From two new initial public offerings (IPOs), a $1.2-billion share build-up by an activist investor in a giant bank, heating up mega-deal rivalry in the entertainment industry and indications of another superstore score…
These are the deals worth keeping a close eye on this week:
#1 Citigroup: The $1.2-Billion Vote of Confidence
Citigroup stock is trading up nearly 4 percent after news that activist investor ValueAct Capital Partners LP has built up a $1.2-billion stake in the banking giant. It’s a show of confidence that Citi will be able to gain lost ground as a service provider, and now investors are eyeing a clearer path to growth.
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According to the Wall Street Journal, ValueAct has built up this stake over the past four to five months, and made a similar move a couple of years ago with Morgan Stanley. The build-up gives ValueAct around .07 percent of Citibank. And it helps that this activist investor isn’t looking for a major shakeup at Citi.
#2 Comcast Bears Its Fangs
On Monday, Comcast officially notified Brussels of its intention to bid around $30 billion for British Sky, in a race to control the British entertainment giant before Fox and Disney get their hands on it.
On the same day, media reported that Comcast is speaking with investment banks about an all-cash bid to thwart Disney’s takeover of Twenty-First Century Fox Inc.’s assets. According to Reuters, citing unnamed sources, Comcast is asking investment banks to increase the bridge financing facility they have already arranged for the Sky offer by as much as $60 billion to finance the Fox bid.
This will be the deal of the year to watch because it determines dominance in the industry, and neither Comcast nor Disney are going to lose this deal with a big fight. Fox gives them access to European and Asian markets, and Sky would solidify that. Comcast is likely growing more anxious over Sky because Fox has found a way to buy it without troubling British regulators too much. Disney would help it out in that respect.
It’s not clear yet whether Comcast will actually counter-bid because the regulatory hurdles remain uncertain, so while we’re watching this deal, we should also be watching the antitrust hearings for the AT&T-Time Warner deal because that will dictate the regulatory atmosphere.
#3 Big News Expected This Week From Walmart
Walmart’s on a tear and now everyone’s gearing up for an announcement that it will buy a controlling stake in Flipkart, and Indian e-commerce company. The announcement is anticipated by the end of the week, according to sources cited by Reuters.
This is set to be the biggest acquisition of a business by Walmart to date.
This deal has been on the table for a while. Earlier reports suggested Walmart would seek around a 51-percent share for $10-$12 billion, with FlipKart valued at $18-$20 billion, and now sources have told Reuters that the Flipkart CEO would exit after the deal.
#4 Cybersecurity IPO
Carbon Black Inc., a cybersecurity company, launched its IPO on May 6, after having raised its target price to $19 a share (up from the earlier $15-$17 per share), with underwriters valuing it at $1.27 billion.
It initially filed on April 9, and is hoping to turn this around in less than a month under the symbol NASDAQ:CBLK, and the first day of trading saw the stock pop 26 percent, closing near $24.
Can it maintain?
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Like all of these tech IPOs, we’ll be looking at sustainable revenue growth. Last year, Carbon Black reported $162 million in revenue—up 39 percent from 2016. From 2015 to 2016, it saw 65-percent revenue growth. But last year, it also reported a loss of $55.8 million—25 percent more than its loss the previous year. Growth absolutely must outpace losses and the customer base must adequately to make that happen. Related: “Defective At Its Core”: Trump Scraps The Iran Deal
Carbon Black describes itself as a “leading provider of next-generation endpoint security solutions.1 Our predictive security cloud platform continuously captures, records and analyzes rich, unfiltered endpoint data. We believe the depth, breadth and real-time nature of our endpoint data, combined with the strength of our analytics platform, provides customers with the most robust and data-intensive solution to address the complete endpoint security lifecycle. Our solutions enable customers to predict, prevent, detect, respond to and remediate cyber-attacks before they cause a damaging incident or data breach.”
That this is a huge demand service is unarguable, but whether Carbon Black can compete will depend on what it plans to do to grow its customer base.
#5 The Company Amazon Can’t Crush?
The biggest question for most is whether Zuora is ahead of its time, and whether Amazon would kill it. Haven’t heard of it?
Zuora is another cloud software company that helps subscription-based companies manage their billings and finances.
Well, Amazon hasn’t killed it—yet. It’s mid-April IPO price was $14, and shares were up 43 percent on its NYSE debut, but many analysts think they’re too high to sustain. But not everyone agrees: Needham’s Scott Berg still sees upside. He’s put a $24 price target (right now, it’s just over $19) on the stock, with a ‘buy’ rating because he thinks this company could grow revenue at a pace of 30 percent a year over the next decade.
The reason Amazon hasn’t done in Zuora is that they aren’t really competitors; in fact, Zuora is a customer of Amazon’s Web Services (AWS)—the retail giant’s own cloud computing division. And Amazon also uses some Zuora technology.
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By Charles Benavidez for Safehaven.com
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