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Robinhood soars after retail traders flock to shares

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Robinhood updates

Robinhood, the trading app used by many retail investors to drive the furious rally in “meme stocks” early this year, has gained characteristics of a meme stock itself.

Shares of the brokerage rose 50 per cent to close at $70.39 on Wednesday, giving it a market capitalisation of $58.9bn. The volatility prompted multiple trading halts on the Nasdaq exchange, with Robinhood earlier in the day having surged as much as 82 per cent.

The rise came less than a week after Robinhood listed in a disappointing initial public offering. This week’s reversal reflected the embrace of the stock by retail investors on social media and the new availability of options contracts tied to the company’s shares, traders and analysts said.

By 4pm in New York, more than 171m shares had changed hands.

Robinhood’s commission-free transactions attracted legions of retail investors with time and money to spare during the pandemic. The California-based company’s app was a central venue for trading so-called meme stocks earlier this year, as customers organised on social media platforms such as Reddit to bid up stocks such as the distressed theatre chain AMC and the video game retailer GameStop.

But the company also angered many customers in January when it curbed trading in several heavily shorted stocks to meet a margin requirement from its clearinghouse. Some day traders relished the company’s rocky debut on the stock market last week, when it fell 8.4 per cent in one of the worst performances for a flotation of its size.

Momentum picked up in recent days as some big-name investors bought into the stock, including Cathie Wood, who manages the investment fund Ark Invest.

Since the IPO, investor sentiment in Robinhood shares has brightened on social media sites such as Reddit, according to retail investor sentiment tracker Breakout Point. Mentions of its ticker on Reddit surged on Wednesday morning.

Retail investors on Reddit began rallying around the goal of a $60 share price — up from $35.15 on Friday — and there was “considerable cheering for Cathie” Wood, said Ivan Cosovic, founder of Breakout Point.

“It was a very hated IPO in the retail world, but Cathie bought and some retail investors on the sidelines decided to give it a try,” he added. “The rest is Fomo,” or “fear of missing out”.

Line chart of Share price ($) showing Robinhood shares surge in volatile trade

Data provider Vanda Research noted retail traders had begun to turn heavily towards the stock on Tuesday, helping send the shares up 24 per cent to close above its listing price for the first time.

Options trading in Robinhood’s shares also began on Wednesday, according to Chris Murphy, co-head of derivative strategy at trading company Susquehanna International Group. The derivatives, which allow traders to speculate on the potential moves in a stock, have become particularly popular with retail investors in the past 18 months.

Dealers selling bullish call options to investors would typically buy Robinhood stock to hedge their risk, pushing the market in an upward direction.

The gain on Wednesday lifted Robinhood’s market valuation above hundreds of blue-chip US companies including carmaker Ford, foods company Kraft Heinz and asset manager T Rowe Price.

When asked on the morning of the IPO if he thought Robinhood would become a meme stock, co-founder Vlad Tenev said: “I don’t know if people have understood the ramifications of what high retail participation in the markets means, but I think fundamentally it’s a very good thing and we are excited to be a part of it.”

An earlier version of this article incorrectly stated that options trading began on Tuesday



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Abu Dhabi’s Adnoc plans 7.5% stake float of oil drilling unit

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Abu Dhabi National Oil Co updates

The Abu Dhabi National Oil Company plans to list a 7.5 per cent stake in its drilling unit via an initial public offering on the Gulf emirate’s stock exchange next month.

Adnoc Drilling is 95 per cent owned by Adnoc, which has in recent years embarked on a modernisation drive including diversifying its investor base and unlocking cash from its infrastructure base.

In 2018, when Baker Hughes acquired a 5 per cent stake in the business, Adnoc Drilling had an equity value of $10bn.

“Adnoc Drilling’s planned value creation opportunities, including a major rig fleet expansion and well drilling program, ideally position the company to take full advantage of emerging opportunities,” said Sultan Al Jaber, Adnoc’s chief executive.

The offering, which is open to domestic and international investors, is expected to take place in October on the Abu Dhabi Securities Exchange (ADX) subject to market conditions and regulatory approvals. The size of the offering could be increased.

The United Arab Emirates, which is already the third-largest producer in Opec, is committed to raising its output capacity from 4m barrels a day to 5m barrels a day.

The Gulf state earlier this year clashed with its larger neighbour, Opec kingpin Saudi Arabia, by refusing to endorse a planned Opec+ production increase. Abu Dhabi argued that its “baseline”, the level from which Opec quotas are calculated, should be increased. A compromise deal was clinched in July that raised the UAE’s baseline quota from 3.2m barrels a day to 3.5m barrels a day.

Adnoc Drilling, the largest drilling company in the Middle East by fleet size, is the sole provider of drilling services to Adnoc. In 2020, Adnoc Drilling’s revenues were $2.1bn, with a profit of $569m.

The deal would be the second IPO launched by Adnoc since the 2017 listing of its distribution arm, the largest operator of petrol stations and convenience stores in the UAE.

The national oil company has separately opened its refineries and oil and gas pipelines businesses to international investors. It is also seeking to sell stakes in its power plants and other infrastructure.

Adnoc earlier this year started trading futures of its flagship crude oil, Murban, on ICE Futures Abu Dhabi, a commodities exchange based in the capital’s financial district.

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Chemicals distributor Azelis seeks to raise €880m in Brussels IPO

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IPOs updates

Speciality chemicals distributor Azelis is seeking to raise €880m in an initial public offering in Brussels in what will be one of the sector’s largest listings this year.

The Antwerp-based company, which is owned by Swedish buyout firm EQT, is targeting a valuation of more than €5bn, according to people familiar with the matter.

The IPO would make Azelis the world’s fourth-largest listed chemicals distributor in a highly fragmented €117bn market. As well as using the IPO’s proceeds to cut some of its €1.6bn of debt, the company also plans to make further acquisitions.

“As a public company, we believe we will be able to fully capitalise on growth opportunities, continuing to complement our strong organic growth with accretive acquisitions,” said chief executive Hans Joachim Müller.

Müller said he hoped to expand operations in Asia and gain a foothold in Latin America, where Azelis does not have a presence.

Founded in 2001 from the merger of French and Italian distributors, Azelis’s business extends beyond distribution. It also has a network of laboratories that test products and add new ingredients to existing products for clients.

The company expects tougher regulations in markets from animal nutrition to cosmetics to push more chemical producers to outsource distribution and formulation services to larger external providers.

Azelis laboratory
In addition to distribution, Azelis also has laboratories that test products and add new ingredients to existing products for clients © Ben Connell

Azelis generated revenues of €2.2bn last year, while its operating profit climbed 10 per cent from 2019. It employs 2,800 people across 56 countries.

Demand for chemicals has rebounded rapidly from the pandemic’s initial hit, sending valuations for the sector soaring and handing EQT a chance to capitalise.

Nouryon, the former chemicals arm of Akzo Nobel that was acquired by US buyout firm Carlyle in 2018 in a €10bn deal, is also set to go public.

Although Azelis has only a 2 per cent market share, it is enough to make it one of the sector’s largest players alongside Germany’s Brenntag, IMCD from the Netherlands and Illinois-based Univar Solutions. In a sign of investor appetite for the sector, Brenntag’s share price is at an all-time high.

Müller said that because the company’s global service centre was in Belgium, Brussels was the best place to list. It would be the largest IPO on the Brussels Stock Exchange since 2007.

EQT will retain a stake in the company following the IPO, which Azelis had considered before the Swedish private equity firm led a buyout of the business in 2018.



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Petershill/Goldman Sachs: private capital seeks paradoxical public market boost

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Goldman Sachs Group updates

Groucho Marx was suspicious of any “exclusive” club whose standards were so low he could join it. The UK’s dyspeptic long funds may have similar reservations about Petershill Partners. This offshoot of Goldman Sachs buys stakes in private equity groups and hedge fund managers. The investment bank plans to float Petershill, which may be worth about $5bn, in London. Anyone with a broking account will be able to buy shares previously only available to select Goldman clients.

The Wall Street bank will remain a gatekeeper in another respect by investing the capital of Petershill Partners in return for fees. These look generous, even though a minimum 7.5 per cent annual charge would be levied on income from investee companies, rather than on fund value.

Goldman, which is diversifying into asset management, will have earned its money if it uses its powerful network to make lucrative investments.

If you think that will happen, Petershill will be a worthwhile investment itself. If not, shrug and pass on. A stock market is a place to test business propositions. It is not a corporate Hall of Fame, though that is how London sometimes self-defeatingly seems to see itself.

Petershill invests in asset managers rather than their products. This spares end investors two tiers of management fees. Typically, it purchases minority stakes in private capital managers when they issue equity to finance expansion.

Private capital is hot at the moment. You might therefore ask why Petershill is seeking a mooted $750m from unfashionable public investors rather than that source.

The reason is that alternative asset managers from Apollo to Pershing Square prize permanent capital, which they can deploy for the long term. The stock market is a good supplier. You might also see adroit timing in Petershill’s plan to float when private capital management is, in the words of one buyout boss: “The hottest of hot spaces at the peakiest of market peaks”.

However, the mooted price of about $5bn would equate to only around 22 times estimated net income in the 12 months to June. That is a lot lower than US peer Blue Owl and quoted UK buyout group Bridgepoint, which are trading at more than 30 times forward earnings.

Routinely presented as polarities, private and public market capital remain inextricably entwined, as this deal would prove.

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