October 20, 2020

Market recap

Dow Jones


-409.97 (-1.43%)

S&P 500


-56.88 (-1.63%)



-192.67 (-1.65%)



-$1.07 (-3.17%)

American Airlines


$0.10 (0.80%)

AMC Entertainment


$0.505 (16.61%)

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Top Story

ConocoPhillips Will Acquire Concho Resources

The Largest US Oil Deal Since Before the Pandemic

ConocoPhillips (COP) has reached an agreement to acquire Concho Resources (CXO) for $9.7 billion in an all-stock transaction. This will be the largest oil deal in the US since the COVID-19 pandemic began.

ConocoPhillips is the top oil producer in Alaska. Its acquisition of Concho Resources will give the company a more significant presence in the Permian Basin of Texas and New Mexico. When the deal closes, the new combined entity will be the biggest US oil independent and will pump 1.5 million barrels of oil per day.

Other Oil Industry Tie-Ups

The US oil industry has seen an uptick in merger and acquisition activity recently as companies continue to struggle with sparse demand and low prices. Since June, oil prices have stayed at about $40 per barrel, which is lower than what many companies need to make a profit on new shale wells.

Last month, Devon Energy (DVN) agreed to a $2.6 billion merger with WPX Energy (WPX). In July, Chevron (CVX) agreed to purchase Noble Energy for $5 billion. These were both all-stock deals, like the ConocoPhillips-Concho Resources deal.

The Advantage of Joining Forces

Both ConocoPhillips and Concho have faced significant challenges this year. As of the end of last week, Concho’s shares have dropped by about 25% over the past year while the S&P 500 index climbed by 17%. ConocoPhillips’ share price has fallen by about 38% during the same period.

The companies are hoping that joining forces will help them better respond to changes in the oil industry. ConocoPhillips said the combined company will be able to reduce costs by $500 million per year by 2022. The companies also plan to use their combined efforts to lower greenhouse gas emissions. The deal is expected to close early in 2021.

Why Every College Student (and High School Senior) Should Fill Out the FAFSA®

For parents, prospective college students, and current college students this is the dreaded FAFSA® season. Completing the FAFSA® might seem daunting, but we’re here to cheer you on and dispel some of the myths.

Alibaba Invests in “New Retail”

Alibaba Buys Stake in Sun Art Retail Group

Alibaba (BABA), the Chinese ecommerce superpower, will pay $3.6 billion to take over Sun Art Retail Group, China’s biggest brick-and-mortar retail store operator. When the deal closes, Alibaba will own 72% of Sun Art. Alibaba first became involved with Sun Art three years ago when it paid $2.88 billion for a 36.16% stake in the company.

Alibaba currently has a market capitalization of over $800 billion, making it China’s most valuable company. Sun Art operates over 480 big box stores that sell groceries, toys, clothes, and more in China. Sun Art’s 2019 revenue was about $14.2 billion, and its revenue rose by 5% between the first half of 2019 and the first half of 2020.

Alibaba’s Strategy

Alibaba sees its investment in Sun Art as a way to expand its “New Retail” operations. “New Retail” is a strategy with which companies create synergy between their online and offline commerce. For example, retailers are giving consumers the opportunity to use the same online payment methods in stores and online, and are using brick-and-mortar stores as places to pick up online orders.

Walmart (WMT), one of Sun Art’s main competitors in China, also employs these “New Retail” strategies. Walmart has about a 10.3% market share of hypermarket sales in China, while Sun Art’s market share is about 14.1%. Investors will be curious to see how Alibaba’s takeover impacts the rivalry between Walmart and Sun Art stores in China.

Zooming Out

Just like in the US, the COVID-19 pandemic in China caused many consumers to shift from in-person shopping to ecommerce. Additionally, like in the US, grocery stores in China saw sales rise as people stocked up on food and household essentials. It is expected that many people around the world will stick to online shopping habits formed during the pandemic for years to come, and companies like Alibaba are working to respond to these changing trends.

Yesterday, the Chinese government announced that the country’s GDP grew by 4.9% during the third quarter. This puts the country’s economy closer to its pre-pandemic growth trajectory after it was battered by COVID-19 early in the year. Investors will be interested to see how this growth, and Alibaba’s investment in Sun Art, will impact the retail landscape in China.

Deutsche Telekom Reaches for the Sky

Deutsche Telekom Successfully Tests Aerial Antenna

Deutsche Telekom, Europe’s largest telecommunications provider, successfully tested an aerial base station in the stratosphere. These stations have a wingspan as large as a Boeing (BA) 747 aircraft, but they only weigh about 3.5 metric tons. The test involved remotely piloting a station with an antenna on board.

When the aircraft reached 45,000 feet, the antenna was connected to a 4G network on the ground. Over the course of the test, the airborne station handled video calls, data downloads, and more. It was able to cover an area of 87 miles across.

The Advantages of Aerial Antennas

Deutsche Telekom hopes this type of technology will be able to provide mobile coverage to rural areas. This is important, because often remote locations can be hard to reach with ground-based networks.

Additionally, aerial antennas may be an important component for developing 5G-powered technologies such as self-driving cars because of the fast reaction times they provide.

Logistical Challenges

The possibilities for aerial antennas are exciting. They are faster and in some ways more cost-effective than coverage through satellites. However, keeping them in the air has proved to be logistically challenging. A number of companies have developed a variety of aerial antenna strategies.

Loon, a startup incubated in Google’s (GOOGL) research lab, is working on high-altitude balloons to run wireless networks. Facebook (FB) was working on solar-powered drones for aerial antennas, but has paused the project. Deutsche Telekom’s successful test is a significant benchmark for aerial base station technology, and investors will be eager to see what steps the company will take next.

Not-So-Breaking News

  • China’s economy expanded by 4.9% year-over-year during the third quarter. This missed expectations, but marked an improvement from the 3.2% growth seen during Q2 for the world’s second-largest economy. During the first three months of the year, China’s economy contracted by 6.8% as a result of the COVID-19 pandemic.
  • American Airlines (AAL) made plans to return its Boeing (BA) 737 MAX jets to service by December if the Federal Aviation Administration deems that the aircraft is safe. American will use the jets for a daily flight between Miami and New York from December 29 until January 4.
  • Tesla (TSLA) announced it will export Model 3 sedans made in its Shanghai factory to European countries including Germany, France, Italy, and Switzerland starting this month. The Tesla factory in Shanghai is the first wholly foreign-owned car manufacturing project in China.
  • AMC Entertainment Holdings (AMC), the world’s largest movie theater operator, plans to reopen more than 530 of its locations across the US this month. The company’s shares rose 24% on the news after tumbling almost 60% this year.
  • CVS (CVS) is working to immediately hire over 15,000 employees in order to prepare for an expected uptick in COVID-19 and flu cases this fall and winter. The company also wants to expand its workforce so it will be ready to help distribute a COVID-19 vaccine if and when one becomes available.
  • FAFSA® stands for Free Application for Federal Student Aid, and must be filled out every year a student hopes to receive federal financial aid—which can include loans, grants, and work-study. If you’d like a step-by-step overview, check out our convenient FAFSA cheat sheet on the SoFi Blog.

Financial Planner Tip of the Day

“It is recommended that you fill out your FAFSA® as close to October 1 as possible to give you a good chance to get access to available funds. Need-based aid is awarded on a first come, first served basis, so it is in your best interest to apply as soon as possible.”

Brian Walsh, CFP® at SoFi

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