Taking Stock - Prosus to acquire Stack Overflow for $1.8bn

In today's taking stock we discuss, Prosus has agreed to acquire Stack Overflow, a platform used by software developers, for US$1.8-billion (about R24.4-billion).

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Stocks on the Johannesburg Stock Exchange slumped on Thursday paring most of the gains seen last week as strong US data overshadowed economic recovery sentiments with worries of impending inflation. Rising inflation could force the US Federal Reserve to withdraw support for the economy by increasing rates. Analysts have said that since a majority of the South African stock market is linked to global markets, worries of higher inflation and interest rates push the market down, in line with most global markets. The benchmark All-Share index closed down 1.82% and the blue-chip Top 40 index ended down 1.93%.

 

EUROPEAN MARKET COMMENTARY

European stocks closed mixed Thursday as investors reacted to fresh economic data and looked ahead to a key US jobs report later this week. The pan-European Stoxx 600 index ended the session just below the flatline. Basic resources fell 1.9% to lead losses, with miners Anglo American and Antofagasta dropping 2.9% and 3.6%, respectively. The index was unmoved by the latest euro zone business activity data which rose in May as coronavirus restrictions eased.

 

US MARKET COMMENTARY

Cyclical stocks lifted the Dow Jones Industrial Average off its low on Thursday to close the session near the flatline, while better-than-expected labor market data helped support sentiment. Merck and Dow Inc. were the two best performers in the 30-stock benchmark, both rising more than 2%. Consumer staples and utilities were the biggest gainers among 11 S&P 500 sectors, while consumer discretionary and tech weighed on the broader market, falling 1.2% and 0.9%, respectively.

 

ASIAN MARKET COMMENTARY.

Shares in Asia-Pacific slipped in morning trade today, with technology shares regionally taking a hit. Hong Kong-listed shares of Alibaba fell 0.95% in today. The losses came despite Alibaba-affiliate Ant Group receiving approval to operate a consumer finance company. That marked a major positive development for Ant in the forced restructuring of its business months after its highly anticipated debut was abruptly shelved.

 

CURRENCY MARKET COMMENTARY

The rand weakened on Thursday, stepping back from a more than two-year peak hit earlier in the session, as the dollar rose after stronger-than-expected US private payrolls data that suggested an improving labour market. At the close, the rand was 0.84% softer as it traded around R13.64 to the dollar. Gold prices languished near two-week lows this morning and looked set for their worst week in three months after robust US economic data boosted the dollar and bond yields, ahead of much awaited May non-farm payroll numbers.

 

COMMODITIES MARKET COMMENTARY

Gold prices languished near two-week lows this morning and looked set for their worst week in three months after robust US economic data boosted the dollar and bond yields, ahead of much awaited May non-farm payroll numbers. Oil prices dropped today as concerns about the patchy roll-out of anti-coronavirus vaccinations around the globe tempered optimism earlier in the week that demand for fuels was recovering from the depths of the pandemic.

LOCAL COMPANIES

Prosus to acquire Stack Overflow for $1.8bn

Naspers-controlled Internet investment firm Prosus has agreed to acquire Stack Overflow, a platform used by software developers, for US$1.8-billion (about R24.4-billion). According to Prosus, Stack Overflow, which was founded in 2008, has a global developer and technologist community using its platform. It serves more than 100 million people every month. “Stack Overflow has deep engagement within its community and is an invaluable tool for tech-focused collaboration and learning,” the group said in a statement. “Over 85% of its learning-focused community visits the platform every week to access more than 52 million questions and answers.” There is a new question posted on Stack Overflow every 14 seconds, and developers and technologists visiting the platform have been helped over 50 billion times since its inception. “With expertise in scaling communities in high-growth markets globally, Prosus can help accelerate Stack Overflow’s growth ambitions, with a particular focus on reaching a wider international community, while also further scaling the company’s Teams product to position Stack Overflow at the centre of product and technology development within major enterprises globally,” Prosus said.

 

Latest Steinhoff court action could improve payout to shareholders

Another day in court and another grenade lobbed into Steinhoff’s carefully structured plan to carve up the group’s limited cash and near-cash resources among seemingly unlimited creditor claims. The latest court action, which overlaps the unexpected liquidation application brought by the former Tekkie Town owners, challenges the extremely favourable, and so far unchallenged, position enjoyed by Steinhoff’s financial creditors. At stake is billions of euros of bonds ringfenced for the financial creditors. A reduction in this payment could free up tens of billions of rands of funds, which could be used to improve the proposed payout to shareholders. The latest court action, brought by Trevo Capital and Hamilton BV, was adjourned last week by the Western Cape High Court and is scheduled to resume on Monday. Trevo and Hamilton, who are acting on behalf of thousands of Steinhoff shareholders, contend the necessary test for solvency and liquidity was not undertaken by the Steinhoff board before it signed off on guarantees for the benefit of the financial creditors both before the fraud at Steinhoff was revealed and then again as part of the debt restructuring in 2019. The 2019 restructuring provides for the financial creditors to be paid 100c in the euro and receive 10% compounded per annum interest until full repayment is made. After the December 2017 revelations of accounting irregularities and the consequent collapse of the Steinhoff share price the holders of hundreds of millions of bonds, due to mature in 2021 and 2022, called up a guarantee that Steinhoff had provided in 2014. During 2018 and much of 2019 Steinhoff stitched together a new agreement with financial creditors who had bought up the bonds from various institutions that had rushed to sell them, at heavily discounted prices, in the aftermath of the December 2017 revelations.

INTERNATIONAL COMPANIES

Tesla shares drop on report of steep May sales decline in China

Tesla shares dropped more than 5% Thursday after a report said the company’s vehicle orders in China steeply declined last month. The Information, citing a single source familiar with the data, wrote that Tesla’s “monthly net orders in China dropped to about 9,800 in May from more than 18,000 in April.” CNBC has not corroborated that report. Tesla’s Shanghai factory is supposed to have the capacity to make around 500,000 electric cars a year for deliveries in China and exports to other parts of Asia and Europe. Elon Musk’s electric vehicle company has been grappling with recalls and safety investigations in China. It is also dealing with a public relations backlash there following some high-profile vehicle crashes, price changes and quality complaints from Chinese customers. China represented last year the second-largest electric vehicle market in the world, according to IEA research. Tesla’s near-term growth hinges largely on its ability to make and sell cars successfully in China. Chinese Tesla rival Nio saw deliveries slide in May as a global semiconductor shortage hit its business. But another competitor, Xpeng, said it delivered 5,686 cars in May representing a 483% year-on-year rise and a 10% increase from the previous month. Tesla shares are down about 15% year-to-date, and down more than 35% from their intraday high on Jan. 29.

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Media, Sasfin Wealth

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