There are always new developments occurring in the venture capital, startup, private equity, stock market, crypto, and retail investing sectors. Here is the Frugal Finance news you need to know now:
Microsoft is splurging $60 billion on its own shares, and it’s not the only company doing share buybacks. Last week, Microsoft's board approved a plan to buy back as much as $60B of the company's own stock — the software giant's largest share repurchase program ever. Stock buybacks are kind of like gifts to shareholders: by reabsorbing their own shares, companies can potentially improve their stock prices by reducing the number of available shares. When shares outstanding decrease, investors' ownership in the company pie can increase. Think: owning 1 share out of 10 total, vs. owning 1 out of 5. Microsoft shares are already sitting near records, and have soared 38% this year. But it's also sitting on a $130 billion cash reserves pile, so it has money to spend.
Corporations have different options when it comes to spending extra money. They can invest it back into the business like hiring, R&D, building factories, etc — or, they can return value to shareholders through dividends and stock buybacks. Microsoft has used its massive cash reserves to fund acquisitions, boost dividends, and do buybacks. Many companies flush with excess cash are doubling down on buybacks, too. Spending on buybacks increased much faster than capital expenditures on buildings and equipment in the first half of 2021. S&P 500 companies spent more on buybacks than on capital expenditures in the first half 2021. Share repurchases hit $370 billion, up about 30% from the first half of 2020. For example: Lowe's, which thrived on the DIY boom from Covid-19 lockdowns, spent $6 billion on share repurchases — compared with barely $850 million on capital expenditures. Target, another corona-conomy thriver, recently announced $15 billion in buybacks.
The Big Buyback relates to the Big Shortage. Many US businesses are cash-rich, thanks to low interest rates on debt and strong earnings fueled by economic recovery. The problem: supply and labor shortages are limiting how much companies can invest back into their businesses. But the Big Buyback, which could be contributing to soaring stock prices, could hit speed bumps ahead: Democratic senators just proposed a 2% tax on corporate buybacks to help fund the $3.5 trillion US budget bill.
With around 65% of US adults fully vaccinated and Delta variant cases surging, President Biden hoped to start distributing Pfizer booster shots this week. But on Friday, scientists overwhelmingly advised the FDA not to recommend boosters for the general public — only for people 65 and older, and those at high risk. Third shots are already controversial since many countries still don’t have first shots. The FDA’s final decision on boosters is expected this week, and it usually follows scientists’ counsel.
Google just completed a 3.9K mile-long undersea internet cable between the US and Europe. Since 98% of global web traffic flows through undersea cables, e-giants like Facebook, Amazon, Microsoft, and Huawei have been paying top dollar for bandwidth on shared cables. But Google’s cable is Google-exclusive, and can handle more traffic than all existing cables combined. As the cloud computing boom continues, internet giants will either compete to buy more bandwidth — or to build it.
Instead of BYOB, Lennar and KB Home help you build-your-own-home. The housing market has been #thriving since millions of Americans ditched city-living for pandemic-friendly suburbia. Demand is still sky high, with housing inventory sitting at 40-year lows. But last month, home sales dropped for the first time in over a year. We’ll see if homes are still booming when Lennar and KB Home, two of America’s largest home-builders, drop earnings this week.
As eager foodies return to indoor dining, restaurants are having a hard time keeping up with demand. Supply chain and labor shortages have forced some eateries to trim menu items and shorten hours. And many small restaurant owners have seen a surge in operating costs due to rising prices (#din-flation). Last quarter, Cracker Barrel and Olive Garden-owner Darden Restaurants said sales were almost back to pre-pandemic levels. We’ll see if the rebound continued when they serve up quarterly earnings.
The DevOps ecosystem keeps expanding The rapid pace of digital transformation has increased pressure on companies to improve front-end customer software and automate internal processes. And to harness the potential of the cloud, a growing cohort of DevOps startups are creating digital products to help enterprises build software and IT infrastructure. Our latest installment of Emerging Tech Research includes analysis of why enterprises are investing more aggressively in DevOps, and details on emerging opportunities in the space. Key takeaways include: Venture funding for global DevOps startups hit $4 billion in the second quarter of 2021—including a $1 billion Series C for MessageBird, which offers a cloud communication platform. Exit activity was relatively stable in terms of deal count, but deal value was dominated by the IPOs of robotic process automation specialist UiPath and Confluent, which provides a data and application integration platform. Our analysts believe the market for container management software is maturing, but faces rapid disruptions as new technologies emerge.
SoftBank is doubling down on LatAm after first fund tops its expectations. COO Marcelo Claure leads SoftBank's Latin America funds. SoftBank isn't known for identifying opportunities ahead of other venture capitalists. But its strategy in Latin America is a notable exception. The Japanese conglomerate started investing in the region before other top-tier VCs recognized the massive opportunity it holds. After realizing a net IRR of 85% on its first LatAm fund, SoftBank has launched a second vehicle dedicated to the region. Valuation step-ups on notable SoftBank investments in Latin America range from 1.5x on Colombia's Rappi to 8.4x on Brazil-based VTEX, according to new data.
US PE middle-market dealmaking remains red-hot Despite several macroeconomic headwinds, middle-market PE dealmaking in the US has continued its unprecedented run, supported by continued economic recovery and significant capital availability. In thelatest US private equity Middle Market Report, SRS Acquiom and Baker Tilly, analysts break down the middle-market environment during Q2 2021. A few key takeaways: Add-ons continued their trend of more than a decade and increased as a share of PE deals. Middle-market PE firms sought to add on mid-sized aggregators and pursue transformational mergers and acquisitions to scale up platforms, diversify and expand along the value chain, or incorporate ESG values. Even as exits to strategics lagged, attractive valuations and investor confidence led to healthy exit activity in the middle market, especially in sponsor-to-sponsor deals. Middle-market fundraising set off at a rapid clip in the first half of 2021. Buyout firms benefited from LPs' robust appetite for private markets exposure and the unprecedented deal making activity that allowed firms to deploy capital and return to fundraising at a breakneck pace.
500 Startups recently rebranded as 500 Global and expands strategy to later-stage companies. 500 Startups, a venture capital firm and accelerator that has made hundreds of small bets in seed and early stage companies since its founding a decade ago, is rebranding as 500 Global and expanding beyond its roots with a new $140 million flagship fund that will target later-stage businesses. The latest fund is the firm's largest vehicle to date. It brings the firm's total assets under management to $1.8 billion. The new strategy will allow the firm to invest in successful portfolio companies as they mature, lead later-stage rounds and offer co-investment opportunities to limited partners. In addition to its flagship funds, 500 Global manages regional funds in countries like South Korea, Thailand and Vietnam. The firm's portfolio includes 33 unicorns, including Australia-based Canva, worth $40 billion, and Singapore's Grab, which has announced plans to go public via a SPAC at a nearly $40 billion valuation.
ON Partners places top PE executives in 2021 Named to the "Private Equity Recruiting Power 75" ranking of the most prominent executive search firms serving the sector, ON Partners brings deep experience in the growth, venture and private equity space. ON has partnered with hundreds of PE clients to build leadership and board teams, contributing to the firm's overall 89.3% growth over a three-year period. This year alone, the ON executive search team has placed senior executives with both funds and PE-backed organizations, including BetterCloud, Marlin Equity Partners, Nexa, OpenKey, ParkMobile and Realwear, among others.
Antin seeks a $4.9B valuation in Paris IPO. Antin Infrastructure Partners is set to join a growing club of public PE firms when it launches its IPO on Euronext Paris later this month with a valuation that could reach €4.1 billion (about $4.9 billion). The Paris-based firm would raise at least €550 million in the offering, based on its target range of €20 to €24 per share. Trading is expected to begin Sept. 24. Antin would follow major European private equity investors that have gone public in recent years, including the UK's Bridgepoint, Sweden's EQT and fellow French firm Tikehau Capital. The surge comes as firms seek to tap into a growing appetite among retail investors for PE stocks—and those that have already gone public are performing well.
Invention to impact Internet-of-things satellite startup Swarm Technologies operates a ground station network and a global constellation of 120 "sandwich-sized" space satellites. SpaceX is in the process of acquiring the NSF-funded company. Swarm Technologies (NSF-1758752) is one of hundreds of deep tech startups funded annually by the NSF, a governmental agency that accelerates discoveries into the marketplace. Each startup can receive up to $2 million to support translational research and development. By annually investing roughly $200 million in startups, NSF helps teams navigate the earliest stages of technology translation. In the past five years, these companies have gone on to raise billions in follow-on capital, and the portfolio has had 100-plus exits.
Advent, GIC are now teaming up in $5.6B bid to bag UK tea brands. Advent International has joined with GIC in a £4 billion bid (about $5.6 billion) to buy PG Tips, Lipton and other tea brands from Unilever, Sky News reported. The Anglo-Dutch consumer goods giant began exploring a sale of the business in early 2020. The unit is said to have previously attracted interest from PE suitors including Cinven and the Abu Dhabi Investment Authority, as well as The Carlyle Group, Clayton Dubilier & Rice and KKR. If a deal goes ahead, it won't be the first time Unilever has sold to PE. In 2017, for example, KKR acquired its margarine and spreads division for around $8 billion. It also wouldn't be the first time PE has invested in tea, with London-based Zetland Capital buying the UK's Typhoo in July. GIC, which has been an LP in at least four Advent funds, has a history of teaming up with the firm. Earlier this month, the pair made a joint offer to buy Swedish Orphan Biovitrum in a deal valuing the Stockholm-listed pharmaceuticals company at 69.4 billion Swedish kronor, or around USD $8.1 billion.
Brilliant Earth Group, Inc. (BRLT) is now on IPO Access on Roinhood. Brilliant Earth Group, Inc. (BRLT) plans to go public. You can now find BRLT in the IPO Access list and review the prospectus. Argo Blockchain plc. (ARBK) also plans to go public. You can now find ARBK in the IPO Access list and review the prospectus on the Robinhood.com website or mobile app. Cue Health Inc. (HLTH) plans to go public soon. You can now find HLTH in the IPO Access list and review the prospectus if you would like to invest in shares during this company's initial public offering.
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A look at how startup founders are using record-high valuations to cash out of their companies earlier. Why even giant vessels can't solve the shipping crisis. Amazon has become ubiquitous in markets across the board. Its next target? Healthcare. It costs between $600 and $800 for Iceland's new Orca carbon capture plant to suck 1 ton of carbon dioxide from the air, but that's just the beginning. Robinhood is seeking to attract more novice investors as it turns to college campuses to recruit younger customers. It's a large and growing portion of HOOD's market share. Shares in Chinese cosmetic surgery companies are falling as investors guess the industry will be the next to see regulation. And Elon Musk's Spacex just completed the first completely civilian manned space launch in history after a 3 day trip returned safely. This means big things for space tourism and future opportunities with Spacex, Virgin Galactic, and Blue Origin in the battle of the billionaires.
Design startup Canva notched a $40B valuation, making it the world’s most valuable female-founded and female-led startup. Hike: House Democrats proposed a $2.9 trillion tax hike for high earners and big businesses to pay for President Biden’s $3.5 trillion social agenda. Rivian became the first to bring a fully electric pickup truck to the consumer market, beating Tesla, Ford, and GM — who merely unveiled prototypes.
Keep reading more Frugal Finance news bulletins to learn more about what's going on in the world of money.
