ECONOMIC SILUET: Deals, direct listings, and no recession talk

Senin, 28 Oktober 2019

Deals, direct listings, and no recession talk

MON, OCT 28, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF MON, OCT 28, 2019 • 12:04 ET

DJIA		27058.80
		+0.37%	+100.74

S&P 500		3038.20
		+0.52%	+15.65

NASDAQ		8317.54
		+0.90%	+74.43

EDITOR'S NOTE

It's feeling pretty bull market-y out there...

Not only did the S&P 500 hit a new intraday high today (the Dow has been trailing for some idiosyncratic reasons), but there's been very little recession talk coming out of this earnings season, and now we even have deal activity perking up.

Fitbit shares are surging 30% on a Reuters report that Alphabet has made a takeover offer. Prologis is acquiring Liberty Property in the "red hot industrial REIT sector." And Louis Vuitton parent LVMH made a bid for Tiffany! Intriguing...we'll go through it at the top of the show today.

Other bull market-y signs typically include things like an IPO frenzy, but this cycle has been a curious one: we got a frenzy of listings that overall went pretty well through mid-year (especially if you were a tech software company), but the bloom has come off the rose thanks to Uber, Lyft, WeWork, SmileDirect, and others that have stumbled of late.

(Speaking of which, Beyond Meat reports after the bell today. We'll have a preview of what to expect--and its lockup expires tomorrow. Is the stock's 50% retracement thus far enough?)

The IPO cycle is now morphing into a food fight over the merits of the whole IPO process. Today you have Richard Branson's space tourism company, Virgin Galactic, "going public" through a backdoor listing with venture capitalist Chamath Palihapatiya's special purpose acquisition company, whose ticker is now SPCE.

So far, the shares are positive on the day, and Chamath is right that this will be a "litmus test" for whether other start-ups go public the same way. The entire process, he said on CNBC earlier, was minimally distracting to management, took just "three-and-a-half months," and, in terms of the "traditional oligopoly or monopoly" IPO process run by Morgan Stanley and Goldman Sachs: "those days are numbered."

This on the same day that shares of Spotify--which also snubbed a traditional IPO in favor of a direct listing that didn't raise any additional capital--are having their best day yet, popping more than 15% after posting an unexpected profit and strong subscriber and podcast trends. SPOT is now trading about 5% above its "reference price" from last April when it went public.

In any case, regardless of how they're listing, the choice by companies--especially ones like Virgin Galactic whose businesses barely exist yet--to go public now tells you these are perceived as friendly markets.

In fact, did Branson know that today, October 28, is historically "the best day of the year" for the stock market, according to LPL Financial?? If so, he really is a genius ;-)

Have a great day and I'll see you at 1 p.m!

Kelly