Finance This Week — Private Equity goes public, Netflix growth slows & more…
Monday 19th July 2021 — Friday 23rd July 2021
1. Private Equity firm Bridgepoint goes public
IPO date: 21st July 2021
Stock market debut: London Stock Exchange
Ticker symbol: BPT
Offer price: 350 pence per share
Shares offered: 85 million new shares
Bridgepoint was founded in 2000 after a management buyout from NatWest Equity Partners and has assets under management of €27.4 billion. The group has 43 partners, more than 300 employees and over 170 investment professionals.
Shares surged 26% as the firm went public, opening at 440 pence per share. This took the firm’s market capitalisation to £3.6 billion. Bridgepoint raised £300 million from its IPO. The funds raised will aid plans for growth into property and infrastructure as well as growth through acquisitions.
An IPO is an unusual step for a private equity firm and it is the first time in almost in nearly 30 years a private equity firm has gone public. Private equity is an illiquid, long-term asset class and thus exposing private equity to a highly liquid stock market that is subject to volatile price movements could present challenges in the future. Moreover, according to Bloomberg, Bridgepoint is not the only private equity company that has been looking at going public. Antin Infrastructure Partners is considering a listing and TPG is weighing a potential IPO or merger. Going public allows PE firms to have access to permanent capital, which could be one reason to explain why Bridgepoint has gone public and made use of favourable market conditions.
2. Netflix growths slows
On Tuesday, Netflix announced that it had missed growth forecasts and seen a slowdown in the number of its subscribers. Overall, the company added 1.54 million new subscribers, below the 1.75 million analysts had expected and a fraction of the 10 million it added in the second quarter a year earlier. In the US and Canada, Netflix lost about 430,000 paid memberships in the second quarter.
With in-person entertainment options open once again, analysts expect people will spend less time with Netflix than earlier in the pandemic. Restrictions have also delayed the production of movies and TV shows that typically fuel Netflix’s growth.
Netflix is also seeing its number of competitors grow and its competitors strengthen their market power. Netflix is facing significant competition from streaming services including Disney, Amazon Prime and Apple. This has led to a slowdown in the firm’s growth. Netflix has said they will move into gaming which will be available to its subscribers to drive further growth. This could also present the firm with an edge over its competitors.
3. Crypto market update
Yellen signals clampdown on crypto — Monday
On Monday, US Treasury secretary, Janet Yellen, told regulators the US government must move quickly to establish a regulatory framework for stable coins, a rapidly growing class of digital currencies.
In the meeting, participants discussed the rapid growth of stablecoins, potential uses of stable coins as a means of payment, and potential risks to end-users, the financial system, and national security: “The Secretary underscored the need to act quickly to ensure there is an appropriate US regulatory framework in place.” New regulations are expected to be issued in the coming months.
Bitcoin on the rise again after dropping below $30,000 — Tuesday/Wednesday
On Wednesday morning, Bitcoin rose 6% to approximately $31,000. This came after Elon Musk said that Tesla was ‘likely to resume accepting Bitcoin’ and that SpaceX also holds Bitcoin.
This rally came one day after the cryptocurrency fell below the key level of $30,000 to $29,000. The fall coincided with calls from the US government to tighten controls on cryptocurrencies.
4. Equities update
Stocks drop to low as Delta variant strengthens its grip across the World — Monday
Covid cases in the US have spiked and cases are reaching 26,000 cases per day as the Delta variant has begun to strike investors with fear. The rise in cases led to US stock markets worst drop since October. The Dow Jones dropped 2.1% and S&P 500 fell 1.6%. The Nasdaq Composite also dipped 1.1%.
Rise in unemployment claims leads to unsteady stocks — Thursday
Initial claims for state unemployment benefits increased 51,000 to 419,000 for the week ended July 17, the highest level since mid-May. Economists polled by Reuters had forecast 350,000 applications for the latest week. Many of the claims were in states which have experienced a resurgence of the virus including Kentucky, Michigan, Missouri and Texas.
Claims have declined from a record 6.149 million in early April 2020, though they remain above the 200,000–250,000 range that is seen as consistent with healthy labour market conditions. The S&P 500 and Dow Jones industrial average fell further after the announcement from record highs set on Tuesday, dropping 0.1% and 0.2% respectively.