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Test 2


America’s second-largest grocer will begin trading this week, Wirecard’s $2 billion balance sheet error, and gold prices climb amidst fears of a second wave of coronavirus.

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SoFi Daily News


JUN 23, 2020

  Market Recap  

Dow Jones

S&P 500


-$0.19 (-0.59%)

$9.15 (+2.62%)

Virgin Galactic
$2.35 (+15.67%)

  Amid evolving news + uncertainty surrounding COVID-19, your financial needs are our top priority.
For more information on COVID-19 and your finances click here.

  All Eyes on Albertsons’ Upcoming IPO  
  America’s Second-Largest Grocer Aims for a Public Debut  
  The grocery chain Albertsons is planning an IPO. Shares of the company are likely to begin trading publicly by the end of this week.

Albertsons is the second-largest grocery store chain in the US after Kroger (KR). In addition to operating its namesake stores, the Idaho-based company also owns Jewel Osco, Safeway, and Vons, as well as the meal-kit maker, Plated.

Albertsons aims to sell shares for between $18 and $20. This would give the company a valuation of over $10 billion. The company will trade on the New York Stock Exchange under the ticker ACI. Because the stock sale comes from existing shareholders, it will not yield proceeds for Albertsons. For example, it will give one of its backers, Cerberus Capital Management LP, a chance to cash out on its approximately 15-year investment.

  Past Attempts to IPO  
  In 2015, Albertsons also made an attempt to go public but did not go through with it because other retail stocks were performing poorly at the time, and investors were wary of Albertsons’ heavy debt load. The company also looked to IPO in 2018 when it attempted to acquire the drugstore, Rite Aid, but shareholders were not on board.

Times have changed for the company. Since the end of fiscal 2017, Albertsons has reduced its net debt by $3 billion. Additionally, like other grocers around the country, Albertsons saw a boom in sales during the pandemic as people stocked up on supplies and ate meals at home. Same-store sales for the company were up 47% in March and 21% in April.

  Investors Are Eating Up New IPOs  
  The IPO market is roaring back after stagnating during the start of the pandemic. After a period of almost no IPOs, several companies have had successful debuts recently including Warner Music Group (WMG), ZoomInfo Technologies (ZI), and Vroom (VRM).

Investors also have their eyes on other companies getting ready to IPO. For example, two weeks ago, the insurance start-up Lemonade announced it confidentially filed to go public. Airbnb said it may go public this year as well, despite suffering losses due to the pandemic. Albertsons’ public debut will be one of this year’s biggest IPOs yet, and investors will be watching it closely.


  What’s Going on With Wirecard?  

  German Fintech Giant Reels  
  Wirecard AG (WDI), a German digital payments company, announced yesterday that over $2 billion listed on its balance sheet probably never existed. This $2 billion is equivalent to the total net income Wirecard reported over the course of 10 years. The company has lost $12.5 billion in market value as its stock sank 85% in just three trading sessions.

Wirecard was once one of Germany’s leading fintech companies. It created payment software and partnered with IKEA, FedEx (FDX), Aldi, and other retailers. The company said its payment systems are still operating like normal. However, it is now reeling from the scandal and trying to retain credit lines, sell parts of its business, and reduce costs in order to stay viable.

  Some Short Sellers Win Big  
  Wirecard has faced skepticism from investors for some time. Certain people who bet the company’s stock would decline saw huge returns when share prices plummeted.

Short sellers are investors who borrow shares of a company, then sell them with the expectation that they will be able to buy them back for a lower price in the future. Companies that shorted Wirecard’s stock made hundreds of millions of dollars. For example, Slate Path Capital, a New York-based firm that had one of the biggest short positions, was up as much as $227 million on their bet thanks to Wirecard’s tumble at the end of last week.

Though some skeptics of the company have won big, many people who tried to short Wirecard over the past few years as its stock climbed steadily higher, lost money in the process.

  European Tech Investors May Be Wary Going Forward  
  Other investors who believed in Wirecard have lost huge amounts of money. Wirecard’s stock was high for several reasons. The COVID-19 pandemic raised investor interest in virtual payment systems significantly. The German establishment also stepped in to help the company flourish and even banned short sellers for a brief period last year.

Additionally, the ratio of tech investors to tech companies in Europe is skewed. Large numbers of investors have been chasing a relatively small amount of European companies for years. But as Wirecard unravels, this problem will get worse because even though investors are eager to back tech companies, they may begin to tread carefully after this scandal.


  Coronavirus Concerns Galvanize Gold  

  Investors Anxious About Economic Uncertainty  
  Gold prices are on the rise and could hit their highest levels since 2012. This is due to several factors.

COVID-19 cases are increasing in states like Texas and North Carolina as lockdown restrictions ease. Investors are fearful that an increase in cases could cause more business closures and economic instability.

Investors are also predicting that central banks around the world may pump more stimulus money into their economies if coronavirus cases continue to increase. This could cause global currencies to be devalued, making gold an attractive investment option. Gold is also popular when interest rates are low, as they are now.

  Gold Prices on Track to Break Records  
  On Monday, gold was trading at its highest level in almost eight years. Gold futures, contracts where a buyer agrees to purchase a specific quantity of gold on a specific date, are up 16% this year.

UBS (UBS) expects gold prices will reach $1,800 per ounce by the end of the year. According to Goldman Sachs (GS), the price of gold could even spike to a record $2,000 per ounce by the end of 2020.

  A Self-Fulfilling Prophecy  
  Some financial advisors may suggest that their high net worth clients invest in gold. Nine private banks handling about $6 trillion for the world’s ultra-rich responded to a survey by Reuters saying they have advised clients to do this already. If wealthy investors pile into gold, thinking its worth will increase, this demand could create a self-fulfilling prophecy and cause gold prices to skyrocket.

Investors will have their eyes on coronavirus cases as well as monetary policies from central banks, to see how these factors will impact the rising price of gold.


  Not-So-Breaking News  

  • Virgin Galactic (SPCE) signed a new Space Act Agreement with NASA. This means Richard Branson’s space tourism company will start coordinating private trips to the International Space Station. Shares of the company rocketed higher by nearly 16% on Monday.

  • China halted poultry imports from a Tyson Foods (TSN) facility in the United States after a coronavirus outbreak at the plant. PepsiCo (PEP) also shut down a factory in Beijing on Sunday after reporting a cluster of coronavirus cases.

  • Apple (AAPL) kicked off its Worldwide Developers Conference on Monday by introducing new operating systems for its iPhone and iPads. The tech giant also said it will start using its own processing chips, instead of Intel’s, in all Macbooks.

  • Ant Financial Services Group, an affiliate of Alibaba (BABA), received approval from China’s top regulator to change its name to Ant Technology Group. The move is meant to emphasize the technology component rather than the financial element of the business after earlier scrutiny from watch dogs.

  • Kweichow Moutai Co., a Chinese liquor giant, has surpassed Industrial & Commercial Bank of China Ltd. to become the biggest stock by market value in mainland China. The alcoholic beverage maker is now worth $256 billion and has seen its shares climb by roughly 1,350% over the past 10 years.

  • SoFi surveyed 1000 consumers to see how the coronavirus is still affecting their mood and their money. Find out how people are handling their finances during these uncertain times on the SoFi Blog.

  Financial Planner Tip of the Day  
  “Exchange-traded funds (ETFs) can help you save money on broker commissions, which can add up when you’re buying stocks one by one.”  
  – Brian Walsh, CFP® at SoFi  

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