Picking up where they left of Friday afternoon, major averages rallied sharply Monday morning on a combination of factors:Relief over the Citigroup rescue package (imperfect, but something’s better than nothing). …
Expectations for a government rescue of Citigroup were fulfilled in the wee hours Sunday night/Monday morning. In exchange for $27 billion in Citi preferred stock, the government will inject $20 billion of capital in the struggling firm and guarantee $30
Worried about the U.S. deficit? Think the government should reduce spending?Well, that’s exactly the “worst possible” approach to solving our economic dilemma, according to William Black, Associate Professor of Economics and L
After scoring one of the biggest exclusive deals in music retailing in a long while– or at least since Wal Mart snagged the exclusive for the new AC/DC opus “Black Ice” earlier this year– Best Buy began selling the long awaited new recording by Guns n’ Roses, “Chinese Democracy,” on Sunday.
But stepping down the escalator at the chain’s Chelsea story in New York City on Sunday, when a more than 17 year wait for original Guns n Roses material ended, it would have been easy to walk by the modest display box with the Chinese Democracy CDs and vinyl LP’s. There were few other signs of CDs being available, and the store was not blasting it on the P.A. system as a record store would have back in the old days.
It was a far cry from the scenes in 1991, when fans waited in long lines outside record stores in cities around the world for the band’s “Use Your Illusion” two-CD set.
But then again, 1991 was a long time before iTunes, Apple’s online music store, made its debut. While Best Buy has the exclusive on “Chinese Democracy” in actual stores, the 14-song set is available on iTunes too, unlike the AC/DC record which can only be bought at Wal-Mart stores (and to accommodate Wal-Mart free New York City, at MTV’s store in Times Square.)
And for all the quiet at the Chelsea store on Sunday afternoon, the new Guns n Roses is a clear early hit, with iTunes on Monday morning ranking it the #1 album in the U.S.
Either way, we’ll know how well the CD did both online and at Best Buy next week, when Billboard reports its debut on the record charts.
(Photo/Reuters)
Mets fans can rest easy. Citigroup and the New York Mets have confirmed that their record 20-year, $400 million naming rights deal for the team’s new ball park, set to open for the 2009 baseball season, is still on. Not that Citi could wiggle out of the deal anyway.
On Sunday, the struggling bank won a $326 billion bailout from the federal government. But the Mets deal was signed in 2006, when times were flush for Citi, or at least when the extent of its troubles was harder to see.
To be sure, handing over $20 million a year to the National League baseball team is a drop in the bucket compared to the magnitude of the bailout, but even the bank seems to be having second thoughts about the deal’s value.
Millions of fans and television spectators will be regularly reminded of how much Citi spent to name the baseball field, before ultimately turning to the government to be rescued. Probably not be the branding Citi intended for when it signed the deal.
Here is what CFO Gary Crittendon had to say about it Monday on CNBC:
“That was a decision made in a different time. We have binding legal agreements… I don’t think it’s an issue.”
So let’s follow the money here: The government gives funds to Citigroup, who is now better able to make an annual payment to the Mets. Sounds a bit like a new taxpayer subsidy for the Mets, who are already receiving government subsidies for building their stadium.
The Citigroup rescue seems to be the latest sign that the government is now wary of scaring away shareholders from financial services companies as it rescues them.
In its massive bailout of the financial giant unveiled Sunday, the government took warrants that would dilute shareholders by only about 4.5 percent. Compare that with the bailouts for Fannie Mae and Freddie Mac as well as AIG, where the government took nearly 80 percent.
The government also only took preferred shares, as opposed to senior preferred shares in the case of Fannie and Freddie and the revised rescue of AIG earlier this month, again sending a comforting signal to existing shareholders in these institutions at a time when the financial services sector is a pariah for many investors.
What changed the government’s heart? Maybe the realization of how bad the crisis has become. And clearly Citi shareholders and the stock market are cheering out loud today.
(Photo credit: Shannon Stapleton, Reuters)
Microsoft/Yahoo, Samsung/SanDisk, Electronic Arts/Take-Two….Facebook/Twitter?
According to Kara Swisher of All Things Digital, Facebook had talked for several weeks about buying micro-blogging site Twitter for $500 million in stock, and then gave up on the idea about three weeks ago.
The sticking point apparently was price — whether the deal valued Facebook shares too highly. “But, more important, it seems, was a feeling among Twitter investors and execs that the start-up should still take a shot at building its revenues-there are none right now-as well as it had done at building its growth,” Swisher writes.
But she notes that Twitter needs all the investors it can get, and while the lack of revenue was an issue for Facebook, it may revisit the deal at another time. “We’d hate to see Twitter go to another company,” like Google, Yahoo, Microsoft or Verizon, she said, citing an unnamed source.
Keep an eye on:
Thanksgiving has come early for embattled Citigroup. The second-largest U.S. bank by assets received a pardon of sorts from the government late on Sunday, getting a $20 billion lifeline – the biggest bank bailout yet.
The bank had been widely thought to be too big to fail because of its global reach. Chief Executive Vikram Pandit and other top management will keep their jobs, but the government will have the final say on executive pay packages.
Citigroup’s shares lost 20 percent of their value on Friday, closing at $3.77, down 60 percent for the week and reaching their lowest level since December 1992. The group’s market value fell to $20.5 billion. That’s a far cry from the good old days of late 2006 when the bank’s market value topped $270 billion.
Citigroup’s market value is now also in line with Goldman Sachs Group Inc. Which makes for interesting speculation: Might Goldman be interested in picking up its rival at current low prices? A person familiar with Goldman’s strategy said it was not interested, but CreditSights said an acquisition of Citigroup by Goldman or Morgan Stanley would significantly add to earnings, if Citi’s bad assets were absorbed by the U.S. government.
For now, Citigroup is alive. But the carving of the turkey may be just around the corner.
More Deals of the Day:
** China Life Insurance Co, the world’s biggest life insurer by market value, is interested in buying Asian assets of American International Group, a senior China Life manager briefed on the situation said.
** Johnson & Johnson Inc will acquire Israel’s Omrix Biopharmaceuticals Inc for $27 a share, or a total of $465 million, the Globes financial news website said.
** Major shareholders of Hynix Semiconductor picked Credit Suisse, Woori Securities and Korea Development Bank to lead manage the sale of 36 percent of the chip maker in a deal that could be worth about 968 billion won ($646 million) at current market prices.
** The United Arab Emirates began to bail out Dubai’s rattled lenders, consolidate its financial sector and cap a building spree as the former boomtown began cutting state spending in the face of the global crisis.
** Slovenian telecoms provider Telekom said on it hopes to buy Macedonian mobile phone operator Cosmofon, adding it was also looking for other takeover opportunities in the Balkans.
** Inhaled-drug specialist Vectura’s Chief Executive Chris Blackwell said the company is looking to make acquisitions to boost its pipeline, adding that it may consider non-inhaled products to do so.
** EADS agreed to keep for three years a majority stake in three German plants it had planned to sell, German newspaper Financial Times Deutschland reported, citing industry sources.
** Key details remain undecided about a government-led plan to restructure swathes of Dubai’s financial sector, Wasim Saifi, chief executive of Dubai-based mortgage lender Tamweel said.
** SSL International Plc, a maker of Durex condoms and Scholl footcare products, said it agreed to buy the Crest condom brand and related assets for 7 million Swiss francs ($5.72 million) in cash from privately owned Doetsch Grether AG.
No one disputes that the IPO market is pretty much dead, notwithstanding yesterday’s IPO by Grand Canyon, a deal that broke a 15 week streak without an IPO. With the stock market as crazy as it’s been, IPOs aren’t likely to stage a miraculous comeback soon.
But the IPO market’s troubles go beyond the current turmoil. They can be linked, among other causes, to changes in technology and regulation following the tech bubble earlier this decade, according to a white paper released on Thursday by consulting firm Grant Thornton.
The paper lists among the culprits of the IPO market’s anemia for the greater part of the decade:
- the emergence starting in 1996 of online discount brokerages such as Charles Schwab and E*Trade, which brought “unprecedented investment into stocks” and helped to cause the dot.com bubble, which in the process “destroyed the very best stock marketing engine” ever;
- decimalization of stock prices in 2001, which brought on automated trade execution, leading market makers to no longer exchange information, with traders “hijacking the markets for speculation.”
- a number of factors, including regulation, led to institutions no longer paying a premium for research, causing a “dumbing down” of stock research and leaving many companies without analyst coverage.
The end result of all this is a far lower average number of deals since the dot.com boom than before, in particular the disappearance of the $25 million IPO, which co-author David Weild says has “gone the way of the dodo bird.”
The authors argue that certain private placement markets such Nasdaq’s Portal, which is open only to qualified institutional buyers, or QIBs, and London’s AIM Market, both designed to help small companies float shares, have only partly satisfied the liquidity needs of smaller companies.
And so the authors imagine a new kind of market called “Second Market” that would have among its features: being open to all investors, have stocks with quote increments of 10 cents or 20 cents, and be intermediated by brokers.
Ultimately the authors argue, the languishing market for IPOs by smaller firms threatens U.S. competitiveness and innovation. Grant Thornton says there were an average of 520 IPOs per year before the dot.com bubble, versus 134 IPOs per year.
And with only 29 deals so far in 2008, and not a single one on the calendar, that average is likely to fall further.
No one disputes that the IPO market is pretty much dead, notwithstanding yesterday’s IPO by Grand Canyon, a deal that broke a 15 week streak without an IPO. With the stock market as crazy as it’s been, IPOs aren’t likely to stage a miraculous comeback soon.
But the IPO market’s troubles go beyond the current turmoil. They can be linked, among other causes, to changes in technology and regulation following the tech bubble earlier this decade, according to a white paper released on Thursday by consulting firm Grant Thornton.
The paper lists among the culprits of the IPO market’s anemia for the greater part of the decade:
- the emergence starting in 1996 of online discount brokerages such as Charles Schwab and E*Trade, which brought “unprecedented investment into stocks” and helped to cause the dot.com bubble, which in the process “destroyed the very best stock marketing engine” ever;
- decimalization of stock prices in 2001, which brought on automated trade execution, leading market makers to no longer exchange information, with traders “hijacking the markets for speculation.”
- a number of factors, including regulation, led to institutions no longer paying a premium for research, causing a “dumbing down” of stock research and leaving many companies without analyst coverage.
The end result of all this is a far lower average number of deals since the dot.com boom than before, in particular the disappearance of the $25 million IPO, which co-author David Weild says has “gone the way of the dodo bird.”
The authors argue that certain private placement markets such Nasdaq’s Portal, which is open only to qualified institutional buyers, or QIBs, and London’s AIM Market, both designed to help small companies float shares, have only partly satisfied the liquidity needs of smaller companies.
And so the authors imagine a new kind of market called “Second Market” that would have among its features: being open to all investors, have stocks with quote increments of 10 cents or 20 cents, and be intermediated by brokers.
Ultimately the authors argue, the languishing market for IPOs by smaller firms threatens U.S. competitiveness and innovation. Grant Thornton says there were an average of 520 IPOs per year before the dot.com bubble, versus 134 IPOs per year.
And with only 29 deals so far in 2008, and not a single one on the calendar, that average is likely to fall further.
Citigroup Inc tried to calm employees’ concerns on Friday by saying it planned to keep its Smith Barney brokerage and that they shouldn’t worry about the stock price.
As Citi’s shares fell for the fifth consecutive day, Chief Executive Vikram Pandit tried to downplay speculation the banking giant might sell major businesses to restore its health and investor confidence.
Pandit told employees they should not focus on the bank’s falling share price because that is not what regulators and credit rating agencies worry about, according to two people who heard him speak.
His advice might prove tough to follow. In midday trading, the shares were down 69 cents, or 14.7 percent, at $4.02, after hitting a record low of $3.58 earlier in the day. They closed at $9.52 a week ago.
Citi may not want to shed Smith Barney, but it still is looking at options such as a merger with another company or sale of parts of the company. That’s enough to make employees fret, on top of Citi’s plan to cut 52,000 jobs by early next year.
Plus, concerns are rising that the negative news surrounding Citi could prompt customers or trading partners to flee.
(Additional reporting by Dan Wilchins and Jonathan Stempel)
(Photo, of Pandit in happier times, at a Reuters Summit)
Citigroup Inc tried to calm employees’ concerns on Friday by saying it planned to keep its Smith Barney brokerage and that they shouldn’t worry about the stock price.
As Citi’s shares fell for the fifth consecutive day, Chief Executive Vikram Pandit tried to downplay speculation the banking giant might sell major businesses to restore its health and investor confidence.
Pandit told employees they should not focus on the bank’s falling share price because that is not what regulators and credit rating agencies worry about, according to two people who heard him speak.
His advice might prove tough to follow. In midday trading, the shares were down 69 cents, or 14.7 percent, at $4.02, after hitting a record low of $3.58 earlier in the day. They closed at $9.52 a week ago.
Citi may not want to shed Smith Barney, but it still is looking at options such as a merger with another company or sale of parts of the company. That’s enough to make employees fret, on top of Citi’s plan to cut 52,000 jobs by early next year.
Plus, concerns are rising that the negative news surrounding Citi could prompt customers or trading partners to flee.
(Additional reporting by Dan Wilchins and Jonathan Stempel)
(Photo, of Pandit in happier times, at a Reuters Summit)
