• Private Equity's Mountain of Dry Powder Is a Danger Sign
    Bloomberg

    Private Equity's Mountain of Dry Powder Is a Danger Sign

    (Bloomberg Opinion) -- Investors keep flocking to private equity in Asia even though returns are declining. They should take heed: Payouts are likely to get worse from here, rather than better.The hunt for yield in a low-interest world has spurred institutional investors from China Investment Corp. to Japan’s Government Pension Investment Fund to join the rush into the alternative asset class. Private equity firms founded by veterans of Warburg Pincus and KKR & Co. are seeking to raise at least $4.5 billion for new funds in China, Cathy Chan of Bloomberg news reported Thursday, in the latest sign of the region’s burgeoning appetite for nonpublic investments.New York-based KKR, meanwhile, is targeting more than $12.5 billion for its fourth Asian fund, which would surpass the record $10.6 billion raised by China’s Hillhouse Capital Group in 2018.(2) At the end of June, private equity firms in Asia were sitting on a record $361 billion of unspent capital, according to London-based market research firm Preqin.The returns haven’t lived up to the hype. Funds focused on Asia generated an internal rate of return of 12.8% last year, down from 15.5% in 2018, according to Preqin. That’s below what investors could have made outside the region: North American funds chalked up an IRR of 16.4% in 2019 while those centered on Europe returned 18%.Even brand-name private equity shops have sputtered. Hillhouse’s $10.6 billion fund saw its IRR slip by 5.16 percentage points between September 2018 and the third quarter of 2019. Over the same period, the MSCI Asia Pacific Index dropped 3.3%, according to data compiled by Bloomberg. KKR’s two existing Asian mega-funds have had varying success, with its older fund underperforming the broader market.It’s getting harder for private equity firms to realize returns by selling companies on stock markets as the world wakes up to the reality that not all hot technology startups will be IPO winners. That follows disappointing debuts for high-profile names such as Uber Technologies Inc. and Lyft Inc., along with the collapse of WeWork’s U.S. share offering last year.Much of the private-equity action in Asia has focused on China, which has also had its share of setbacks. OneConnect Financial Technology Co., a unit of Ping An Insurance (Group) Co., cut the size of its U.S. IPO by almost half last month, while Oyo Hotels is firing thousands of staff in China and India. Like WeWork and Uber, both companies are backed by Japan’s SoftBank Group Corp.The U.S.-China trade war has also had a damping effect, with some private equity-invested companies finding themselves embroiled in the tensions. Facial recognition startup Megvii Technology Ltd. delayed its IPO in Hong Kong after it was included in a U.S. blacklist cutting off its access to key American technology. Bytedance Inc., owner of the wildly popular video app TikTok, is now a subject of a U.S. national security review, and is weighing the sale of a majority stake in the unit.All that considered, it isn’t surprising that the value of private-equity backed trade sales dropped 14% to $28.5 billion last year, according to data compiled by Bloomberg, while share sales by private equity owners slumped 27% to $6.4 billion, declining for a third year to the lowest since 2013.While the U.S.-China phase one trade deal signed last week offers some hope of an improvement in conditions, money is still likely to keep piling up in Asian private equity. For one thing, there aren’t many better alternatives. Institutional investors need to diversify: They can’t keep all their funds in U.S. equities, even if these have been going gangbusters for years.But that doesn't mean individuals need to follow suit. Private equity investments are more risky because they are illiquid and take years to pay off. Smart investors should see the ever-growing piles of dry powder as a sign of danger rather than success.\--With assistance from Dani Yang and Irene Huang.  (1) The Hillhouse fund is the largest devoted specificallly to Asian investing. Chinese state-backed, or policy, funds such as a $29 billion vehicle created in October to invest in the semiconductor industry are larger.To contact the author of this story: Nisha Gopalan at ngopalan3@bloomberg.netTo contact the editor responsible for this story: Matthew Brooker at mbrooker1@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Does This Valuation Of National Beverage Corp. (NASDAQ:FIZZ) Imply Investors Are Overpaying?
    Simply Wall St.

    Does This Valuation Of National Beverage Corp. (NASDAQ:FIZZ) Imply Investors Are Overpaying?

    In this article we are going to estimate the intrinsic value of National Beverage Corp. (NASDAQ:FIZZ) by taking the...

  • Aurora Cannabis Inc. (ACB) Stock Sinks As Market Gains: What You Should Know
    Zacks

    Aurora Cannabis Inc. (ACB) Stock Sinks As Market Gains: What You Should Know

    Aurora Cannabis Inc. (ACB) closed the most recent trading day at $2.13, moving -0.93% from the previous trading session.

  • Planes, Trains, Autos Eclipse Miners in Fabric of Canada Market
    Bloomberg

    Planes, Trains, Autos Eclipse Miners in Fabric of Canada Market

    (Bloomberg) -- Move over materials, there’s a new kid on the block. The C$300 billion ($230 billion) industrials group has ousted miners and forestry stocks to become the third-most valuable collection of companies on Canada’s equity market, behind banks and energy.Comprised mainly of transportation, engineering and construction stocks, industrials are generally seen as cyclical stocks and had blockbuster gains last year with a 24% rally. That was behind only tech and utilities.Last year Ballard Power Systems Inc.’s shares more than doubled after reporting a technology breakthrough that will reduce the amount of high-cost platinum used in its fuel-cell products. Air Canada came in second in the group after announcing a planned acquisition of tour operator Transat AT, accelerating its global presence in the leisure industry.Ballard’s surge has continued this year, climbing about 70% in January, as China signaled it wouldn’t further cut subsidies for electric vehicles, easing some fears for battery investors.One drag on the sector has been Bombardier Inc., which saw its stock slump and bonds tumble this week after the company said it was rethinking the A220 jet program with Airbus as it seeks ways to increase cash flow to help with paying down its $10 billion debt load. But, at a shadow of its former self, its contribution to the sectoral gauge is less than 1%.Markets -- Just The NumbersChart of The WeekEconomyCanadian businesses reported improved sentiment amid reduced concern about global trade conflicts, according to a Bank of Canada survey. Future sales like new orders have picked up, particularly outside of the energy sector, the Ottawa-based central bank’s fourth-quarter survey of executives found.Economists will see a big data dump on Jan. 22 with new housing price figures, inflation and the Bank of Canada’s rate decision.PoliticsPrime Minister Justin Trudeau’s bid to complete the Trans Mountain oil pipeline won a major victory Thursday as the nation’s top court rejected an appeal brought by British Columbia aimed at challenging the controversial project. The Supreme Court of Canada has dismissed the case, the court said in a statement.TrendingInCanada1\. St. John’s, Newfoundland, has declared a state of emergency as a blizzard ramps up with 75 centimeters of snow expected in the province.2\. And if you missed it, we taste-tested McDonald’s Corp. and Beyond Meat Inc.’s new PLT burger, which is getting a trial run in Ontario.\--With assistance from Steven Frank.To contact the reporter on this story: Divya Balji in Toronto at dbalji1@bloomberg.netTo contact the editors responsible for this story: Kyung Bok Cho at kcho7@bloomberg.net, Jacqueline Thorpe, David ScanlanFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    Airbnb Revamps Corporate Governance, Tying Bonuses to Safety

    (Bloomberg) -- Airbnb Inc. is laying the groundwork for a public market debut later this year, announcing a new corporate governance strategy that values safety, sustainability, diversity and accountability.The home-share startup has said it will track guest safety incidents, verify all seven million listings by December, measure its global carbon footprint and enhance employee diversity. To achieve its ambitions, Airbnb is creating a new Stakeholder Committee on the board and tying staff bonuses to safety metrics, according to a statement Friday.In addition, Airbnb has promised to be transparent, reporting progress at an upcoming Stakeholder Day that can be attended by guests, hosts, communities, employees and investors.“Building an enduringly successful business goes hand-in-hand with making a positive contribution to society,” the company said. “Increasingly, this is what citizens, consumers, employees, communities and policy makers desire -- even demand.”Airbnb has been on the defensive over safety since a mass shooting in October at a party house in Orinda, about 20 miles east of San Francisco, where five people died. Local media started to highlight the number of shootings at Airbnb rentals, and family of those slain questioned how the platform vets its guests. In December, the Wall Street Journal published an investigation showing how Airbnb employees who pushed for stricter safety measures, like requiring users to supply a government ID, were overruled by company executives who feared this could deter new guests or hosts.The company is also entangled in battles with cities around the country over regulations and has been accused of discrimination by hosts. With a $31 billion private valuation, Airbnb is poised to be one of the most high-profile market listings this year. Getting ahead of some of the concerns could help appease investors who may be wary of the unfriendly reception other tech titans, like Uber Technologies Inc., Lyft Inc. and Slack Technologies Inc. received last year.The new Stakeholder Committee will be led by Belinda Johnson, who is due to step down as chief operating officer and join the board in March. The company will also award $100 million in grants to support local projects that promote cultural heritage, economic vitality and sustainable communities and demonstrate clear local impact, according to the announcement.These new initiatives will be demanding on the company as it prepares to go public; verifying every listing by December means staff will have to work through tens of thousands of listings a day. But Airbnb says it’s just getting started.“When we first sat down to begin this work, we knew we were undertaking a difficult and serious task. We allowed ourselves to think about problems and opportunities that will take multiple teams working over multiple years to solve,” the company said. “We are nowhere near finished.”To contact the reporter on this story: Olivia Carville in New York at ocarville1@bloomberg.netTo contact the editors responsible for this story: Molly Schuetz at mschuetz9@bloomberg.net, Robin AjelloFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Zacks.com featured highlights include: Carrols, Braskem, FirstService and CryoLife
    Zacks

    Zacks.com featured highlights include: Carrols, Braskem, FirstService and CryoLife

    Zacks.com featured highlights include: Carrols, Braskem, FirstService and CryoLife

  • Calculating The Intrinsic Value Of Tilray, Inc. (NASDAQ:TLRY)
    Simply Wall St.

    Calculating The Intrinsic Value Of Tilray, Inc. (NASDAQ:TLRY)

    In this article we are going to estimate the intrinsic value of Tilray, Inc. (NASDAQ:TLRY) by taking the expected...

  • Implied Volatility Surging for Canopy Growth (CGC) Stock Options
    Zacks

    Implied Volatility Surging for Canopy Growth (CGC) Stock Options

    Investors need to pay close attention to Canopy Growth (CGC) stock based on the movements in the options market lately.

  • Simon Property Extends Online Return Services to 52 Centers
    Zacks

    Simon Property Extends Online Return Services to 52 Centers

    Simon Property (SPG) to enjoy the largest network of Return Bar counters in the shopping-center industry, with the latest expansion of the Happy Returns' service desks to 52 locations.

  • Will The Permian Peak This Year?
    Oilprice.com

    Will The Permian Peak This Year?

    Though many investors are still bullish about the Permian Basin, some analysts have some worrying forecasts

  • Alkermes (ALKS) Stock Sinks As Market Gains: What You Should Know
    Zacks

    Alkermes (ALKS) Stock Sinks As Market Gains: What You Should Know

    In the latest trading session, Alkermes (ALKS) closed at $19.99, marking a -0.05% move from the previous day.

  • Should Teradata Corporation’s (NYSE:TDC) Weak Investment Returns Worry You?
    Simply Wall St.

    Should Teradata Corporation’s (NYSE:TDC) Weak Investment Returns Worry You?

    Today we are going to look at Teradata Corporation (NYSE:TDC) to see whether it might be an attractive investment...

  • Top Ranked Income Stocks to Buy for January 16th
    Zacks

    Top Ranked Income Stocks to Buy for January 16th

    Top Ranked Income Stocks to Buy for January 16th

  • EnLink’s Dividend Cut Doesn’t Go Nearly Far Enough
    Bloomberg

    EnLink’s Dividend Cut Doesn’t Go Nearly Far Enough

    (Bloomberg Opinion) -- The language around a dividend cut is necessarily delicate. Hence, EnLink Midstream LLC characterizes the 34% drop investors are about to experience as a “resetting.” The problem is EnLink has taken the delicacy thing a bit too far — and thereby garbled the message.To say this distribution cut was expected would be something of an understatement.EnLink’s problem is a familiar one among pipeline operators. Growth across much of its business has slowed, bringing high leverage and calls on its cash flow into sharp focus. New guidance suggests Ebitda will creep up a little in 2020. The old distribution would have taken half of that; interest and payments on preferreds roughly another third. That wouldn’t leave much for capital expenditure or cutting debt, which stood at 4.2 times adjusted Ebitda at the end of September (more if you layer on the preferreds).The new distribution saves just shy of $190 million a year, enabling EnLink to generate $10-$70 million of free cash flow after capex and distributions in 2020, according to the company’s own guidance. Here is where, despite EnLink having done the right thing in resetting dividends, it took its delicacy a bit too far.EnLink’s sky-high dividend yield was a signal it was distressed. The way to cure distress is to cut leverage. Even at the high end of guidance, $70 million merely scratches the surface, equivalent to less than 2% of debt outstanding at the end of September. EnLink’s own guidance suggests leverage will barely drop (and may even rise a little) this year.It is clear that, rather than diverting as much cash as possible to paying off debt, EnLink hopes to ultimately grow its way to lower leverage. On its call Thursday morning, management emphasized the first call on excess cash flow would be investing in new projects. This is why, oddly and as laid out toward the back of the latest slide deck, EnLink’s guidance is for free cash flow to actually drop in the high case for Ebitda versus the low case.The messaging here is upside down. Promises of growth, once a strong currency in energy circles, have been debased over the past five years. EnLink’s own guidance for “modest” growth in Ebitda actually encompasses $75 million of promised cost savings, which tells you how much pressure is bearing down on the underlying business.There’s a lot of history to learn from here. Back in late 2015, Kinder Morgan Inc. slashed its dividend by roughly three quarters to deal with its debt, presaging the great resetting that was to come across the midstream sector. Even then, though, Kinder tried to soften the blow by maintaining a robust capex budget centered on growing its way out from under — a budget it had to slash twice in a matter of months as it became clear that wouldn’t fly. Similarly, Plains All American Pipeline LP’s “one and done” convertible issue in early 2016 segued into what one might have called a “two and through” distribution cut — except that another, even bigger cut followed a year later. Both stocks have been dead money for much of the past four years.EnLink could have used this as an opportunity to rip off the band-aid. As it is, the 34% cut leaves the stock yielding about 13%, still at the high end in a troubled sector and looking more stressed than generous. A 65% cut would have taken that yield down to a still-robust 7% and, using the company’s own guidance, resulted in almost $220 million of free cash flow.The problem, of course, is the elephant not quite in the room called the Global Infrastructure Partners term loan. GIP took on a $1 billion loan when it bought 46% of EnLink. That stake is now worth only about $1.2 billion, not much more than the loan balance, which stood at “less than $900 million,” according to an EnLink presentation in late November.It is also serviced by distributions from EnLink (see this column from a couple of months ago for details). And this is perhaps the biggest problem with EnLink’s delicate touch. One of the questions that has dogged EnLink is whether GIP’s loan-servicing needs would trump the imperative of fixing the balance sheet. By my math, assuming a loan balance of just under $900 million, GIP needs a minimum annual payout of roughly $75 million. A 65% cut to EnLink’s distributions, while offering faster direct deleveraging, would have cut GIP’s distribution to less than $90 million — not much more than the bare minimum. At 34%, it gets $168 million.In taking the path of a smaller cut and emphasizing growth, EnLink’s strategy looks more closely aligned with its big, private-equity shareholder than the zeitgeist in the public market. Its own guidance indicates a listless 2020 for the stock, with distributions lower but leverage staying flat. Rewards are backdated to 2021 and beyond. As messages go, that sounds so 2015.To contact the author of this story: Liam Denning at ldenning1@bloomberg.netTo contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.netThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Encana to Shift Base to the United States, Rebrand as Ovintiv
    Zacks

    Encana to Shift Base to the United States, Rebrand as Ovintiv

    Through this restructuring, Encana (ECA) will effectively exchange Ovintiv's one share of common stock for every five common shares of Encana.

  • 5 Toxic Stocks to Disown or Play Short to Book Profits
    Zacks

    5 Toxic Stocks to Disown or Play Short to Book Profits

    Figuring out bloated toxic stocks on a regular basis and discarding them at the right time is the key to successful investing.

  • Noble Energy's Leviathan Field Starts Commercial Operation
    Zacks

    Noble Energy's Leviathan Field Starts Commercial Operation

    Noble Energy's (NBL) Leviathan field starts commercial operation per schedule, and is expected to drive performance of the company over the long term.

  • Nektar's Pain Drug Gets Adverse Advisory Committee Decision
    Zacks

    Nektar's Pain Drug Gets Adverse Advisory Committee Decision

    Nektar (NKTR) to stop development of chronic pain candidate, NKTR-181, following two FDA advisory committees' decision to not recommend its approval.

  • Realty Income (O) Hikes Monthly Dividend for 105th Time
    Zacks

    Realty Income (O) Hikes Monthly Dividend for 105th Time

    Realty Income's (O) February dividend payment marks a 3.1% increase as compared to the same month in 2019.

  • Top Ranked Income Stocks to Buy for January 15th
    Zacks

    Top Ranked Income Stocks to Buy for January 15th

    Top Ranked Income Stocks to Buy for January 15th

  • EQT Awaits $1.4-$1.8B Write-Downs, Aims for 30% Deleverage
    Zacks

    EQT Awaits $1.4-$1.8B Write-Downs, Aims for 30% Deleverage

    EQT Corporation (EQT) estimates its fourth-quarter net sales volumes in the band of 370-375 Bcfe, indicating a narrower outlook from the earlier guided the earlier guided range of 355-375 Bcfe.

  • AdvisorShares CEO says 2020 'could be a good year' for cannabis
    Yahoo Finance

    AdvisorShares CEO says 2020 'could be a good year' for cannabis

    Despite waning investor optimism in the cannabis space, AdvisorShares CEO Noah Hamman says 2020 could be a big year for the sector.