrugged aside US sanctions to bid for shares in one of the world’s premier AI companies,’ said the South China Morning Post. SenseTime received about HK$2 bn of orders for the retail tranche of its IPO when the books closed, said the paper – an oversubscription of around 2.3 times, according to estimates by brokers. Shares of the company will trade for the first time on December 30, marking Hong Kong’s biggest IPO since September.
However, SCMP added that the result ‘paled in comparison’ with the four-times oversubscription received by the Hong Kong-based company in early December before it was added to the US government’s sanctions list under the Uygur Forced Labor Protection Act. Even though the sanction did not bar US investors – institutional or retail – from owning shares of SenseTime, the company excluded them from its stock sale.
– The FT reported the news that Fidelity International has listed a second active EST in Australia in response to ‘increasing local investor demand’ for such products. The $706 bn asset manager originally launched its global demographics strategy as a managed fund back in 2012. The ETF version of the fund has now been listed on Australia’s stock exchange under the ticker FDEM. Speaking to the paper, Alva Devoy, managing director at Fidelity’s Australian arm, said the asset manager was launching the strategy as a listed vehicle ‘because Australian investors are becoming increasingly interested in actively managed ETFs’. She said local demand for active ETFs was robust because the products were ‘simple to access’ via the ASX.