WeWork Nightmare Continues With Bailout Sought
JPMorgan (NYSE:JPM) and Softbank (OTCMKTS:SFTBY) are reportedly in a bidding war to bailout failed office space rental company WeWork. The board of the nearly defunct group will be meeting this week to weigh emergency funding options which include a possible takeover by SoftBank, slashing the company’s valuation to $8 billion. Softbank has already offered $5 billion to the company, plus another $1.5 billion in an accelerated equity investment it was planning to make next year. JPMorgan will probably be submitting a competing loan offer but one that is expected to be more expensive and complicated. Softbank’s original valuation back in January was $47 billion, so we’re talking about a total of about one sixth of that and it’s still 2019. If the company falls, there could end up being a fire sale of commercial real estate in London, just prior to what may, eventually, become Brexit, somehow. How this affects the European banking system in the current environment, nobody knows, but we may soon find out just how many mortgage-backed securities are about to crash in Europe if WeWork folds and has to liquidate.
UBS Profit Drop, Extremely Low Interest Rates Weigh
Speaking of a weak European banking system, The record breaking low interest rate environment that has persisted for over 10 years is taking its toll on UBS Group (NYSE:UBS). The drop was better than that 22% median drop expected by analyst consensus, but there doesn’t seem to be a way out of the current interest rate environment unless inflation forces rates higher in the face of the current deluge of new money printing. That prospect could be even more bearish for the bank and European bank stocks in particular, all of which have been skirting all time lows last reach at the tail end of the last financial crisis. The long and short of it is that the European banking system appears extremely weak and fragile and any small tremor could upset the whole apple cart. The lower rates go in order to keep trying to stimulate the global economy, the worse situation these banks could find themselves in, as they try to shield depositors from the effects of negative interest rates.
Amazon Earnings This Week
Amazon (NASDAQ:AMZN) earnings are 2 days away and consensus is for about a 20% fall in net income despite strong growth for the Amazon Web Services segment. Shares ended trading yesterday at their highs though volume was about 33% lower than average, indicating that perhaps traders are waiting for earnings news to shuffle positions in one of the world’s most influential stocks.
Though the specifics of Amazon’s earnings could have implications for other companies as well, particularly streaming companies like Netflix (NASDAQ:NFLX) now benefiting from the wave of cord cutting that has been gathering pace. Amazon’s own line of streaming devices is fast becoming part of the company’s bestsellers, and in particular the Amazon FireStick has topped that list on and off for months. It allows the user to use authorized streaming services on any screen that the device can be plugged into. The issue is that the FireStick is so popular that there are widening circles of people who jailbreak the FireStick, which allows the side-loading of apps not in the Amazon Appstore. This could potentially eat into streaming revenues of other companies, though it is unclear what the effect has been so far, of if it has even been noticeable.
Meanwhile, Amazon is also being scrutinized for the regular sale of expired food. Plus, the prospect of a Bernie Sanders or Elizabeth Warren presidency, two politicians who are deadest against Amazon for being too big, among other things, has the company a bit nervous.
Star Wars Hype Has Disney In Spotlight
Disney (NYSE:DIS) has been range-bound since April but still very near all time highs, as the final trailer for the final (maybe) Star Wars film The Rise of Skywalker hit the airwaves, or the streaming waves, or whatever waves people use these days, on Monday Night Football last night. It premiers in theaters on December 20th and tickets are on sale now, for those who don’t think they can brave the lines to get in on opening night and who haven’t been disappointed by every Star Wars movie since the turn of the millennium. Disney earnings are due on November 7.