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Today's big stories

Fresh data showed November was the busiest month of the year for company acquisitions
The back-in-fashion way companies are listing on the stock market might be a minefield for investors – Read Now
UK retailer Debenhams announced it’s closing down

1.

Blacquisition Friday

What’s Going On Here?

Fresh data on Tuesday showed there were more takeover deals in November than in any other month this year – but wait, there’s more!

What Does This Mean?

After a spring in which everything came grinding to a standstill, dealmaking has bounced back with a vengeance. Companies across the world have already announced $760 billion worth of acquisitions this quarter alone – the most so far for the period since 2016 (tweet this).

There are a few reasons for all that activity. Some companies might be trying to snag a struggling business while it’s going cheap, while others – like European banks – might want to bolster their operations ahead of the pandemic-driven downturn. Or it might have nothing to do with coronavirus, and the company might just be sticking to its strategy of buying knowledge and skills they don’t have in house. That’s arguably what Salesforce and Facebook – which announced it was buying customer relationship management firm Kustomer on Tuesday – are doing.

Why Should I Care?

For markets: What goes up…
Acquisitions tend to cause both companies’ share prices to shift significantly, but usually in opposite directions. The target generally sees its stock rise, bringing it more in line with the offer on the table. But the buyer’s share price tends to fall, reflecting the extra risk the company’s taking on – either because investors think it could be paying over the odds, or because it’ll somehow have to successfully integrate the business with its own.

The bigger picture: CEOs get bored too.
Some economists have another theory about all these deals: company bosses might’ve had more time on their hands to come up with acquisition strategies during lockdown. Of course, that also means they might be trying to outdo each other with bigger and bigger deals. But that’s not necessarily the way to go, says McKinsey: the consultant has found that lots of smaller acquisitions over time – rather than one big bonanza – are the ones that add the most value.

You might also like: Why Facebook needs to buy companies to survive.

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2. Analyst Take

The SPACs Craze Is Getting Out Of Hand

What’s Going On Here?

There was even more investment activity involving special-purpose acquisition companies (SPACs) – a.k.a. blank check companies – last week. That brings the amount they’ve raised this year to $41 billion.

But according to analysis from Renaissance Capital, they might not be everything they’re cracked up to be.

The investment bank found that shares of 89 SPACS made a -19% return on average – with only 26 SPACs’ returns in positive territory.

And that’s the rub: investors have no previous operations or financial data to go on, which means they have to assess a SPAC based on their management team’s track record.

That’s a problematic job even for the professionals, and something we’ve taken a closer look at in today’s Insight: tune in to hear if this SPACs craze is really worth all the fuss.

Get the full Insight here

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3.

Dept Collection

What’s Going On Here?

On Tuesday, one of UK’s best-known department store retailers Debenhams announced that it’s run out of money and is shutting up shop.

What Does This Mean?

Debenhams’ collapse came the day after British retail empire Arcadia – which owns Topshop, Miss Selfridge, and more – announced it was going under. Between them, they’ll take more than 25,000 jobs down with them. Slow sales during the pandemic proved to be the final blow for both companies, but they were under a lot of pressure even before coronavirus broke out: their physical stores have been costing them too much money, and they’ve been sluggish to adapt to a British customer who – lockdown or no lockdown – has been spending more and more of their hard-earned quid online.

Why Should I Care?

For markets: Hang on in there.
There have been some high-profile retail casualties in the US too, with J.C. Penney and J. Crew both filing for bankruptcy earlier in the year. But for those that survive, there might be better days ahead: investors are betting that typical spending habits will return when vaccines arrive. That might be why shares of some bruised retailers – like department store Macy’s – have been climbing higher since news of Moderna and Pfizer’s successful trials broke.

The bigger picture: Days are just a concept.
Ecommerce has made the “Friday” in Black Friday more and more flexible over the last few years, and the pandemic might’ve just bent it to breaking point. Retailers – which make 20% of their annual sales in November and December – have been spreading out their in-store deals over a longer period of time this year to limit holiday shopping crowds. So while Black Friday sales numbers are usually a good indicator of the retail sector’s fourth-quarter fortunes, investors will have to wait a bit longer for clues this time around.

You might also like: How Amazon ruined holiday shopping for the world.

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💬 Quote of the day

“Machines take me by surprise with great frequency.”

– Alan Turing (an English mathematician, computer scientist, and philosopher)

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🤔 Q&A · RE: Popularity Contest

“What does it mean if an investor is ‘valuation agnostic’?”

– Tom

“Put simply, Tom, a valuation agnostic investor doesn’t take into account valuation metrics – like a firm’s share price compared to its predicted earnings per share – when evaluating a company, meaning they’re equally happy to buy its stock whether it looks cheap or expensive. That’s because they reckon buying into a company with strong future prospects can be a good idea no matter its share price – which, after all, tends to rise in line with earnings growth in the long run, even if it fluctuates in the shorter term. It’s an investing approach that may have been popularized by a quote taken from a letter Warren Buffett wrote to his company’s shareholders: ‘It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.’”

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📚 What we're reading

Productivity is destructive (Pocket)
What happens when you hold your breath? (Outside Online)
You don’t get to choose your restaurant family (Grub Street)

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Finimize - 😨 SPACs aren't worth the fuss

Today's big stories

Blacquisition Friday

What’s Going On Here?

What Does This Mean?

Why Should I Care?

The SPACs Craze Is Getting Out Of Hand

👋 Introducing Flatfile Concierge

Dept Collection

What’s Going On Here?

What Does This Mean?

Why Should I Care?

🤯 All your assets, all in one place

🎉 How to leave a lasting legacy

Older messages

😭 Stocks ruin Christmas

🎄 Best Buy brings tidings of despair

🎉 Meet our Next Gen Investor Summit speakers

👋 Meet the Finimize analysts

📈 Ackman's 9,500% strategy

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