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Today's big stories

IBM revealed a major restructuring
Recent analysis suggests you might want to give this year’s biggest investment phenomenon a miss – Read Now
Morgan Stanley announced a $7 billion acquisition

1/3

Fashion Week

What’s Going On Here?

Tech trendsetter IBM showed off a whole new look on Thursday, announcing plans to split itself into two separate companies.

What Does This Mean?

By the end of next year, IBM will spin off its business that manages the technology infrastructure of some of the world’s biggest companies – a market worth $500 billion – into a new public company. It'll instead focus on the $1 trillion market opportunity in cloud computing and artificial intelligence (AI), via services like Watson (a Jeopardy-winning AI) and Red Hat (open-source software that cost IBM $34 billion in 2018). The company’s hoping the separation will set both firms on a path toward improved growth, higher profits, and bigger rewards for each set of investors.

Why Should I Care?

Zooming in: Split personalities.
Investors tend to categorize companies as either high-growth – if they grow earnings quickly – or high-yield – if they’re slower-growing but stable enough to pay dividends. IBM’s firmly in the latter category: it currently has a dividend yield of 5.4% (calculated by dividing IBM’s forecasted dividends over the next year by its share price). But considering its cloud computing segments are high-growth, the company might’ve thought its share price deserved to be higher (and its dividend yield – since the two move inversely – lower). By splitting up, then, it’ll create both a stable dividend-paying business and a higher-octane growth business.

For markets: Happier apart.
It was a sideshow to the main event, but IBM also revealed preliminary third-quarter results that were roughly in line with investors’ expectations. Its stock jumped 4% on Thursday, though chances are it was mostly thanks to the investors who bought in ahead of its upcoming split. That could be an encouraging sign for the US tech titans that might eventually be forced to break up – not to mention for the investors who might end up richer if they are.

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2/3 Premium

SPACs Lack Payback

What’s Going On Here?

“Special-purpose acquisition companies” (SPACs) are all the rage right now, but recent analysis into how much they typically make for investors might surprise you.

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3/3

Over The Moon

What’s Going On Here?

Houston, we have an acquisition: Morgan Stanley announced it’d buy investment management firm Eaton Vance for $7 billion in a bid to take its business into the stratosphere (tweet this).

What Does This Mean?

Eaton Vance has made a name for itself in recent years through highly customizable and tax-efficient investment funds, to the benefit of its mostly American customers. And like almost all investment management firms, it earns a proportion of the cash it looks after as fees.

It seems to have done enough to impress Morgan Stanley, whose purchase will be split between cash and stock. Investors will receive $28.25 and exactly 0.5833 shares of Morgan Stanley for each share of Eaton Vance they own, totaling $56.50. That’s 38% more than Eaton’s shares were worth on Wednesday.

Why Should I Care?

The bigger picture: Slow and steady.
“Wealth management” – looking after the money of well-to-do individuals – is Morgan Stanley’s smallest but most profitable business segment. So adding Eaton Vance to the mix will give it – and its related investment management business – a boost. Both segments tend to be stable in both good and bad times, especially compared to, say, trading, which has super-high highs and depressingly low lows. Some investors prefer that predictability, which might be why one of Barclays’ investors has been trying to push the British bank toward more stable savings and loans businesses – with no luck.

For markets: The art of the deal.
Morgan Stanley’s CEO has a long-standing reputation as a dealmaker, and he’s expanded his portfolio recently by buying Canadian fintech Solium Capital and online brokerage E-Trade. Between the former’s business in managing employee stock plans and the latter’s catering to a new wave of amateur traders, Morgan Stanley might be building a full-service platform customers would be happy to pay for – a rarity these days.

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💬 Quote of the day

“When in doubt, tell the truth.”

– Mark Twain (an American writer, humorist, entrepreneur, publisher, and lecturer)

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🎓 Class is officially in session

Today’s event, Investing 101, isn’t your typical how-to, but we’re not exactly your typical teacher. We’re more like that cool, unconventional teacher you see in the movies. So we’ll run you through the ins and outs of investing, sure, but you can bet we’ll take off our tie and sit on a wrong-way-round chair to do it.

📚 Investing 101: Back to Basics: 3pm UK Time, October 9th
👫 Money Mistakes To Avoid In Your 30s: 1pm UK Time, October 12th
💰 Diversify Your Portfolio With Cryptocurrency: 12pm New York Time, October 15th
🙌 A Beginner’s Guide to Investing: 1pm New York Time, October 16th

😭 In case you missed it

🏦 It’s not just American bank stocks looking cheap
European bank stocks might be a bargain too.

🎉 One obscure initial public offering is causing a stir
Poland’s answer to Amazon is going public.

🥈 Gold’s stellar run might’ve come to an end
Finimize analyst Andrew thinks gold’s gains are misleading.

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✊ Vive la crowdfunding revolution
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📚 What we're reading

“Aggressive napping” isn’t as intimidating as it sounds (Lifehacker)
New parents are living the Rugrats life (Mel)
Fat Bear Week crowns its champion (Metro)

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Finimize - 😱 IBM is no more

Today's big stories

Fashion Week

What’s Going On Here?

What Does This Mean?

Why Should I Care?

SPACs Lack Payback

🥕 Eating well just got easier

Over The Moon

What’s Going On Here?

What Does This Mean?

Why Should I Care?

🎓 Class is officially in session

😭 In case you missed it

Older messages

📉 30 reasons to ditch US stocks

🎬 Cineworld calls cut

🥤 Pepsi smashes Coke

📉 Last quarter’s worst stocks

💨 Uber’s high-speed deal

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