Quick Take: SMC completes Eagle Cement takeover and 2 more market updates
US Federal Reserve (Fed) [link] raised US interest rates by 50 basis points, and did so using language that threw some cold water on the optimism from the earlier news that November inflation had been “softer” than expected. The Fed’s chairman, Jerome Powell, again repeated that it is “not close” to ending its fight against inflation, and that interest rates will be heading higher than most expect through a longer period of 2023 than most would expect. Mr. Powell said, “Restoring price stability will likely require maintaining a restrictive policy stance for some time.”
MB Quick Take: I only get a chance to read the first takes on this result, so take this with a grain of salt, but the US markets did not respond to this news positively. Stocks were down at the time of this writing, and analysts were coming on TV and social media to criticize the Fed for being too harsh with its rate raises and for exposing the US economy to a greater chance of a recession in 2023. This result basically guarantees that the BSP will raise our rates by 50 basis points later today. It’s also another bit of short/medium-term bad news for REITs, as it signals that lower-risk investments like bonds and treasuries will carry higher yields going forward, and that REIT share prices will need to fall somewhat to keep REIT yields competitive.
Eagle Cement [EAGLE 17.0 suspended] [link] provided notice that San Miguel [SMC 94.0 0.8%] had completed its tender offer of EAGLE shares. The shares were sold to SMC yesterday through a special block trade facilitated by the PSE. The completion of the tender offer leaves SMC with 99.9581% of EAGLE’s outstanding shares, and leaves EAGLE with a public float of just 0.0419%.
MB Quick Take: That’s game! This was basically the final “real” step in the process of SMC’s takeover of EAGLE. The original buy-out was for control of the company, and this was just to scoop up all the shares from minority holders (at the same price) who didn’t have the benefit of being invited to the negotiating table. EAGLE shares were already suspended, but since the public float is so small and SMC has no plans to sell additional EAGLE shares to the public, the stock will now enter into a delisting process to be removed from the PSE.
DoubleDragon [DD 6.9 0.4%] [link] board approves process to raise US $125 million in venture capital equity for Hotel101 Global, DD’s Singapore-registered subsidiary. Hotel101 Global will hold all overseas investments of Injap Sia’s condotel brand. This Series A and Series B equity raise could begin as early as next month, and is likely a step toward a foreign-based IPO for the Hotel101 Global entity in the future. Mr. Sia has been previously quoted as saying that he’d like to conduct a Hotel101 Global IPO by 2025.
MB Quick Take: Don’t get too distracted by the “Series A” and “Series B” talk; the takeaway here is that DD is on the hunt for some outside capital to finance the build-out of this ambitious project. The reason I say to ignore the “series” talk is that this $125 million raise is way bigger than what you’d normally expect to see when talking about a venture capital equity raise. Basically, it sounds like DD is going to find a first investor (or syndicate of investors) to come in at a stepped-up valuation for Hotel101 Global, and then find a second investor (or syndicate) to come in at an even higher valuation than the first group. This will demonstrate valuation growth, and Hotel101 Global (and DD) can use this as the basis for an even higher valuation as part of some future IPO process.
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Merkado Barkada's opinions are provided for informational purposes only, and should not be considered a recommendation to buy or sell any particular stock. These daily articles are not updated with new information, so each investor must do his or her own due diligence before trading, as the facts and figures in each particular article may have changed.
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