ArkMalibu Update: Assessing the Impact of COVID-19

We have enjoyed sharing weekly news with you during this global crisis. We plan to slow the frequency of our emails as the world continues to adjust and reopen. We anticipate that leaders, businesses, and citizens will collectively forge ahead as fast as they can. Though our frequency in sharing with you will change, we look forward to continuing to offer our insights into the M&A market, the economic outlook, and reasons to be optimistic.

Reasons for Optimism in M&A and Capital Markets

  • 147 deals closed in the U.S. & Canada over the past 7 days (last week 98 deals closed)
  • Nasdaq moves within 2% of its pre-coronavirus peak
    • Warner Music Group’s $1.9 billion IPO marks biggest U.S. offering YTD
    • ZoomInfo’s $900 million IPO marks Portland’s largest IPO in history
  • June 5th marks the fourth straight week of S&P 500 gains
    • As the market opens, S&P is down only 8.1% from its all-time high on February 19th, and up 39.1% from its low on March 23rd
  • Bond Market Update
    • Investment grade companies issued $589 billion of bonds in April & May, nearly tripling the amount sold during the same period last year
      • Amazon sold $10 billion worth of three-year bonds at 0.4%, the lowest interest rate for any bond in U.S. corporate history (prior record-low was 0.45%)
    • High yield corporate bonds lead all fixed income categories for second consecutive week
    • High grade municipal bond prices recover completely from selloff caused by pandemic, with municipal yield curve from 1 to 5 years sitting at an all-time low
  • Emerging markets debt extends winning streak to five weeks, bringing its total return for May to 4.6%
  • European Central Bank expands existing stimulus program, increasing bond purchases by $820 billion to a total of $1.52 trillion

Good News We’ve Been Reading

Economic Recovery Beginning Across Globe

  • United States: all 50 states continue to progress in reopening stages
    • U.S. gains 2.5 million jobs in May, despite forecasted loss of 8 million jobs
    • Top online travel agencies in U.S. see downloads reach pre-pandemic levels, with increases for 10 straight days
    • Personal & business travel rises in key markets
    • NBA restarts season on July 31st in Orlando, with 22 teams playing eight regular-season games, a play-in tournament, and playoffs
  • Europe: inter-EU borders continue to open, plans for international tourism underway
    • Italy: opened to arrivals from 26 other EU countries on June 3rd
    • France: opens borders to EU Nationals June 15th
    • Germany: lifts warnings for travel between 31 European countries on June 15th
    • Spain: reopens for international tourism July 1st
  • Japan: foot traffic in Tokyo returns to 60% of normal levels
  • Africa: Nigeria reopened churches, mosques, and hotels June 2nd

Vaccine Development & Testing Update

  • Operation Warped Speed, aiming to deliver effective vaccines for the U.S. by the end of the year, selects five companies as most likely candidates to produce a viable vaccine
    • Includes Moderna, AstraZeneca, Pfizer, Johnson & Johnson, and Merck
    • Clinical trials of up to 150,000 volunteers will begin in July
  • Moderna targets July for final phase of human trials
  • Canada signs contract to procure 37 million syringes and works to procure other essential supplies in preparation for mass vaccinations
  • Countries prepare for the future with ample supplies of tests, personal protective equipment, and hospital beds

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

  • Yamaha’s Remote Cheerer app lets fans tap on their devices to support favorite sports players
  • Philippines-based Centro Manufacturing develops anti-COVID dividers for public transportation
  • Dutch food markets team up with online platform to offer “The Food Box” to support local farmers
  • Denmark restarts football league season with fans taking usual seats via Zoom
  • Danish startup Lifeline Robotics develops robots for throat swab testing

Insights from CEOs Around the Globe

  • “I truly believe video is a new voice. Video is going to change everything about communication. The way for us to work, live and play is completely changed. On that respect, a lot of opportunities are ahead of us.” – Eric Yuan, Zoom
  • “I think this crisis will be a catalyst for people switching from on-premise into the cloud for finance. And we’re already seeing good growth rates.” – Aneel Bhusri, Workday
  • “As Covid-19 impacts every aspect of our work and life, we have seen two years’ worth of digital transformation in two months… We are working alongside customers every day to help them stay open for business in a world of remote everything.” – Satya Nadella, Microsoft
  • “Telehealth is here, finally, and I think that’s going to change forever. And I think that [the] industry will continue to work and build out a more robust architecture.” – Chuck Robbins, Cisco
  • “We expect that a recovery led primarily by commuter trips will open up exciting new prospects for Uber for business, as companies look to move their employees to and from offices, as well as partnership opportunities with transit agencies to move essential workers.” – Dara Khosrowshahi, Uber Technologies
  • “Despite the current uncertainty and volatility, the fundamentals that underpin our business remain strong… Why do I say that? We know that in the coming decades, populations will grow to more than nine billion people by 2040, up from just over 7 billion today. Billions of people will enter the middle class and seek lifestyles and products that require energy.” – Darren Woods, Exxon Mobil

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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