- Written by Super User
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RenRen is a publicly traded company that is listed (ADRs) on the New York Stock Exchange (NYSE:RENN). The company is making an attempt to go private and has an offer on the table to buy-out shareholders at a price of $4.20 per share.
RenRens traditional business, a social network ecosystem, has been in decline as competition from Weibo and WeChat have clipped platform growth. Simultaneously, management has been investing in a growing number of Fintech firms including SoFi, Fundrise, Sindeo and more. These strategic investments clearly will boost RenRens value going forward so it makes some sense for management to go dark and take things private. But as we learned several weeks back not everyone is pleased with this turn of events.
A renegade group of shareholders has been pushing back on the share purchase offer stating the amount is far too low especially in light of fast growing valuations of RenRens Fintech portfolio.
In an open letter published early last week, a group of shareholders state the true value of RenRen is more like $6.72 per share. A dramatic increase over the existing offer. The letter demands the Board of Directors reject the offer as it is paltry.
Our analysis concludes that the Offer undervalues the sum of the parts by roughly 40% and discounts tremendous value not accounted for in both its balance sheet and operating assets. Moreover, the low ball offer removes any possibility of Renren shareholders realizing the potential of its promising VC portfolio of over 25+ companies and $500MM of at cost investments, some of which are likely to realize windfall profits.
So what does RenRen own?
- 18.5% of SoFi at a cost of $89 million
- 14.72% of Lending Home at a cost of $65.83 million
- 35.6% of Fundrise at a cost of $17.18 million
According to the letter, RenRen has $260 million dedicated to Fintech. With a current market cap of $1.18 billion, these investments are materially important. But think of the values booked today and look to the future. This is what this group of investors has done. Using a recent valuation for SoFi of $4 billion, according to these shareholders, this represents $4.82 in value per share. Jump forward to an expected IPO and use a $10 billion valuation for SoFi and share value rockets higher to $6.63 per share as detailed by this group. And what about all of the other investments? The disgruntled shareholders state these examples just underscore how absurd it is to value all of Renren for just $4.20.
So will RenRen move forward with the buyout at $4.20 per share? Who knows. The price per share is only $3.40 today. If you are a shareholder in RENN you will want to keep an eye on this issue.
- Written by Super User
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It is a common belief among investment professionals from all walks of life that bonds are safer investments than stocks. This is why most financial advisors will generally recommend that an individual increase the proportion of their portfolios that is allocated to bonds as they age. While it is true that holding a high-rated bond to maturity is generally a safer investment than holding any individual stock, the same cannot be said of bond funds. These funds suffer from a variety of problems, at least currently, that may make them inappropriate for an individual that is either in or nearing retirement (or anyone else for that matter).Interest Rates
Since the early 1980s, bonds and bond funds have consistently delivered capital gains, which may have led some investors into these funds hoping for more of the same. Unfortunately, this is unlikely to be the case. This is because bond prices move inversely to interest rates. Wells Fargo explains this relationship thusly,
When new bonds are issued, they typically carry coupon rates at or close to the prevailing market interest rate. Interest rates and bond prices have whats called an `inverse relationship - meaning, when one goes up, the other goes down. The question is: how does the prevailing market interest rate affect the value of a bond you already own or a bond you want to buy from or sell to someone else? The answer lies in the concept of `opportunity cost.
Investors constantly compare the returns on their current investments to what they could get elsewhere in the market. As market interest rates change, a bonds coupon rate - which, remember, is fixed - becomes more or less attractive to investors, who are therefore willing to pay more or less for the bond itself.
Wells Fargo provides an example to illustrate this concept, which I will share here as it is quite useful to aid understanding:
Suppose the ABC Company offers a new issue of bonds carrying a 7% coupon. This means [that] it would pay you $70 a year in interest. After evaluating your investment alternatives, you decide this is a good deal, so you purchase a bond at its par value, $1,000.What if Rates Go Up?
Source: Wells Fargo
Now lets suppose that later than year, interest rates in general go up. If new bonds costing $1,000 are paying an 8% coupon ($80 a year in interest), buyers will be reluctant to pay you face value ($1,000) for your 7% ABC bond. In order to sell, youd have to offer your bond at a lower price - a discounts - that would enable it to generate approximately 8% to the new owner. In this case, that would mean a price of about $875.
An individual who is aware of this simple relationship can easily identify the cause of the bond bull market that prevailed for the past 35 years as well as the reason why bonds and bond funds delivered such strong capital gains over that period. That cause is interest rates. Since the early 1980s, when the Federal Reserve set interest rates in the double digits (in December 1980, the Federal Funds rate was 18.5%), the Federal Reserve has been steadily decreasing interest rates (the Federal Funds rate today is 0.14%). Due to this inverse relationship between bond prices and interest rates, this has caused bonds to steadily appreciate, resulting in capital gains for bond investors.
(click to enlarge)
Source: Federal Reserve Bank of St. Louis
Unfortunately, the steady decline in interest rates has made it highly unlikely that any further capital gains will be forthcoming. This is because interest rates cannot go measurably lower than todays levels. At its most recent meeting, the Federal Reserve decided to maintain its target Federal Funds rate at 0-0.25%. This is the lowest level possible without allowing interest rates to go into negative territory (which has happened in a few European countries recently, but even then the rates did not go significantly below zero). Therefore, the likelihood of further capital gains is minimal. Meanwhile, should rates ever begin to increase, then all bonds will begin to decline in value.
This may not be a problem if an investor purchases an individual bond and holds it to maturity. This is because, barring a default, the par value of the bond will be returned to the investor at maturity. Thus, fluctuations in value are nothing to be concerned with. However, a bond mutual fund is very different. An investor in the fund has no control over whether or not the fund sells any particular bond and given the current interest rate environment, it is quite likely that the bond will be sold at a loss (once interest rates begin to turn). Furthermore, should bond prices decline, then the NAV of the fund will also begin to decline. This may prompt some investors to leave the fund, forcing the fund to sell bonds in order to meet these redemption requests. Due to the pooled nature of mutual funds, the losses will be spread over all investors in the fund.Illiquidity
On Tuesday, September 22, 2015, The Wall Street Journal published an article entitled, Bond Funds Push Limits. In this article, the Journal discussed how several of the largest mutual funds in the country have a relatively high proportion of their assets invested in bonds that trade so infrequently that it would take much more than seven days to sell them should the fund need to raise cash to meet redemption requests. For example, the Dodge amp; Cox Income Fund (MUTF:DODIX) has $496 million, or 1.1% of the fund, invested in debt backed by Petrobras (NYSE:PBR) that would require 155 days to liquidate should the fund need to.
This is problematic for investors for a few reasons. First and foremost is the fact that retail investors tend to move in herds. Thus, should the NAVs of these funds begin to decline, it is quite likely that redemption requests will increase rapidly, exceeding the ability of the funds to meet these requests solely with cash on hand. This would force the funds to sell their assets to fulfill these requests and as already mentioned, many of the bonds owned by these funds will take a considerable amount of time to dispose of. In fact, 10 of the 18 largest bond funds invest meaningfully in these bonds. Here are a few of the biggest offenders:
(click to enlarge)
Source: The Wall Street Journal, Morningstar, MarketAxess
As the Journal points out, the funds may still be able to liquidate their illiquid assets quickly if they need to. However, in order to do this, they will need to heavily discount the bonds, resulting in significant losses for those investors who remain.
- Written by Super User
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SEI Investments Company (NASDAQ:SEIC) traded negative at $48.5. On an intraday basis, the price dropped -0.17 points or -0.35%. The composite uptick value was $1.04 million while the combined downtick value was $0.96. The net money flow was $0.08 million while the up/down ratio was not very comforting at 1.09. The shares on a weekly note has seen a change in share price of -0.35%.
Many analysts have commented on the company rating. Equity analysts at the Brokerage firm Keefe Bruyette Woods maintains its rating on SEI Investments Company (NASDAQ:SEIC). The rating major has initiated the coverage with an market perform rating on the shares. The Analysts at Keefe Bruyette Woods lowers the price target from $58 per share to $56 per share. The rating by the firm was issued on September 3, 2015.
- Written by Super User
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A legislative Column by Assemblyman Will Barclay
A report out last week graded New Yorks overall infrastructure at a C-. The report gave roads and bridges a D- and D+ respectively.
There were several categories included in the report published by the American Society of Civil Engineers, but since roads and bridges are our main source of transportation in Oswego, Jefferson and Onondaga counties, I wanted to mention some of the transportation investments made recently at the state level.
The letter grade serves as an important reminder for us in the State Legislature that we need to keep investing in infrastructure, particularly in roads and bridges.
New York will need to spend some $40 billion on roads by 2030 to keep up with road conditions and repairs, according to the report. This is to maintain 114,000 centerline miles of highway and more than 17,400 bridges.
Sources estimate that more than half of New Yorks bridges are 75 years old so clearly we need to plan for their replacements and necessary repairs.
Local governments are responsible for the maintenance of nearly 85% of the roads and about half of the bridges in the state.
Accordingly, they need assistance meeting the repair demands, especially considering our snowfalls.
Last year, the State Legislature was able to provide additional funding for roads and bridges, thanks in part to bank settlement monies New York received.
While a large portion of settlement monies went to Downstate projects, the state did created the State and Local Bridge fund.
The Legislature set aside $150 million in this years budget to finance the fund which will help Upstate.
This is the first year of the five-year program which will ultimately invest $750 million to repair or replace 100 bridges serving critical freight, agricultural and commerce corridors.
For the past two years, we included additional monies for local governments for winter recovery.
I was pleased these dollars were included in the budget both years, as we all know too well what our winters can do to asphalt.
This is only the second year New York has specifically set aside dollars for winter-related road repairs in recent history and I hope it continues, as this directly benefits Upstate and weather-related repairs are a major consideration for highway maintenance crews throughout our area.
This year, we were able to set aside $50 million for road repairs needed related to winter snowfalls and the previous year, we set aside $40 million.
For the last three years, weve been able to fund the CHIPS (Consolidated Local Street and Highway Improvement Program) at a higher level than previously funded, which I was pleased to see.
Ive advocated for this funding in Albany because it directly assists towns, villages and cities in Upstate New York.
In the 2012-13 budget, CHIPS was funded at $363 million.
The program saw a $75 million increase which began in 2013-14 and since then, it has received $438.1 million each year.
Investing in infrastructure ensures opportunities, opportunities for jobs, a stronger economy and safe travel.
The report is a good reminder that we should continue to make investments going forward, and to make infrastructure more of a priority in the coming years, not just when there are extra dollars to be found thanks to large bank settlements.
If you have any questions or comments on this or any other state issue, or if you would like to be added to my mailing list or receive my newsletter, please contact my office.
You can also friend me, Assemblyman Barclay, on Facebook.
- Written by Super User
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THE past few months havea dark time for Ivan Glasenberg, CEO ofcommodities giantGlencore. With the tumble in global commodity prices, Glasenberg haslost 74% of his net worth this year and 81%since July 2014, when he was the 190th-richest person in the world with$7.3 billion.
Still, the company has recovered losses since last Monday's 29% plunge - when Glasenberg lost $500 million in a single day - which wassparked by concern the stock could be worthless if metal prices keep sliding.
The shares bounced back last week after the company released a statement saying its business is "robust" and it has secure access to funding. Analysts including Citigroup Inc. had said that dumping the stock wasunjustified and recommended buying the shares.
In his first public appearance since last weeks selloff,Glasenberg chose to focus on the copper price and how it doesn't reflect supply and demand for the metal. He spoke, along with the Central Bank of Nigeria Governor Godwin Emefiele, at a seminar called "Managing the Commodity Cycle" in Claridge's Hotel in London's Mayfair district.
"It's clear that there's distortions," Glasenberg said. "How big they are we don't know, but eventually the fundamentals will prevail."
Others are just as confident about Africas prospects in the medium term, despite the current turbulence. Here are 15 big investments that global and African companies have planned for the next few months:
1. Africa'srichest man Aliko Dangoterecently announced plans to invest $400 million in constructing a cement plant in Zimbabwe, which, when completed, will produce 1.5 million tonnes of cement a year. Dangote Cement Plc, Africa's biggest producer of cement, plans to expand into 14 African countries outside its home Nigerian market and is investing about $4 billion to boost capacity to 50 million tons by the end of this year.
2. Heidelberg Cement AG, the world's third-biggest cement maker,said it is considering adding South African and Mozambique production capacity as the German company seeks to tap growing demand for construction material in Africa.
The company opened a $50 million grinding plant in Burkina Faso in March this year which will produce 700,000 metric tons a year, boosting manufacturer's annual capacity on the continent to about 10 million tons. The cement maker operates in Ghana, Benin, Liberia, Tanzania, Sierra Leone, Togo and Democratic Republic of Congo.
3. In August,Volkswagen AG said itplans to invest $340 million in its South African car business to bolster production in the country. The Wolfsburg, Germany-based automaker has planned to inject nearly $220 million on production facilities at its manufacturing plant at Uitenhage, near Port Elizabeth in the Eastern Cape province. The remaining $110 million will be spent on enhancing the supply chain.
4. Courier service DHLhas planned an investment in excess of $19 million in sub-Saharan Africa this year. Major projects underway include upgrades to facilities and shipment handling systems throughout the region. In October 2014, DHL announced investments totaling $33 million in South Africa, by both its Supply Chain and Global Forwarding divisions. DHL operates across 51 countries and territories in the region.
5. Sharjah-based Gulf Petrochemsays it will invest $25-30 million in the next year as part of its expansion plans in East Africa; the firm is looking at acquiring port terminals in Dar es Salaam in Tanzania and in Mombasa in Kenya. Gulf Petrochem is a conglomerate worth $2.5 billion with business operations in oil trading and bunkering, refining, storage terminals, bitumen manufacturing, lubricants, shipping and logistics.
6. BPis looking toNorth Africa, particularly Algeria and Egypt; the company plans to develop several gas fields in Egypts West Nile Delta that could end up producing over 10 trillion cubic feet of natural gas. BPs plan is to add 900,000 barrels of oil to its production base by 2020, in order to offset the losses caused by the decline in oil prices.
7. Billionaire George Soros is also looking tosink some money in Africa;the George Soros Foundation is one of the main investors in LeapFrog Investments, a private equity firm that recently announced that it is raising $400 million to make "socially responsible" investments in Africa.
LeapFrog has acquired a minority stake in Africa Finance Business Mauritius (AFB), an active financial start-up in four African countries as well as a majority stake in the Kenyan company specialising in health insurance, Resolution Insurance, for $19 million.
8. Aluminium can manufacturer GZ Industries of Nigeriaplans to expandinto South Africa with the construction of a $71 million factory to be built in Johannesburg. The factory will have an annual capacity of 1.2 billion cans, andwill start operations in the second quarter of next year and supply other southern African countries, the Agbara, Nigeria-basedsaid.
9. Financial services firmDeloitteplans to boost investments in its African operations as it looks to enhance its offering to clients and grow the business. As part of this strategy, Deloitte acquired 100% of research and investment advisory firm Frontier Advisory in Nigeria earlier this month for an undisclosed amount. Deloitte Africa is also exploring more acquisitions targeting businesses in data analytics, digital and customer experience.
10. Financial services firm Ernst amp; Youngplans to investat least $100 millionin acquisitions in South Africa and the rest of Africa over the next five years as it looks to grow its business and develop new skills,EY Africa CEO Ajen Sita said, The company is targeting to have 40% of its investment capital in South Africa, and 50%-60% in the rest of the continent, in countries like Kenya, Nigeria, Ghana and Mozambique.
11. General Electric Coplans to invest $2 billion in Africa by 2018 to boost infrastructure, worker skills and access to energy. GEs investments include deals to work on increased electric grid reliability during peak power demands in Algeria, to generate uninterrupted power for the Nigerian National Petroleum Corps state oil refinery, as well as an investment of $1 billion in railway and power equipment in Angola.
12. SkyPower, the worlds largest developer and owner of utility-scale solar photovoltaic (PV) energy projects, signed agreements in Nigeria for the development, construction and operation of 3,000 MW of solar PV projects at an estimated cost of $5 billion. In Egypt, the company has an agreement for 3,000 MW of utility-scale solar PV projects worth $5 billion, and in Kenya, it secured a $2.2 billion agreement for the development of 1 GW of solar projects to be built in four phases over the next five years.
13. Afrimax Group, part of mobile operator/ data companyVodafone group, has secured $120m of growth funding to accelerate the rollout of its leading edge LTE (4G) networkacross multiple African markets.
In February, Vodafone Uganda was launched; with an existing 4G licence footprint covering 12 countries, population under licence coverage of 222 million, and further licenses being acquired, Afrimax is building the largest portfolio of 4G wireless broadband networks across sub-Saharan Africa.
14. Greenstone Equity Partners, a leading independent fund placement firm in the Middle East, is collaborating with South Africa-based Harith to raise capital from the Gulf Cooperation Council (GCC) region and direct it to the development of infrastructure projects in Africa.
The new partnershipwill focus on attracting funds for Harith's latest offering, Pan African Infrastructure Development Fund II (PAIDF II), which requires around $1 billion in capital to invest in energy, telecommunications, transport and water projects across the African continent. The fund had already raised $439 million by June last year, primarily from African institutional investors.
15. Old Mutual Investment Groupis looking to invest $18-36 million acquiring properties in East and West Africa, part of the group's plans to spread its asset management capability beyond South Africa to key growth markets in the rest of Africa. The company has ambitions to grow its assets under management to $7 billion in the next five years.
These are just a handful of the headlines, and together, they add to a mountain.