Why the Cantor SPAC Rumble Merger is Getting So Much Attention

 

After a mid-year lull in SPAC activity, the last quarter of 2021 has brought a lot of attention to the sector. The most recent deSPAC buzz involves CFVI which is a Cantor Fitzgerald offering. It recently announced a proposed merger with YouTube competitor Rumble. The enthusiasm on this deal is heightened quite a bit in that Rumble is said to have a partnership with another SPAC, (DWAC),  which is trading at over four times its IPO price.

 

Is Rumble a Unicorn?

Shares of special purpose acquisition company CF Acquisition Corp VI (CFVI) have gotten a great deal of attention today after reports it will merge with video platform Rumble. Rumble is a Canadian company headquartered in Toronto. It was founded in 2013 by Chris Pavlovski, a technology entrepreneur. For its first seven years, Rumble’s video content consisted primarily of puppies, mischievous kittens, and cute children. In August 2020, California Congressman Devin Nunes accused YouTube of having too strict a policy on censoring his YouTube channel and began posting his videos on unrestricted Rumble. Other prominent conservatives, such as Dinesh D’Souza, Sean Hannity, and Ohio Representative Jim Jordan followed. The platform began experiencing significant growth in monthly users. Since July 2020 users rose from 1.6 million to 31.9 million by the end of the first quarter of 2021.

The video platform Rumble, popular because it refrains from banning and shadow banning, has a partnership with Trump
Media which is expected to merge with Digital World Acquisition Corp., another SPAC awaiting its merger.  Trump Media owns social media website Truth
Social. Some of the added enthusiasm and buzz surrounding this announced plan to merge is because the Trump social media platform quadrupled the value of the SPAC it plans to merge with.  Trump Media uses Rumble for distribution on a non-exclusive basis.

The former President whose Tweets and other social media postings drew a large following has been off social media as both Facebook and Twitter closed his accounts and banned his use of their platforms earlier this year.  Since his failed re-election bid, the former President has been exploring ways to be heard and to provide other voices with uncensored open communication.

Take-Away

The growing awareness of Rumble as an alternative to YouTube, which is synonymous with video channels, makes this an interesting SPAC merger. It has attention being paid to it from far beyond the typical investor arena.

Paul Hoffman

Managing Editor, Channelchek

 

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Sources:

https://rumble.com/vo90vr-trump-card-played-trumps-top-secret-military-power-behind-the-scenes-milita.html

https://www.thestreet.com/boardroomalpha/spac/spac-wrap-cfvi-dmyq

https://en.wikipedia.org/wiki/Rumble_(website)

https://channelchek.vercel.app/aux/(expanded:recent-news/CFVI)

 

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Esports Entertainment Group’s ggCircuit to Install ALPHA at Four Simplicity eSports Locations; Expected To Generate Approximately $1,500,000 in Multi-Year Revenue Esports Entertainment Group announced that its ggCircuit brand will install the ALPHA software solution at four Simplicity Esports and Gaming Company locations in a deal the Company expects will generate approximately $1.5 million in revenue over the next five years Research, News & Market Data on EEG Watch recent presentation from EEG

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When Stocks Like DiDi Delist, What Happens to Shareholders?

 

DiDi Chuxing is a ridesharing giant based in China. It went public through an IPO on June 30th of this year. The offering raised a total of $4.4 billion ($14 per share). On December 2nd, DiDi announced plans to delist its shares from the New York Stock Exchange and prepare for a listing in Hong Kong, this is just five months after the Chinese-based company debuted as a publicly owned corporation. Why might they be suddenly switching gears? How does a company delist? And, what happens to the shareholders of the ADRs?

Switching Gears

DiDi’s delisting from the NYSE to catch a new ride on the Hong Kong Exchange may have resulted from intense pressure from China’s cybersecurity “watchdog.” Just days after their IPO, a probe into Didi (DIDI) was launched in China for the purpose of protecting national security and the public interest. The regulator took the costly step (to DiDi) of suspending all new user registrations on the app in China.

Reports quickly emerged in July that DiDi was looking into going private in order to satisfy Chinese authorities. This never unfolded. In a statement yesterday, the company announced, “After careful study, the company will start the work of delisting from NYSE and initiate preparation for listing in Hong Kong with immediate effect.” The company stock opened 9% lower this morning (December 3).

Shareholders of DiDi ADRs will see their shares convertible into “freely tradable shares” on another stock exchange, said the company. Didi said it would organize a shareholders meeting to vote on the issue.

How Delisting Works

Companies can become involuntarily delisted by the exchange if they fail to maintain certain standards. An example could be not maintaining the value of $1 per share or more. They may voluntarily delist if they find there is a cost-benefit analysis of either going private or moving to another exchange that can benefit either because of the company they keep on the exchange (i.e. tech stocks traditionally prefer Nasdaq) or because the listing requirements better suit their current and ongoing situation. In the case of DiDi, this move appears to remove regulatory hurdles.

What Else?

On Thursday (December 2), the U.S. Securities and Exchange Commission (SEC) finalized rules that would allow it to delist non-US companies that refuse to open their books to the U.S. regulators. China has for years rejected U.S. audits of its firms, citing national security concerns. This adds a new layer of protection for investors in markets overseen by the SEC.

On December 1^st, Bloomberg reported that Beijing is set to ban the loophole that allowed companies like Alibaba and Didi to list in New York in the first place. Whether this adds value to those currently listed, reduces the pace of new listings, or has no impact remains to be seen.

Take-Away

There are a number of reasons a company may delist from a U.S. exchange. One of the least common is adherence to pressure from the company’s country of origin. The American Depository Receipts structure has been in existence since 1927, while the SEC and other countries may tighten their oversight, there are no signs that foreign listings will change very much going forward.

 

Suggested Reading:

Are ADRs Riskier than Stocks?

Publicly Traded Chinese Companies Duty to Shareholders

Are Earnings Important for Young Media Companies?

Esports Investors are Now Better Able to Evaluate Performance Comparisons

 

Sources:

https://ir.didiglobal.com/news-and-events/news/news-details/2021/DiDi-Announces-Recent-Developments/default.aspx

https://www.bloomberg.com/news/articles/2021-12-01/china-plans-to-ban-loophole-used-by-tech-firms-for-foreign-ipos

https://www.sec.gov/investor/alerts/adr-bulletin.pdf

https://www.investopedia.com/articles/small-business/012517/didi-chuxing.asp

https://www.barrons.com/articles/didi-stock-price-delisting-51638525176?mod=hp_LEAD_3

 

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New Uranium Discoveries on Moon Lake South JV CanAlaska Uranium announced joint venture drilling by partner Denison Mines Corp. has intersected uranium mineralization at the Moon Lake South JV project Research, News & Market Data on CanAlaska Watch recent presentation from CanAlaska

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Comtech Telecommunications Corp. Awarded $2.2 Million Contract for 911 Network Maintenance for the U.S. Military Comtech Telecommunications announced that during its first quarter of fiscal 2022, it was awarded a $2.2 million contract to maintain a 911 system deployed across multiple locations for the U.S. military Research, News & Market Data on Comtech Watch recent presentation from Comtech

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	Image Credit: Pixabay (Pexels)

Will the Latest 2021 Stock Retrenchment Be a Variant from Previous Dips?

 

Greed has been rewarded in 2021.

Eight of the last nine market dips have been undone with more buying and higher prices. The ninth, we’re in the midst of right now. This year’s dips have not been huge; buyers came in early before a high percentage of gains had a chance to be erased. Dip-buyers have been rewarded. Does this latest dip represent an opportunity to commit more to the market? Or is it the beginning of a larger fall-off? This is what many investors are deciphering right now. Let’s look at what we know.

 

 

Last week’s holiday-shortened trading saw stocks fall, with the S&P 500 declining 1.89%, the DOW Industrials fell 2.02%, and the Russell 2000 Index which had been the outperformer in November fell off 3.83%.  If 2021 maintains its current pattern, this decline will soon be replaced by higher price levels and new records.

 

 

In the past, money flow from investors into markets often was the result of chasing momentum – buying when stocks are rising, selling when falling. Cash would flow into stocks and equity funds, at times with a frenzy, at a market peak. Conversely, sell-offs were met with further selling until the move exhausted itself. The overall market behavior has been different over the past 18-22 months and it has taken on a pattern worth understanding, especially that which has been happening since the beginning of this year.

 

 

Sell-offs or retrenchments this year have come about largely from Covid 19 related news. Surges in cases, the arrival of the Delta variant, and the most recent sell-off with the Omicron variant. Strong rallies have come from good news, including the expanded roll-out of vaccinations, travel accelerating, and case numbers coming down.

Investors caught on to what is working, causing the market to take on a pattern where it has only been sinking single digits (<10%) before buyers committed more money. With this, the question is whether the news that brought it down in recent days will become an economy (and market) killer. This market mover is once again Covid-19 related. As with the past, there is no level of certainty what havoc a virus or variant of a virus (Omicron) may produce. However, we know more about the overall coronavirus than we did yesterday, last month, and at any time last year. If the past experience is any indicator, the odds are decent that this won’t cause a killer blow to the economy, especially since early reports are that this is not as deadly as earlier strains.

 

Take-Away

The “buy the dip” strategy has paid off this year. For now, investors have been paid by injecting more cash into their positions each time there is a one-week price drop. Interestingly, all of the opportunities have been at higher and higher averages. This time may be different, but there isn’t any obvious reason to believe it will be.

As measured by the S&P 500, Dow Industrials, and Russell Small-Cap index, the market dropped last week. We will soon know whether the trend continues and 9 out of 9 sell-offs quickly recover or if this will become a deviation from the trend.

Suggested Reading:

Is it Wise to Buy on Dips?

Protein Infused Chewing Gum Could Cut Spread of Covid 19 and Variants

Can the Fed Stop Inflation?

Will Small-Cap Stocks Outperform in 2022?

 

Sources:

www.koyfin.com

https://www.thecut.com/2021/11/what-we-know-about-the-omicron-variant-so-far.html

 

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Harte Hanks to Uplist to the Nasdaq Global Market Harte Hanks, Inc. today announced that the Company has met the stringent financial, liquidity and corporate governance listing requirements of the Nasdaq Global Market® (“Nasdaq”), and the Company has been approved for listing on the Nasdaq. Research, News & Market Data on Harte Hanks

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	Image Credit: Federal Reserve (Flickr)

What’s Going on With the Weakening of the Markets?

 

The Consumer Confidence report, ramped-up tapering, the Covid-19 Omicron variant, and debt ceiling issues have all combined to send the stock market and metals markets sharply lower. Investors and traders across many markets seem to be stepping back to assess what all the cross-currents could mean.

Consumer Confidence

U.S. consumers are feeling less confident about their situations than they have since the beginning of the year. The Consumer Conference Board released their November report showing that Consumer Confidence fell 2.1 points to 109.5. Primary drivers for the decrease were concerns about employment and income, rising prices, and to a lesser degree, persistent Covid-19.  

Yellen and Powell Testify

Fed Chair Powell and U.S. Treasury Secretary Yellen testified before the Senate today (November 30). They outlined their thoughts and responded to questions. In their testimony and in response to questions, Janet Yellen spoke of the need to raise the debt ceiling. She implored the Senate to raise the amount of debt permitted by the U.S. government. Yellen explained that failure to deal with the debt limit would “eviscerate” the economic recovery. The U.S. is expected to run out of money to pay its bills by mid-December without Congresses permission to borrow above the current ceiling.

The three major stock market indexes were in the red as the head of the U.S. Treasury and Chairman of the Federal Reserve began to testify. The markets then traded off sharply as the Fed made clear its intent to end the pandemic-era stimulus and indicated the possible need to speed up the process. “At this point, the economy is very strong and inflationary pressures are high, it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases … perhaps a few months sooner,” said Fed Chair Jerome Powell.

Secretary Yellen addressed stablecoins, saying, “I believe that stablecoins can lead to some efficiency in the payments system…,” she later included, “but only if they’re adequately regulated.” The major cryptocurrencies began the day up two or three percent and later traded negative as the testimony shed more light on the Treasury’s intentions. Yellen agreed with Powell that the current economic recovery is strong. But she did have a stern warning for lawmakers. She warned that Congress must take action to address the debt limit by Dec. 15 or the country will not be able to pay its bills. A default on its debts would be the United States’ first in its history and could have a devastating effect on the global economy. “I cannot overstate how critical it is that Congress address this issue,” Yellen said. Putting it more bluntly, Yellen implored, “America must pay its bills on time and in full. If we do not, we will eviscerate our current recovery.”

Omicron was the wild card discussed before the Senate. She said the newly discovered variant could threaten the country’s economic recovery. Also on her list of possible threats were supply shortages and inflation risks.

 

Markets Reaction

With the news of the decline in Consumer Confidence, the unknowns surrounding Omicron, a faster tapering schedule, and even confirmation of more regulation coming for digital currency, the markets sold off. By 3 pm all the major stock indexes were down 1.6% or more, the gold price fell $7.70 or 0.43% an ounce level, Bitcoin dropped $515 or 0.89%, and crude, which has been moving on covid fears was down 4.86%.  Interestingly, despite the Fed’s declining bond purchase amounts, U.S. Treasuries rallied on the news that the Fed would be fighting inflation. The 10 Year U.S. Treasury Note rallied on the news, with its yield dropping to 1.44%.

 

Take-Away

The Fed is not likely to use the word “transitory” when discussing current inflation. Powell made it clear he intends to attack it while the economic recovery is strong. Yellen for her part wants to make sure the U.S. dollar doesn’t lose its standing in the world, which she says would happen if the debt ceiling is not raised soon. Consumers were also heard today, and they are not as confident as they have been since last Winter.

The latest variant of Covid-19 is making news and is just now being understood. Much will depend on the global reaction to this new threat.

Paul Hoffman

Managing Editor, Channelchek

Suggested Reading:

Dip Buying in 2021 Has Consistently Paid-Off, is it Different this Time?

Why Less Gradual Tapering from the Fed is Likely

What the Infrastructure Law Does for Investors

How Much is a Trillion?

 

Sources:

https://www.conference-board.org/data/consumerconfidence.cfm

https://www.prnewswire.com/news-releases/consumer-confidence-declined-in-november-301434044.html

https://www.youtube.com/watch?v=JJxqiyKIEW8

 

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Aurania Provides Update On Drilling & Conference Call Details Aurania Resources announced that drilling successfully intersected the targeted silver-zinc mineralized layer at Tiria-Shimpia in drill hole SH-004 and assays are awaited Research, News & Market Data on Aurania Watch recent presentation from Aurania

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	Image: Fed Governor Lael Brainard and Fed Chair Jerome Powell

Why Less Gradual Tapering from the Fed is Likely

 

Does the re-nomination of current Fed Chair Jay Powell for a second term, and the nomination to elevate Fed Governor Lael Brainard to Vice-Chair indicate a status quo at the Fed? As it relates to fighting inflation, last month Powell said “we can be patient” in raising rates in order to “allow the labor market to heal.” In both Powell’s and Brainard’s acceptance statements, inflation was brought up as a problem – the familiar words “transitory” or “temporary” were non-existent. Instead, tackling inflation was considered a priority for both.

 

The Nominations

The President chose to renominate Jerome Powell for a second four-year term as Federal Reserve Chair yesterday (November 22).  Fed Governor Lael Brainard was nominated to replace Richard Clarida for the number two position at the Fed. Both candidates now need to be confirmed by the Senate.

Powell was appointed almost four years ago by President Trump. His confirmation is expected to be smooth. Brainard, who had been considered a potential replacement for Powell in the top spot, would likely have faced much more resistance to being confirmed for that position.

With the future make-up of the Fed largely out of the way, it appears a U-turn on inflation and a more hawkish demeanor could set a new tone at the December 15  Federal Open Market Committee’s (FOMC) meeting.

Evidence the Fed Will Alter Course

Fed Governor Christopher Waller argued in a speech Friday (November 19) that “the rapid improvement in the labor market and the deteriorating inflation data have pushed me towards favoring a faster pace of tapering and a more rapid removal of accommodation in 2022.”

James Bullard, who is a non-voting FOMC member, said, “I think it behooves the committee to go in a more hawkish direction in the next couple of meetings, so we are managing the risk of inflation appropriately.”

Outgoing Vice-Chair Clarida also spoke Friday and suggested that the committee would be best served by a debate about speeding up the currently-planned $15 billion per month taper pace to its asset purchase program at the upcoming meeting.  

Lael Brainard lead her acceptance statement with,  “I am committed to putting working Americans at the center of my efforts at the Federal Reserve. This means getting inflation down at a time when people are focused on their jobs and how far their paychecks will go.” 

The above comments, coupled with the statements released yesterday by the expected ongoing and incoming Fed heads, are evidence the Fed is altering course. While employment will still be a priority, inflation has become a big enough concern to move it to the forefront of the conversation.

 

Source: Fed Chair Powell’s acceptance statement

 

The change in tone at the top contrasts sharply with Powell’s declaration last month related to inflation, he said, “we can be patient” in raising rates in order to “allow the labor market to heal,” as total non-farm payrolls remain 3.9 million below their pre-pandemic peak. 

 

Source: Fed Chair Powell’s acceptance statement

Interest Rates

While the Fed debates its next move before the December 15 rate decision, the markets may move before they do. It is not uncommon for the Fed to create an environment where the bond market leads, the Fed then can check for economic fallout, and either matches the bond move or jawbone the bond market back. To date, Powell has said his timeline for rate hikes (Fed Funds) would not begin until after tapering was complete. At the current pace, bond purchases won’t fully end until June 2022.

Stocks and other Assets

Since Powell filled the role of Fed Chair in 2018, the S&P 500 has returned 76% and the Russell Small Cap index 63%. While the Fed’s stated role is not to meddle with stock prices, household wealth, including other assets (real estate, crypto, etc.) impact economic activity which is solidly in their wheelhouse. The four years under Powell have seen the best run-up in stocks since Alan Greenspan.

Will a Powell sequel be as good for asset prices as the first term?  What might a swifter-than-expected cessation of near-zero rates and Fed asset purchases mean for asset prices?  There are analysts and pundits lined up on both sides of this debate. Common arguments of those that are bearish say inflation shocks will lead to rate shocks. Assets that are vulnerable to higher rates, including real estate and heavily leveraged companies, may not fare well.

For those that see continued stock market growth, they point to the amount of additional money that has been created and circulating within the economy. The U.S. government’s planned spending programs alone are fiscally stimulating, perhaps not at the same degree as in 2020, but certainly by historical standards.

Take-Away

There is a change that is likely coming to monetary policy. Investors are best to stay in touch through sources whose purpose it is to look out for them. Registering for Channelchek
daily emails is one way to receive unique additional information on topics you care about.

Paul Hoffman

Managing Editor, Channelchek

 

Suggested Reading:

Since 2008, Monetary Policy Has Cost American Savers about $4 Trillion

What the Infrastructure Law Does for Investors

Was the Inflation of 1982 Like Today’s?

Extremely Conservative Investors May Cause Small Companies to Outperform

 

Sources:

https://www.federalreserve.gov/newsevents/pressreleases/other20211122a.htm

https://www.federalreserve.gov/newsevents/pressreleases/other20211122b.htm

https://seekingalpha.com/news/3753290-markets-will-face-a-rates-shock-in-2022-bofa

https://www.grantspub.com/almostDailyHTML.cfm?dcid=964&article=2&email=phoffman%40channelchek%2Ecom

https://wolfstreet.com/2021/11/22/powell-brainard-suddenly-make-inflation-1-priority-in-their-thank-you-statements/

www.koyfin.com

 

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