ArkMalibu Update: Assessing the Impact of COVID-19

It has been two weeks since our last update. Please read our update on the M&A market, the economic outlook, and reasons to be optimistic below.

Reasons for Optimism in M&A and Capital Markets

  • 165 deals closed in the U.S. & Canada over the past 7 days (last week 147 deals closed)
  • Stock Market Update
    • Investor sentiment remains optimistic on June 19th, supported by positive economic data including retail sales rebounding and jobless claims easing
    • As of yesterday’s close, the Nasdaq has rallied 45% since March 23rd, bringing YTD performance to 10.8%
      • Royalty Pharma’s $2.2B IPO is now the largest IPO in the U.S. YTD
      • Vroom raises $467 million in IPO after coronavirus spurs demand
    • As of June 18th, the S&P 500 bounced back 39% off its March low, bringing YTP performance to -3.6%
      • Index currently sits -8.0% below record highs in late February
  • Bond Market Update
    • Federal Reserve’s Secondary Market Corporate Credit Facility begins buying up to $250 billion in individual corporate bonds from eligible issuers (markets loved this)
    • Week of June 17th sees investment-grade corporations issue $52 billion of bonds
    • Issuance in the U.S. high yield bond market tracked at its busiest pace for any June on record as of June 16th, with $23.8 billion priced through June 12th
    • 30-year Treasury bond yield climbed 9 basis points to 1.5% on June 16th, the biggest one-day increase since May 18th
    • Emerging markets debt extends winning streak to seven weeks
  • OPEC and its allies agree to extend record oil production cuts through July
  • Construction of new houses rose 4.3% and housing starts climbed to an annual rate of 974,000 in May, the first increase since January from a five-year low of 934,000 starts in April
  • Trump administration prepares nearly $1 trillion infrastructure proposal
    • Includes majority of money for traditional infrastructure work like roads and bridges, and funds for 5G wireless infrastructure and rural broadband
  • Main Street Lending Program opens for lender registration, administered by Boston Federal Reserve
    • Boston Fed will purchase 95% of each eligible loan submitted to the program

Good News We’ve Been Reading

Economic Recovery Beginning Across Globe

  • United States: all 50 states continue to progress in reopening stages
    • Retail sales boomed a record 17.7% in May compared to April’s 14.7% collapse, the biggest increase in sales since 1992
      • Gap Inc. stores already generating 70% or more of last year’s sales
      • Apple opens 70 stores in the U.S. & Canada
    • New York now in Phase 2, opening offices, outdoor dining, retail shops, and salons
    • Delta adds 100 flights to domestic schedule in June
    • Some states allow visitors to nursing home residents for the first time since lockdown
  • Europe: inter-EU borders continue to open, plans for international tourism underway
    • Italy: unilaterally opened borders on June 3rd and entered Phase 3 on June 15th, reopening theaters and cinemas, gyms and swimming pools, and tourist sites
    • France: mainland France is a green zone as of June 15th, with lighter restrictions including allowing visits to retirement homes, beaches, and cinemas
    • Germany: resumes football matches and opens car dealerships and schools, with land border controls lifted June 15th
    • Belgium: opened restaurants and sports clubs June 8th, with cinemas, casinos, and concerts to follow beginning July 1st
    • Netherlands: Dutch citizens can now visit all countries in the EU or Schengen zone without restriction, and campsites and holiday parks open July 1st
    • Switzerland: as of May 30th, allows groups of 30 people to meet and public events of up to 300 people to resume
    • Japan: as of June 12th, majority of Tokyo’s businesses reopened, including amusement parks, game centers, cafes, live music venues, and bars
  • Africa: South Africa allows businesses to open under advanced level three lockdown, includes sit-down restaurants and office parks
  • Thailand: reopens convention centers and exhibition centers, resuming 47 pioneering trade shows

Vaccine Development & Testing Update

  • U.S. Federal government announces plans on June 10th to fund and conduct studies of three vaccines, marking their final stage of testing
    • Includes Moderna in July, Oxford & AstraZeneca’s co-development in August, and Johnson & Johnson in September
  • World Health Organization plans for hundreds of millions of doses of vaccine this year and 2 billion does by the end of 2021
  • 10 vaccines are in human trials to date
  • Dexamethasone’s preliminary clinical trial results suggest patients on mechanical ventilators treated with steroid drug were 35% less likely to die of COVID-19 than those without the drug
    • In patients with slightly less severe illness, 10-day course of drug reduced mortality by 20%
  • U.S. cities continue to expand testing capabilities as recovery is well underway

Innovations Bloom, Habits Change as Society Adjusts to COVID-19

  • U.S. based Under Armour launches face masks for exercising
  • Designer creates slim pocket sanitizer called Handibac, that can kill 99.9% of common germs
  • Israeli company Ofertex makes antibacterial and antimicrobial facemasks out of recycled materials
  • Starbucks rolls out plan to integrate drive-thru and pickup services at 80% of its locations
  • U.S. based marketing firm Luckie initiates “Radio Recliner”, turning retirees into DJs for online radio hour slots

Positive Encouragement From Leaders Around the Globe

  • All humans are innately driven to be understood, accepted, and affirmed; practice empathy and vulnerability – we are all in this together – Gregg Jantz, A Place of Hope
  • Together we are separated by space, borders, and masks, but we are united by heart and the common bond of humanity – Platon Antoniou, Platon Photo
  • Affirmations and gratitude interrupt maladaptive neurons – you can alter your brain chemistry by inserting them into your daily habits in a minimum of 3 months – Gregg Jantz, A Place of Hope
  • Create the ability to imagine your future; it will fuel your strength day to day and help you arrive – Adam Grant, Wharton
  • Create a challenge network of people who are willing to push you and make you better – Adam Grant, Wharton
  • Identify the people who can help make change a reality and enlist them in your vision – Adam Grant, Wharton

ArkMalibu is happy to answer any questions you may have and to offer guidance during this challenging time. Please visit our website (https://www.arkmalibu.com) for more information.

Until our next update, we send best wishes to you and yours for safety and health.

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