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SoftBank held talks on going private with Elliott

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SoftBank Group explored an audacious attempt to take the Japanese technology conglomerate private over the past week, holding discussions with investors including hedge fund Elliott Management and the Abu Dhabi sovereign investment vehicle Mubadala. 

The talks, which were confirmed by three people with knowledge of them, came as SoftBank founder Masayoshi Son scrambled to revive shares in the Japanese-listed group, which has $55bn in net debt, after a stock market rout last week.

Eventually SoftBank decided instead to move ahead with a plan to sell down about ¥4.5tn ($41bn) in assets to pay down its debt and boost a share buyback to a huge ¥2.5tn ($23bn). That has helped revive SoftBank shares from a four-year low to ¥3,791, up 41 per cent from last week. 

But a potential take-private illustrates the extent to which Mr Son was considering all options to manage the turbulence that rattled SoftBank’s share price and global markets. At the end of last week, SoftBank’s shares had an equity value of around $50bn before any potential premium would have been applied. SoftBank, Elliott and Mubadala declined to comment. 

Mr Son, who already owns a quarter of the company, began thinking about a leveraged buyout after Gordon Singer, who runs the London office of Elliott, expressed interest in buying more SoftBank shares last week as their price fell, according to one person close to the talks. 

During the course of those discussions, these people said, Mr Son began to seriously study the formation of an investor consortium to take SoftBank private. “The idea originated from people around Masa and he wanted to explore it,” one person following the situation said. 

The discussions also involved some of Mr Son’s key lieutenants, including Yoshimitsu Goto, SoftBank’s chief financial officer, Rajeev Misra, the former Deutsche Bank trader who oversees SoftBank’s Vision Fund, and Marcelo Claure, the company’s chief operating officer. 

The plan was eventually abandoned for a number of reasons, including the complications around getting an investor consortium together quickly for such a large deal, Tokyo-listing rules and other tax considerations, multiple people said. 

Mr Son, a risk-addicted dealmaker, has repeatedly vented his frustration with the public markets, arguing that SoftBank’s equity value is at a steep discount to the value of its holdings, including a roughly $130bn stake in Chinese ecommerce giant Alibaba, a majority stake in the UK chip designer Arm Holdings as well as control of telecom operators Sprint and SoftBank Japan. 

By the end of last week, SoftBank said that discount had stretched to a record 73 per cent, the widest in the company’s history. 

Additional reporting by Simeon Kerr

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COVID-19 crisis means financial trouble, creative opportunity for London non-profits, leaders say

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Non-profit agencies in London are taking a pounding in the coronavirus fallout, with just some of those groups losing more than $9 million combined in the first two weeks after the global pandemic was declared.

Leaders in the sector say the crisis spells huge trouble for local organizations, but is also opening the door to innovation and creativity.

“This is really difficult. There is that shared grief,” said Michelle Baldwin, head of the Pillar Nonprofit Network, which supports 600 such groups in London.

When Pillar surveyed its members to begin to gauge the devastation of COVID-19, the response was immediate – nearly a third of its members responded within a day – and the numbers stark.

By March 24, about 90 agencies who responded to the survey had lost nearly $9.1 million in revenue, with tens of millions more looming.

One organization said it stands to lose $1.1 million every week. Another predicted an imminent $10 million loss.

Others, about a quarter of those who answered the survey, didn’t yet know how much revenue they’d lost. A smaller portion said they hadn’t lost any revenue.

About a third of those who responded to the survey said their mission was at risk. Forty-four per cent reported staff layoffs, reduced hours or wage cuts. Only two per cent said COVID-19 was having no, or limited, impact in the short-term.

Baldwin said the results underline the value of the work these organizations do locally.

“It is about recognizing the importance of the non-profit sector. We need it here, and afterward,” she said. “Social enterprises are both social and economic drivers.”

In many ways, the dramatic numbers are no surprise.

Western grad Brian Emmett – chief economist for the charitable and nonprofit sector with Imagine Canada, a national umbrella organization – estimated the country’s registered charities will see financial losses between $9.5 billion and $15.7 billion this year, depending on how long social distancing lasts. He predicts somewhere between 118,000 and 194,000 people will be laid off.

And those numbers doesn’t include any of the non-profit groups that aren’t registered charities.

Cancelled events and fundraisers hit bottom lines hard in London, as elsewhere.

Those are often key to bringing thousands of dollars in donations through the door. Individual donations may also have dipped as Londoners watched markets tank and layoffs happen in light of COVID-19.

Much of the losses were also rooted in the sale of goods and services that had to be stopped, quickly, after the provincial government declared a state of emergency. Baldwin said earned revenue usually makes up almost half of expected revenue for non-profits and charities.

United Way Elgin Middlesex has also cut funding to agencies for programs that aren’t operating because of the virus, CEO Kelly Ziegner said.

Given the uncertainty now over its own finances, the United Way has also told agencies that funding for them is guaranteed for three months only, and will be provided in monthly installments, Ziegner said.

“We have a number of agencies where their programs simply aren’t operating, for example, school-based programs. We’ve paused that funding. We can’t fund programs that don’t operate. It’s just a reality.”

Those cuts add up to about $75,000 in funding a month, she said.

Usually, the United Way provides agencies stable funding for a year or more, Ziegner said.

But, now,  “It’s very hard for us to commit long-term to our agency partners.”

At the end of three months, the United Way will assess its contributions to agencies, she said.

That should give agencies some time to make additional funding plans, or pivot to services – such as food supply and delivery — that are essential, Ziegner said.

United Way Elgin Middlesex relies on payroll deductions (from corporate campaigns) for about 40 per cent of its funding, she said.

The organization is still assessing what the impact of businesses closing and layoffs will mean for those contributions, Ziegner said.

“If people are not being paid, those contributions and that source of revenue will erode for us.  So we’re just trying to get a handle on that. That would our biggest concern in the short term,” she said.

“Could more cuts come? Potentially. But until we have a bigger understanding of the financial picture, it’s hard to say.”

Government funding commitments have, so far, remained stable, Baldwin said. And some relief has been announced since the survey was sent to Pillar members. One of the agency’s roles is to advocate for its members at all levels of government.

And many organizations are showing the power of resilience and perseverance, pivoting to new virtual strategies and using innovative ideas to stay alive, Baldwin said.

Pillar has started a support group for executive directors to share ideas, successes and worries with one another, in addition to other support for members.

“We always talk about the cross-sector collaboration,” Baldwin said.

“If ever there was a moment for that to be our focus and our way forward, it is needed now more than ever.”

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Bitcoin’s Correlations With Global Financial Assets Soar Amid Coronavirus Crisis

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Many investors hold Bitcoin (BTC) as a hedge against the global financial system. However, as the numbers show, Bitcoin has not been spared from the recent COVID-19 financial crisis.

This article will analyze the movement of global financial markets and its correlation with Bitcoin during the COVID-19 crisis. We’ll consider the following sources as price measures for the following.

The recent crash has really challenged Bitcoin’s claim as “digital gold” and puts its assertion as a financial “safe haven” to the test.

Related: Is Bitcoin a Store of Value? Experts on BTC as Digital Gold

A 21-day rolling correlation graph shows that Bitcoin has recently become increasingly correlated with other global financial assets. 

This statistic should be worrisome for cryptocurrency investors trying to find a respite in the midst of all the financial chaos.

Has gold fared any better?

Before we give “digital gold” such a hard time, we should note that physical gold hasn’t sheltered investors from this financial storm either. 

Correlations between gold and other financial assets have also soared during this time, signaling that the world’s financial markets are more interconnected than ever before.

The importance of low, or negative, correlation

Harry Markowitz, the father of the modern portfolio theory, postulated that the most important aspect of risk to consider is an asset’s contribution to the overall risk of the portfolio, rather than the risk of the asset in isolation.

Therefore, a portfolio is not riskier if it contains Bitcoin, which is a more volatile asset, and it is uncorrelated or negatively correlated with the other holdings in the portfolio.

Uncorrelated assets are the envy of portfolio managers because they can reduce volatility and improve risk-adjusted returns. Many portfolio managers keep Bitcoin as an alternative asset in their portfolio for this reason alone.

If Bitcoin does not remain uncorrelated with the rest of the financial market, then it may be viewed as a significantly less desirable, risky asset by asset managers and the institutional market. A decrease in institutional interest could mean large sell-offs and fewer fiat inflows into the market.

So far, this is not the case

Despite a recent uptick in its correlation, a portfolio comprising 80% stocks and 20% Bitcoin would have outperformed a portfolio of 100% stocks from a risk-adjusted return perspective within the last three months and also within the last year.

However, if we were to just look at the last month, Bitcoin would have been better off avoided.

It is true that Bitcoin has remained a relatively detached and uncorrelated asset in times of economic prosperity. But that is not enough. For it to be considered a true financial safe haven, it must be robust against shocks reverberating through other financial markets. Especially in times of turmoil, the asset’s performance should be placed under heavy scrutiny.

Hopeful for a rally

Nevertheless, Bitcoin’s recent price rally has shown signs of promise. This may provide hope to cryptocurrency holders — especially if other assets continue to tank.

Do cryptocurrency indices provide better diversification?

The HODL30 index, a portfolio comprising the top 30 cryptocurrencies by market cap, was less correlated to the overall financial market than Bitcoin. The correlation between the index and American stocks was significantly lower than the correlation between Bitcoin and U.S. stocks.

If cryptocurrency investors want to shield themselves from global market fluctuations, indices may become increasingly relevant.

Time will tell whether Bitcoin or any cryptocurrency will live up investors’ lofty expectations as a financial safe haven. In a tight-knit, interconnected financial system, such a thing may prove impossible. 

Perhaps the culling of fickle cryptocurrency investors during a time of crisis will leave only the strong and sturdy, dampening future volatility. Or, this price crash will set a precedent for investors to scramble for cash whenever the next financial crisis brews because Bitcoin can no longer be trusted to shelter them. 

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Anthony Xie is the founder of HodlBot, a trading tool that enables cryptocurrency investors to automate their trading strategies.



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‘We are facing the biggest financial crash for 100 years’, economists warn

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‘We are facing the biggest financial crash for 100 years’: Economists warn the UK economy could shrink by 7.8 per cent overall in 2020

  • The economy is now predicted to shrink by an astonishing 7.8 per cent overall
  • It represents the most severe hit to livelihoods since a 13 per cent slump in 1921
  • An economist said this year’s crash would easily surpass 2008 financial crisis

Britain’s economy is set to suffer its worst year for a century as the jobs market is crippled by the coronavirus lockdown and firms go bust, economists warned last night.

The economy is now predicted to shrink by an astonishing 7.8 per cent overall in 2020, analysis by banking giant Nomura has found.

That would represent the most severe hit to livelihoods since a 13 per cent slump in 1921, when Britain’s exports collapsed and the post-First World War boom was ended by a fierce deflationary spiral.

George Buckley, UK economist at Nomura, said this year’s crash would easily surpass the 2008 financial crisis – when the UK economy suffered a 4.2 per cent fall – and the lows of the Second World War. 

The economy is now predicted to shrink by an astonishing 7.8 per cent overall in 2020, analysis by banking giant Nomura has found. Pictured: a London restaurant which has shut

The economy is now predicted to shrink by an astonishing 7.8 per cent overall in 2020, analysis by banking giant Nomura has found. Pictured: a London restaurant which has shut 

‘This will be the worst year for GDP for just shy of a century,’ he added. ‘The worst data we’ve seen since the depression of 1921 was during the final stages of the Second World War, when GDP fell by 4.6 per cent.’

Separate figures obtained by The Mail on Sunday show the jobs market has deteriorated far more quickly than it did after the 2008 crash.

Britain’s largest recruitment website Reed said the number of new vacancies being advertised has fallen by the same amount in three weeks as it did in nine months during the crisis just over a decade ago.

Vacancies on the Reed website last week dived 63 per cent from 59,000 to 22,000. That followed drops of 45 and 55 per cent in the previous two weeks.

George Buckley, UK economist at Nomura, said this year's crash would easily surpass the 2008 financial crisis – when the UK economy suffered a 4.2 per cent fall – and the lows of the Second World War. Pictured: shops are shut in London

George Buckley, UK economist at Nomura, said this year’s crash would easily surpass the 2008 financial crisis – when the UK economy suffered a 4.2 per cent fall – and the lows of the Second World War. Pictured: shops are shut in London

James Reed, chairman of Reed, said: ‘I’ve never seen anything like this. The shock waves now are much larger and faster. This is going to have a seismic impact on employment and we need to make sure it is not catastrophic.’

A memo circulated among bank bosses, seen by the MoS, shows half of the UK’s 5.8 million small and medium-sized businesses face running out of cash in just eight weeks. 

The note, from credit reference firm Experian, also warns of a consumer debt crunch, with borrowers unable to pay off their debts as they lose their jobs, become furloughed or see their earnings slashed.

The report said most families now have little to no savings to fall back on following a decade of record low interest rates. It added: ‘Even those on 80 per cent of salary may see their finances stretched and may need to resort to credit.’

Kristalina Georgieva, head of the International Monetary Fund, said: ‘This is a crisis like no other. Never in the history of the IMF have we witnessed the world economy coming to a standstill. It is way worse than the global financial crisis.’

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