Transcript Investment Club - Sites at Lafayette

Investment Club
Friday, September 30th
MARKET UPDATE
Colin Evanko, Mac Erb, Katie Gonick, Marie
Bucklin
Markets
Dow Jones
S&P 500
● Closed at 18143.45
Closed at 2153.13
● Down 1.07% yesterday
Down .93% yesterday
● Down 1.35% past 5 days
Down 1.2% past 5 days
Company Updates
Wells Fargo update -- “Congressional Grilling”
SABMiller and AB InBev Merger
Microsoft acquisition of LinkedIn?
Oil: OPEC deal
Proposal of production cuts to
increase oil prices
Limit output from 33.2 million barrels a day
to 32- 32.5 million barrels a day
This is a 200,000 to 700,000 cut in
productions of barrels per day
Iraq against production cut numbers
threatens the production cuts
Crude Oil per barrel prices closed at
$47.20 per barrel
Increased 1.42% yesterday
Global Aspects: Japan and Eurozone
Japan: Deflation
Attempted shift signals from central bank have not made a difference
“Inflation would happen because people expect it to occur”
New strategy: hold down credit costs
Government stimulus package?
Eurozone: Immune to Stimuli
Inflation remains at zero
Economy has been strong against Brexit
Currencies
Deutsche Bank
Dollar rises 0.3% (WSJ)
2016 PRESIDENTIAL ELECTION
Jesse Glaser and Natalie Soler
TRUMP VS. CLINTON:
ECONOMIC POLICY
DONALD J. TRUMP
Republican Candidate for President
“
Winning the
Global
Competition
An America First Economic Plan;
donaldjtrump.org
Reshaping America’s Tax System
▷Only 3 tax brackets
▷Limit corporate tax to 15%
▷No more estate tax
▷Mostly benefit rich
Trickle-down
2.7 Trillion Dollars
That’s a lot of money
10 years
And a lot of years
Trade
▷Severely taxing Chinese goods,
“cheaters”
Would just shift production to
Vietnam/Mexico
▷Criticizes NAFTA
Appointing people to “win for America”
▷Send US into recession/trade war
▷Sectors projected to be hurt:
Nonspecified retail trade, wholesale,
hospitals, restaurants
Jobs/Economic Recovery
▷“Jobs are leaving America”
False: +15M jobs in last 7 years, inequality
has declined for first time in 35 years
▷Will recovery end?
Preying on fear
Reality: longest recovery in history
Trade policies not pro-growth
Hillary Clinton
Democratic Presidential Candidate
Economic Policies
Taxes
Climate Change
Healthcare
Progressive income tax bracket,
ranging from 10% to 43.6% ($5
million and above)
Reintroduce Federal Estate tax
Half a billion solar panels installed
by the end of her term
$60 billion Clean Energy
Challenge - cut carbon emissions
Promote and expand Obamacare
Defend access to reproductive
healthcare
Wall Street
Leave
Campaign Finance
Impose a risk fee based on size and
risk of contributing to another
crisis
Impose a tax on HFT
12 weeks of paid family and
medical leave
Overturn Citizens United
10,400,000*
Jobs and Wages
Emphasis on Infrastructure (government sponsored*)
▷ Economy on track already to create 7.2 of those million
Only 3.2 million would be new
▷ Clean energy superpower
▷ Oppose the TPP → bring back jobs to America
$498,000,000,000*
Taxes and Revenue
Amount of tax revenue over 10 years*
▷ $381 B from income, $11 B from corporate, $106
from Estate
▷ Economy on track already to create 7.2 of those million
Only 3.2 million would be new
▷ Introduce a 43.6% tax bracket for income $5 million and
above
▷ Reduce GDP by 1% in the long-run
▷ Reintroduce Estate Tax back to 2009 level of 45%
The IPO Process and the Saudi Aramco
IPO
Rand Lewis, Heman Matharu
What is an IPO?
Initial Public Offering
First time a previously private company offers shares to the general public
Public receives ownership position in the company in the form of equity capital
Most companies only issue 20-30% of its shares on the public market during an
IPO
Pros and Cons of an IPO:
Pros:
Raise capital - expansion efforts and to pay back debt
Exit for existing investors - PE/VC backed
Obtain an acquisition currency
Reward Employees
Marketing the business
Cons:
Giving up control/ownership/ subject to regulatory scrutiny - answer shareholders with quarterly earnings reports
No need for cash/exit
Compliance Costs - higher for public companies because of Sarbanes-Oxley
Step 1: Decision and Pitch
Company decides to go public, board and major shareholder approval needed
Relationship banks get notice, other banks invited to pitch for spot on deal
Firm going public looks at relationship, IPO track record, reputation
Joint Book Runners and Co-Managers (1-2: at least 10), ~12 banks per deal
How Banks get mandated:
Relationship banks grow relationships: inform clients of new ideas/acquisition
targets, market updates, catch-up meetings, always on call
Banks makes sure to be aware of deal and to be included on initial proceedings
Invited to Pitch? Pitch book has to be perfect (no grammatical errors!) IPO pitch
could involve 100+ page presentation, company has to like senior management
Pitch book includes market overview, bank qualifications, IPO valuation/strategy
for execution etc.
Chosen for role? Role given will directly impact fees
Step 2:
Kickoff meeting: everyone involved in IPO, discuss registration forms and timeline
Ongoing due diligence: Customer calls, industry/market due diligence, legal and IP
due diligence, financial and tax due diligence
Diligence call with senior management: Are you planning on
increasing/decreasing this expenditure? What are key risks for the company going
forward? Are you considering an acquisition? Etc.
Step 3: The S-1 Filing
S-1 Registration Statement: Public learns of IPO, financial statements, key data,
company overview and risks, overview of IPO - how many shares are being offered
30 day wait for SEC approval/comments
No future projections released
Step 4:
S-1 revisions made
Pre-selling offering: Pre-IPO analyst meeting, start talking with investors ( issue a
“red herring”), just about the story no info about the deal
Pre-marketing ( 2 weeks): research analysts and institutional investors (thoughts
on deal), initial price range set by banks after consulting with client (critical)
Banks list best investors based on: brokerage commissions, interest and track
record, potential brokerage fees (equity syndicate)
S-1 amended with adjusted price range based on investor feedback
Step 5:
Roadshow (1-2 weeks): Bankers and company management travel to meet
investors; orders are taken: how many shares and what will you pay?
Bankers brag on demand from investors (never want to be the bank who got the
least investors), price range further revised
Pricing: Maximum Price desired for banks, shareholders and company
management, need to be careful
Offering adjusted if necessary
Step 6:
The Pricing Meeting: Investor demand, deal over or under subscribed, price at low
or high end of range?
Allocation: Syndicate team will allocate shares to investors (favor given to top
investors)
Trading: The general public can finally buy and sell shares
IPO fees typically range from 3-7% depending on size of company, risk/workload
for bank, # of banks on deal, track record
As the deal gets larger, the fees drop
Saudi Aramco IPO:
Oil Price crisis
Saudi Aramco currently the world’s most valuable company - $2T (~4x bigger than
Apple and Alphabet)
Planning to sell 5% to public to create “war chest”, prepare for country’s posthydrocarbon age
Profits are shrouded in secrecy
5% predicted to raise ~$100 billion, largest IPO ever (5x bigger than Alibaba)
Being called “Wall Street’s Biggest Event Ever”
Unique deal:
Valuation and current owners
Size
Situation - proceeds will bulk up sovereign wealth fund to help diversify economy, scrutiny from regulators
Banks: As of right now J.P. Morgan, HSBC and Moelis and Company are being considered for top spots;
there will be many more
Company accounts for 90% of government revenue
Considering multiple exchanges
Recent Developments: OPEC!!!
Saudi Aramco IPO Facts to consider:
$2-3 Trillion valuation
Produces 1-8 barrels of oil around the world (12% of global production)
261 billion barrels of oil reserves
U.S. buys 1 million barrels a day from Aramco
93% tax to government
Can pump a barrel of oil for less than $10
Background
• Originally an American based oil company, it was nationalized by the Saudi
government in 1980
• Produces petroleum, natural gas and other petrochemicals
• Deals with exploration, production, refining, distribution and marketing
• Activities are monitored by the Saudi Arabian government
• 65,000 Employees – large proportion are geophysicists and geologists
Financial Data
• As a state owned company, a lot of the data is unavailable
• $378 billion annual revenue (2014)
• Biggest producer of oil in the world – 12% of the world’s production
• Produces 10.3 million barrels of crude oil per day (2016)
• 261 billion barrels in oil reserve – 2nd only to Venezuela with 297 billion
Continued
• On average, it costs them $9.90 to pump 1 barrel of oil
• The US buys 1MM bpd from Aramco, China buys 1.4 MM bpd
• 75% of its oil is sold overseas, while the remaining is sold domestically at a
discount
• Refineries – 4 domestic, 6 joint venture domestic, and 5 international joint ventures
in the US, China, Japan and Korea
Average Cost to Pump 1 Barrel of Oil
INTERVIEW QUESTION
Jason Shavel
INTL FCSTONE / THOMSON REUTERS
Kat Stevens and Maggie Evans
CAREER OPPORTUNITIES:
• Sales and Trading Internships Summer 2017 (juniors)
• Fixed-Income Institutional Sales (full-time)
Deadline is October 2 to apply
Apply on Career Spot
(1) a cover letter
(2) résumé
(3) college transcript.
INTL FC Stone will be on campus 10/12 to conduct 1st round interviews
Contact Lauren Pisauro before interview for extra prep
CAREER OPPORTUNITIES CONT:
• Go To Market Associate (full-time 18 month rotational
program)
Working with some of the largest financial companies in the world and help them
Apply on the Thomson Reuters website under careers
obtain the data and information
1) Resume
2) Cover letter
Contact [email protected] for information about the company or
this opportunity