Didi departure from NYSE marks end of Wall Street romance with Chinese big tech

NEW YORK, United States - The Chinese ride-hailing giant Didi Chuxing's announcement that it will delist its shares from the New York Stock Exchange marks the end of a cushy relationship between Wall Street and Chinese tech giants, who are under siege from authorities in Beijing and regulators in America.

Only 5 months transpired between Didi's going public in New York in June and word Friday that it will prepare a Hong Kong listing. During that time its market value has fallen by 63 percent.

Didi's move comes in the wake of a sweeping Chinese regulatory crackdown in the past year that has clipped the wings of major internet firms wielding huge influence on consumers' lives -- including Alibaba and Tencent.

After Friday's announcement, heavyweight Chinese online retailers whose stocks are sold on the New York exchange, such as Alibaba, JD.com and Pinduoduo, dropped sharply.

Shares in Alibaba -- whose arrival on Wall Street in 2014 to a loud fanfare kicked off the parade of Chinese firms listing in the Big Apple -- fell to their lowest level in nearly five years as rumors circulated that, after Didi leaves, Alibaba might be next.

Technically, even as Didi Chuxing moves its listing to Hong Kong, holders of its shares in New York retain those stakes. Their investment does not simply vanish.

But "people are very fearful about regulations and the Chinese government," said Kevin Carter, portfolio manager at EMQQ. "And that has really, really affected sentiment. People are scared."

Coincidentally, on Thursday US market regulators announced the adoption of a rule allowing them to delist foreign companies if they fail to provide information to auditors.

The move is aimed primarily at Chinese firms, and requires them to disclose whether they are "owned or controlled" by a government.

"While more than 50 jurisdictions have worked... to allow the required inspections, two historically have not: China and Hong Kong," Securities and Exchange Commission chairman Gary Gensler said.

'Sensitive data' 

The Global Times, a newspaper close to the Chinese Communist Party, criticized the new US regulation in an opinion piece Friday.

"If the US sets unequal conditions on national security for competition between the two countries by demanding Chinese listed companies hand over audits for inspection so as to spy on China's internal situation and store huge amounts of sensitive data acquired by Chinese companies, China won't accept that," the unsigned piece said.

Many of these New York-listed shares are held not by private citizens but rather by institutional investors.

"Some funds can only have shares that are traded on US markets," said Gregori Volokhine, president of Meeschaert Financial Services. "This is what is putting pressure on shares."

And for many market watchers, Didi, described as China's answer to Uber, will not be the last Chinese tech giant to delist from New York.

"It is not specific to Didi because for months we have seen the communist party's grip on companies tighten," said Volokhine.

Shortly after Didi went public in New York, the reservation platform Full Truck Alliance and the job-search site Kanzhun were investigated by China's cybersecurity watchdog.

The Chinese government has also tightened regulations on companies that offer families private tutoring. This has hurt companies listed in New York.

According to figures in May from a US government agency, a total of 248 Chinese companies are listed in the United States, with a combined market capitalization of 2.1 trillion dollars.

"After an active start to the year, Chinese companies have largely stopped tapping the US IPO market since June, due to regulatory and policy roadblocks in both countries," said Matthew Kennedy, a strategist with Renaissance Capital.

This week Spark Education, a big Chinese online small-class teaching firm, withdrew its planned IPO in the US.

"The way things are, one can say there will be no more new Chinese IPOs and the ones in the pipeline will be withdrawn one by one," Volokhine said. Renaissance Capital says there are 35 companies in that pipeline.

In leaving the US market, Chinese companies are giving up an investor base like no other in the world -- with $52.5 trillion in assets under management, compared to $7.1 trillion in China, according to a study last year by McKinsey and Company, a management consulting firm.

Carter said this political pressure on Chinese companies creates an odd situation in which the stars of the Chinese tech world are plummeting on the stock market, but not because of their earnings reports.

"And these companies are still making profits. And then those profits are still growing," he said.

"The revenue growth for the year is over 30 percent. Not for every company, but a bit collectively. No matter where the stock is, no matter where the stocks trade, that's still the case," he said.

Agence France-Presse

Ferrari wins rich $10 billion valuation in Wall St IPO

NEW YORK, United States—Ferrari, the inimitable Italian luxury sports car maker, garnered a rich $10 billion valuation on Wall Street Tuesday as its initial public offering went out at $52 a share.

The share sale by parent Fiat Chrysler Automobiles came in at the high end of its predicted range, demonstrating substantial enthusiasm by investors and an endorsement of Fiat Chrysler chief executive Sergio Marchionne’s plan to bring the legendary mark of the prancing horse to the US market.

Underwriters offered 17.2 million shares of Ferrari, comprising about nine percent of the company, according to banking sources. Fiat Chrysler had expected to price the offering at between $48 and $52 a share.

The shares are expected to begin trading Wednesday, under the ticker “RACE,” with market watchers waiting to see how the company is greeted on the New York Stock Exchange.

The market’s reception for IPOs has been somewhat meek in recent weeks, and analysts point out that demand for high-end luxury goods in a key growth market for Ferraris, China, has slowed down.

But the company was effusive about prospects for its six hyper-powered models in the IPO filing.

Ferrari shipped 7,255 new cars to its wealthy customers last year and the prospectus envisages only a gradual expansion to around 9,000 a year by 2019.

“We believe our cars are the epitome of performance, luxury and styling,” it said.

“We intend to maintain and extend our leading position in the luxury performance sports car market and to continue to protect and enhance the value and exclusivity of the Ferrari brand and its association with the lifestyle we believe it represents.”

Fiat Chrysler raising cash

The move comes one year after Italian giant Fiat sealed its takeover of the better-performing US automaker Chrysler in an ambitious, slow-moving merger engineered by Marchionne.

Weeks after that, the company said it would split off the hallowed Ferrari brand. The IPO is the first step in that direction.

As a unit of Fiat Chrysler, the supercar maker has been a cash generator. In 2104 it reported net revenues of 2.76 billion euros ($3.13 billion), and a net profit of 265 million euros.

Revenues grew seven percent a year between 2005 and 2014, and margins increased strongly over the same period.

Fiat Chrysler owns about 90 percent of Ferrari and, with a high debt level, could benefit from raising cash in the sale.

At the end of June, the carmaker had net debt of $10.8 billion due to a combination of the costs of the Chrysler takeover and ongoing loss making activities in Europe.

Now Fiat Chrysler plans to invest some $48 billion to expand its total worldwide sales to seven million vehicles per year, largely through the development of its Jeep, Alfa Romeo and Maserati brands.

Marchionne has been pushing the idea of another merger with a major brand—General Motors is his named target—in the belief that only more consolidation in the global auto industry will guarantee a company’s survival.

Analysts say Marchionne, who is also chairman of Ferrari, has been astute in bringing a restricted number of shares to market—a strategy that mirrors Ferrari’s own market approach of keeping production tight to preserve their exclusive cachet.

The flotation will not have any impact on Ferrari’s involvement in Formula One racing, in which it is reemerging as a force after enduring a lean period in the slipstream of world champion Lewis Hamilton’s Mercedes team.

Ferrari’s status as the longest-established and most celebrated team in motor sport’s elite championship is vital to the value of its brand.

It also accounts for more than 10 percent of its revenue through sponsorship and related commercial agreements, including licencing of the company’s name and its famed logo in sportswear, watches, accessories, consumer electronics and theme parks.

The listing will leave Fiat Chrysler with 80 to 81 percent of Ferrari which the parent company intends to distribute to its own shareholders next year.

Piero Ferrari, a son of legendary founder Enzo Ferrari, will retain a ten percent stake after the flotation.

source: business.inquirer.net

US stocks follow European equities lower

New York–Wall Street stocks Tuesday finished lower, following European markets downward after political turmoil in Greece revived worries about the eurozone.

The Dow Jones Industrial Average lost 55.16 points (0.31 percent) to fall below 18,000 at 17,983.07.

The broad-based S&P 500 dropped 10.22 (0.49 percent) to 2,080.35, while the tech-rich Nasdaq Composite Index fell 29.47 (0.61 percent) to 4,777.44.

Equity markets in Britain, France and Germany each fell more than 1.2 percent after Greece’s Prime Minister said a snap election for president planned for Jan. 25 would determine whether the country leaves the eurozone.

US consumer confidence rose in December, while home-price increases were more modest in October, data showed.

Analysts said trade was limited ahead of Thursday’s New Year’s holiday.

“Basically, the volume is light and there is no specific theme that is driving the stock market,” said Hugh Johnson of Hugh Johnson Advisors.

“It’s more or less just trend-less and volatile. I wouldn’t attach much significance to what’s going on today.”

Civeo, which provides workforce accommodations to oil and natural resources companies in Canada and Australia, sank 52.6 percent, citing the weak oil-investment environment. Civeo projected 2015 revenues of $540-$600 million, much below the $817 million forecast by analysts.

Real-estate investment trust American Realty Capital Properties rose 7.4 percent after activist investor Corvex Management disclosed a 7.1 percent stake in the company and said it would press for changes to boost shareholder return.

Bond prices fell. The yield on the 10-year US Treasury fell to 2.19 percent from 2.21 percent Monday, while the 30-year dipped to 2.76 percent from 2.78 percent. Bond prices and yields move inversely.

source: business.inquirer.net

US to slap record $8.9-B fine on BNP Paribas

NEW YORK – French bank BNP Paribas has agreed to pay US authorities a $8.9 billion fine to avoid being tried in court for dealing with US-blacklisted countries, sources close to the matter told AFP.

The deal ends months of haggling which saw French President Francois Hollande pressing his US counterpart Barack Obama to intervene and lighten the punishment.

Agreement on the record fine, approved by the bank’s board of directors at a special weekend meeting in Paris, is due to be announced Monday after markets close at the New York Stock Exchange around 4:00 pm (2000 GMT).

The US Justice Department and New York banking regulator Benjamin Lawsky will make separate announcements, another source said, also speaking on condition of anonymity.

BNP declined requests for a public comment.

At least $2 billion of the fine will go to Lawsky, who is temporarily suspending parts of BNP’s dollar-handling business in the United States — key to any major bank’s US operations — for all of 2015.

Sources said the suspension would take place progressively since BNP has operations underway.

BNP, France’s largest bank, has until December 31 to find a bank that agrees to make dollar payments on its behalf.

The deal forces BNP to plead guilty to the bank’s deals from 2002 to 2009 with countries that Washington has blacklisted like Cuba, Iran and Sudan.

The investigation probed more than $100 billion of transactions, finding that $30 billion of that amount were concealed in order to skirt the sanctions.

Too tough on BNP?

BNP has a strong enough capital base to handle the penalty, but the size of the fine and the temporary suspension of parts of its dollar-handling business — key to any major bank’s US operations — will mean a significant hit on its earnings.

BNP chief executive Jean-Laurent Bonnafe reportedly wrote to employees on Friday conceding the bank will be “punished severely,” but stressing that “this difficulty … will not impact our roadmap.”

US authorities have already forced BNP to dismiss three senior officials allegedly linked to the sanctions violations, including its chief operating officer.

Lower bank officials could also be fired as part of the settlement.

Sources say the settlement could include a year-long suspension of the bank’s dollar clearing for oil and gas trading activities in Switzerland, Singapore and France, and suspension of dollar clearing on behalf of other banks and some clients.

That would likely be a blow to the bank’s bottom line. In 2013 BNP reported total profits of 4.83 billion euros ($6.59 billion) on revenues of 38.8 billion euros. It has already set aside $1.1 billion to cover losses from the case.

BNP has been largely quiet about the allegations and potential penalties during months of negotiations.

Critics have accused Washington of being especially tough with foreign banks, and BNP in particular, while treating US banking transgressions more lightly.

In punishing US banks for financial crisis-related violations, negotiated fines have run into the billions but none has had to plead guilty, an act which could lead to the loss of a banking license.

In 2012 Dutch bank ING paid a relatively paltry $619 million financial crisis, and Britain’s Standard Chartered $670 million. HSBC, which was also accused of complicity in money laundering, paid $1.9 billion.

None were forced to plead guilty or halt certain banking operations.

But US authorities have become much tougher on banks that are less cooperative in investigations.

‘Negative consequences’

In May, Credit Suisse pleaded guilty to helping Americans evade taxes and was fined $2.6 billion, over three times the $780 million fine US authorities imposed on fellow Swiss bank UBS for the same charges in 2009.

Analysts say the size of the BNP fine relates to the size of the business it did with Sudan and Iran, several times larger than that handled by ING and Standard Chartered.

The BNP controversy has been a thorn in US-France relations. French officials warned in early June that it could cause problems for the huge transatlantic trade treaty under negotiation between the European Union and the United States.

“Evidently… this risks having negative consequences,” Foreign Minister Laurent Fabius ominously warned.

Hollande also raised the issue with Obama during a dinner in Paris.

Fabius said that Hollande had told Obama the case is “very important for Europe and for France,” saying if BNP is weakened it would “create a very negative interference in Europe and its economy.”

But even before the dinner, Obama had signaled he would stay out of a legal issue.

“The rule of law is not determined by political expediency,” he said.

source: business.inquirer.net

Candy Crush tempts investors with sweet success

SAN FRANCISCO – Candy Crush is out to tempt investors with the sweet taste of success while avoiding the sourness left in the mouths of those who bit into social game maker Zynga.

King Digital Entertainment, the developer behind the wildly addictive puzzle game, said this week that Candy Crush is seeking a listing on the New York Stock Exchange.

The news set the Internet abuzz with chatter from those crowing about the mobile game’s dizzying success and from the cynical hearkening back to the lackluster fate of Farmville maker Zynga.

Zynga pioneered online social gaming at a time when Facebook was center stage and got caught on its heels when players enthralled by free play on smartphones or tablets flitted away from the San Francisco-based company’s titles.

- Zynga took arrows -

“Zynga was a pioneer in its space,” said longtime game industry analyst Scott Steinberg, now general manager of Phoenix Online Studios.

“The trouble is, sometimes pioneers catch the arrows.”

Zynga was an early innovator, and is not out of the game, although its stock is about half the price it was when the company made its stock market debut at the end of 2011.

While no one can predict how long a game will be a hit, Candy Crush has shown staying power and King has the benefit of learning from Zynga’s woes.

“Like anything else that comes to market and trades on popularity instead of business fundamentals, you have to be aware that the two will collide and the guys on the popularity side are going to lose,” said independent analyst Rob Enderle of Enderle Group in Silicon Valley.

Candy Crush – King’s top-seller – started life as a Facebook game in 2012 but can also be played online and on smartphones.

- Candy shared -

The game is free, but players can pay for in-app extras to help them pass up through its more than 500 levels.

In a move that encourages players to spread the game, Candy Crush lets people call on friends or family at Facebook to download the title and help them advance.

In a promising note, Candy Crush has characteristics in common with classic title Tetris, which remains a star at nearly 30 years old.

Millions of commuters, teenagers  - even pensioners – clock in daily to test their skills at the game, which involves lining up tiny pieces of colored sweets to make them vanish from the screen of their computer or mobile phone.

King rolls out new features and doesn’t rest on laurels, according to analysts.

A constant peril for makers of mobile games, which are often free, is that players can be fickle in their loyalties.

“It is one thing to have a game that is a cultural phenomenon,” Steinberg said.

“It is another to have one with a user base that stay loyal year in and year out.”

Candy Crush has “struck a nerve” and King is using it as a springboard for other games, according to the analyst.

-          Mini-bubble fear –

Enderle warned that the buzz ahead of King’s initial public offering may signal a feeding frenzy that could put early investors on the thin wall of a “mini-bubble.”

The analyst was leary of mobile or social game companies overall, reasoning that popularity tended to be fleeting and their business models yet to be perfected.

“Zynga showed that you are as good as your last game,” Enderle said.

King Digital Entertainment said it has asked the US Securities and Exchange Commission regulatory body for clearance to list shares on the New York Stock Exchange under the ticker symbol KING.

King hopes to raise some $500 million, according to an estimate in its SEC filing.

Candy Crush records some 700 million sessions a day and racks up daily sales of $850,000, according to the IDATE digital research and consultancy firm.

It claims to have 324 million monthly unique users for 180 games in 14 languages, available through its King.com website but also on mobile platforms run by Apple, Google and Amazon, and on Facebook.

source: technology.inquirer.net

US stocks slip as sluggish start to 2014 drags on

NEW YORK—The stock market stumbled Wednesday as investors waited for the government’s jobs report later this week and the beginning of quarterly earnings releases from corporate America.

Traders put aside a positive report that showed private employers created more jobs in December than economists had expected. The market had a muted reaction to the minutes from the Federal Reserve’s mid-December policy meeting.

Wednesday’s declines extend what has been a muddled start to 2014. Both the Dow Jones industrial average and the Standard & Poor’s 500 index are down a little less than 1 percent after five days of trading.

The tough start should be taken in context of last year’s exceptional performance, when the S&P 500 surged almost 30 percent.

After bidding up companies’ stock prices to record levels last year, investors are ready to see if their bets are going to pay off. Big, publicly traded US companies will start reporting their quarterly financial results Thursday.

“The question is whether this strengthening economy is translating into stronger corporate earnings,” said Russ Koesterich, global chief investment strategist at the investment firm BlackRock.

Dow member and oil giant Chevron will report after the closing bell Thursday, as well as former Dow member and aluminum company Alcoa. Next week investors will have results from Goldman Sachs, JPMorgan Chase, General Electric and American Express.

“Earnings will determine what’s next for the stock market,” said Lawrence Creatura, a portfolio manager with Federated Investors.

Another theme on investors’ agendas is jobs.

A private survey released Wednesday showed US businesses added the most jobs in a year in December, powered by a big gain in construction work. Payroll processor ADP said companies added 238,000 jobs in December, better than the 200,000 economists predicted.

The ADP data sets the stage for Friday’s government jobs report. Investors expect the U.S. economy created 190,000 jobs last month and the unemployment rate remained steady at 7 percent.

The Dow lost 68.20 points, or 0.4 percent, to 16,462.74. The losses erased more than half of the 105-point gain the index had on Tuesday.

The S&P 500 fell 0.39 points, or less than 0.1 percent, to 1,837.49 and the Nasdaq composite rose 12.43 points, or 0.3 percent, to 4,165.61.

S&P Capital IQ’s Alec Young said he expects the stock market will “churn” at these levels into next week, once investors have earnings and Friday’s jobs report to analyze.

In company news:

Ford rose 16 cents, or 1 percent, to $15.54 after CEO Alan Mulally said he would not leave to run Microsoft. Mulally was considered a top candidate for the position, having led the turnaround for Ford turning the financial crisis.

Forest Labs jumped $10.54, or 18 percent, to $69.30 after the company said it would buy Aptalis, which specializes in treatments for gastrointestinal problems and cystic fibrosis, for $2.9 billion in cash.

Macy’s jumped in after-hours trading after the company said late Wednesday that it would lay off 2,500 workers as it restructures its business. The stock rose $3.21, or 6 percent, to $55.05.—Ken Sweet

source: business.inquirer.net

US stocks decline for 3rd day on taper speculation

NEW YORK—US stocks Thursday closed lower after a surprisingly good retail sales report boosted speculation that the US Federal Reserve could soon scale back its stimulus program.

The Dow Jones Industrial Average fell 104.10 points (0.66 percent) to 15,739.43.

The broad-based S&P 500 declined 6.72 (0.38 percent) to 1,775.50, while the tech-rich Nasdaq Composite Index gave up 5.41 (0.14 percent) at 3,998.40

Thursday marked the third straight day of losses after strong gains throughout the year.

Peter Cardillo, director of investment research at Rockwell Global Capital, attributed the decline to a November retail sales report, which showed growth of 0.7 percent, above the 0.6 percent expected by analysts.

“The market is positioning itself for a very possible tapering announcement at next week’s” Federal Reserve meeting, Cardillo said.

“They have all the evidence needed to act.”

The retail sales data follows better economic reports on growth and unemployment, Cardillo said. These reports have fostered speculation the Fed might taper its $85 billion a month bond-buying program at its policy meeting that wraps up Wednesday.

Hotel chain Hilton Worldwide made a successful return to the stock market, gaining 7.5 percent to $21.50 on its first day of trading following its IPO price of $20.

Social networking company Twitter advanced 5.7 percent after it unveiled a new form of online advertising through its MoPub platform.

Twitter’s rival, Facebook, also scored, rising 5.0 percent after the S&P 500 announced the company would be added to the prestigious index after the close of trade Friday.

Technology company Oracle fell 2.8 percent after RBC Capital slashed its rating to “sector perform” from “outperform,” citing tough competition from other cloud computing vendors and spending concerns in China. Morgan Stanley also downgraded Oracle due to uncertain growth prospects.

Women’s sports attire chain Lululemon Athletica dived 11.7 percent after issuing a disappointing profit forecast for the fourth quarter. Lululemon projected profits of 78-80 cents per share, below the 84 cents seen by analysts.

General Motors fell 0.3 percent after announcing it was selling its remaining stakes in Ally Financial and French automaker PSA Peugeot Citroen.

Bond prices fell. The yield on the 10-year US Treasury rose to 2.88 percent from 2.84 percent Wednesday, while the 30-year increased to 3.90 percent from 3.88 percent. Bond prices and yields move inversely.

source: business.inquirer.net

Twitter set to make a splash on Wall Street – Special

NEW YORK – Wall Street is aflutter over Twitter, set to make the most anticipated stock market debut since Facebook in a huge test for social media and the technology sector.

No official date has been set, but Twitter appears on a fast track which could see its initial public offering priced as early as Wednesday for trading on Thursday, according to some reports.

The company will trade under the “TWTR” symbol on the New York Stock Exchange, breaking from the Nasdaq market used by a large number of tech companies.


There is considerable excitement about the IPO because Twitter is “a unique product that no one can replicate,” said Michael Pachter, head of equity research at Wedbush Securities.

Pachter and his colleagues said in a research report that they expect high demand.

“We believe that the market is likely to generate appetite for more than $1 billion in stock,” they said.

“The simple rules of supply and demand suggest that by limiting the supply of shares offered to the public in its IPO, Twitter will be unable to satisfy demand.”

And Twitter appears to have learned a lesson from Facebook’s debacle in May 2012, marked by trading glitches, accusations about secret information and a plunge in the share value for months after the IPO.

“The Facebook situation last year was a perfect storm of an overheated private market, a fully priced offering, a massive amount of shares brought to market, all compounded by an historical technical glitch,” said Lou Kerner, founder of the Social Internet Fund.

“That confluence of events is not likely to occur again.”

As of its latest update, Twitter will seek to raise up to $1.6 billion — one tenth the value of the Facebook IPO — by offering 70 million shares in a range of $17 to $20.

That is a relatively small chunk of Twitter’s capital, and implies a market value between $9.3 billion and $11.1 billion — a conservative figure compared with some of the private market trades in Twitter so far.

Analysts say Twitter, unlike Facebook, will not flood the market, and that with demand exceeding supply the price will rise.

The early Twitter investors may not get maximum value right away, but could benefit over time from a rise in the share price.

Star quality, but questions on monetization

Twitter does have a star quality that is likely to fuel interest, because it is a key platform for celebrities, politicians and journalists.

In its investor presentation, the company used President Barack Obama’s widely retweeted message of “four more years” after his 2012 re-election, and noted how activist investor Carl Icahn’s single tweet about buying Apple shares moved the stock market.

A crucial question for Twitter, as for Facebook, is how deftly the company is able to monetize its platform.

Twitter has some 232 million active users around the world, but has lost money steadily since 2010, according to IPO documents. The losses amounted to $133 million on $422 million in revenues in the first nine months of the year.

Twitter makes most of its money from advertising, chiefly in the form of “promoted tweets.” A recent revamping of its display opens the door to bigger display-type ads.

The investment firm Sterne Agee notes that “Twitter’s scale and deeply engaged user base create valuable opportunities for advertisers to leverage the platform.”

Analysts point out that Twitter can allow companies to advertise for free, or pay for promoted tweets and benefit from analytics that target people based on their interests and profiles.

“Twitter is a niche business that will not likely be used by ‘everybody’ vs. Facebook, which essentially is,” said a report from Pivotal Research Group analyst Brian Wieser.

“However, at the same time we expect that advertisers will continue to value Twitter for its unique attributes and should conceivably allocate budgets from sources intended towards digital goals.”

Risks of an ‘unproven’ model

But the report goes on to say that Twitter faces big risks including “a relatively unproven advertiser proposition, the prospects of wild swings in investor sentiment, difficulty scaling the business profitability, rush sellings at a time when early investor lock-ups expire (and) government regulations primarily related to privacy.”

Still, Pivotal sets a target price of $29 a share, or 46 percent above the high end of the offering price range.

Others note that it is hard to evaluate Twitter’s financial potential because three-quarters of its users are outside the United States where digital advertising is just taking hold.

“Many international ad markets are years behind the US in terms of the maturity of the digital ad market,” noted Hillside Partners, an investment firm specializing in technology companies.

source: business.inquirer.net