Experience Vlerick Day - Wouter De Maeseneire

FINANCE IN THE NEWS
JUNE, 2013

© Vlerick Business School
USUALLY PEOPLE DO NOT LIKE FINANCE
 So I need to start with telling them about
appealing and hotly debated topics like…
2

Largest company ever according to market cap!
3 |
Jump of $ 50 bio!!

Do you see the link?
5 |

© Vlerick Business School #experiencevlerick8
http://business.time.com

IMPORTANCE OF SOUND FINANCIAL MANAGEMENT
 What is the goal of a company?
 Liquidity
 Profitability
 Solvency
 Let me prove this
 General Motors, Eastman Kodak, Lehman
Brothers, Enron, Worldcom, Chrysler,…
 Nokia, Sony, TomTom,…
9

MGM FILES FOR BANKRUPTCY, BUT JAMES
BOND MAY RETURN IN 2012
"New James Bond films may be released every second year starting in November 2012,
MGM said. It aims to own 50 percent of Bond 23, due out that year, with an equal partner
paying all of the production costs, it said. Later Bond movies would be wholly owned and
funded by MGM..."
11

THE HOBBIT
12
"MGM estimated its total obligations to "The Hobbit" are $265 million to $275 million. The
company said it is looking for "a third party" to fund those obligations. Its investment stake
would be $40 million while the rest would be funded by a lender..."

LARGEST BANKRUPTCIES
18

STOCK MARKET EVOLUTION (S&P 500)
#experiencevlerick19

STOCK MARKET EVOLUTION (EUROSTOXX 50)

TENTATIVE SIGNS OF RECOVERY: REAL GDP
GROWTH (EUROSTAT)
21

HEADS OF EUROPE BACK BROAD PLAN TO
RESCUE GREECE (NEW YORK TIMES - JULY 21, 2011)
23
The pact, negotiated in Brussels, is part of a rescue package of 109 billion euros, or $157
billion, for Greece, the most troubled economy in the euro zone. It will force many investors in
Greek debt to accept some losses on their bonds.
Under the plan, Greece would receive assistance in several ways. Holders of short-term
obligations would be able to swap their notes for debt with longer maturities and backed by
high-rated bonds. An organization that includes most major European banks said its members
would accept the offer and expected 90 percent of all Greek bonds to be exchanged.
Separately, officials said that the terms of the aid
package from Europe to Greece would be
eased, with maturities lengthened to 15 years from
7.5 years, at an interest rate of a quite low 3.5
percent.
The euro zone leaders would give wide-ranging new
powers to the region’s rescue fund, the European
Financial Stability Facility, by allowing it to buy
government bonds on the secondary market and to
help recapitalize banks — which might be needed
when they write down the value of their Greek
bonds.

SOVEREIGN DEBT CRISIS –NOVEMBER, 28 2011
26

15.000.000.000.000 USD!!!
http://usdebt.kleptocracy.us27

S&P DOWNGRADES U.S. TO AA+ - WE'RE TIED
WITH BELGIUM!
Officials at ratings firm
Standard & Poor's said U.S.
Treasury debt no longer
deserved to be considered
among the safest investments
in the world. S&P removed for
the first time the triple-A rating
the U.S. has held for 70 years,
saying the budget deal recently
brokered in Washington didn't
do enough to address the
gloomy long-term picture for
America's finances. It
downgraded U.S. debt to AA+,
a score that ranks below
Liechtenstein.
28
Reaction of commentator: “On the positive side, we are now
equal with Belgium, so we should be getting an overdue
upgrade to our beer and chocolate.”
http://seekingalpha.com
August 6, 2011

SOVEREIGN WEALTH FUNDS
 Abu Dhabi Investment Authority + 500 bio $
 China Investment Corporation 300 bio $
 Kuwait Investment Authority 250 bio $
 Hong Kong Monetary Authority 173 bio $
 Qatar Investment Authority (Volkswagen)
 Singapore Investment Corporation
 Many of the new economies’ state funds invested heavily in
American and European firms during crisis
31

ASIA, MIDDLE EAST AND THE BRICS
 Chinese Shandong Heavy Industry buys Ferretti (Riva, – 374
mio euro) from Candover (PE fund)
 Brasil > UK
 Rosneft > ExxonMobil
 Record results: Ferrari, Porsche,
De Beers, LVMH, Rolls Royce,…
32

INTEREST RATES
33

FACEBOOK IPO

FACEBOOK IPO
 Amount to be raised: $ 5 bio
 Total Valuation: $75-100 bio
 Dual-class shares
 Zuckerberg has 18% ownership but 57% of voting
rights
At market value of $100 bio:
 845 mio user  $118/user
 Revenues: $ 3.71 bio  P/S= 27
 Profit: $ 1 bio  P/E= 100
43

B-POST FIRST IPO IN BRUSSELS IN MORE
THAN THREE YEARS
 Exit of CVC (25%-30% shares)
 CVC will keep 15%
 Belgian government: 50% + 1 share
 Value estimted around €3 bio
 Syndicate of banks responsible for IPO:
JP Morgan, Nomura, BNP Paribas Fortis, Morgan
Stanley, UBS, KBC, ING, Belfius and Royal Bank of
Canada
 High dividend yield (6-8%)
 26000 FTE
 10.5 letters a day

TOP IPOS IN BRUSSELS AND THEIR
PERFORMANCE
Source: De Tijd

HOLLYWOOD DISCOVERS CROWDFUNDING
CANNES, France--The Cannes Film
Festival can sometimes make room for
someone a little different. Someone,
say, like Jeremy Saulnier, a little-
known director who, at 36, has used a
little pluck and plenty of Kickstarter to
defy the stereotypes of the world's
most prestigious (and expensive)
festival.
Thanks to the democratizing advantages of crowdfunding, Saulnier is showing an alternative
path to the normally elite precincts of the Cannes Film Festival. Saulnier’s film "Blue Ruin"
isn't like most here, which are financed lavishly by foreign distributors, Hollywood studios or
government film funds.
Saulnier and his wife liquidated their retirement accounts, refinanced their home and ran up
well over a $100,000 in credit-card debt to make the movie. But the real key came when,
needing tens of thousands of dollars to trigger cast and crew deals, Saulnier put his project
on Kickstarter. He raised the necessary $35,000 in a matter of weeks.

RAISING DEBT: SOME RECENT BOND ISSUES
 ArcelorMittal (BBB-): $3 bio: 3.75% (5 year), 5.50% (10
years), 6.75% (30 years)
 Jaguar Land Rover (B+): $1.6 bio (8.125%)
7 years
 AB Inbev (A-): € 750 mio (4%!!!) 10 years
 Hyatt hotels (BBB): $250.0 (3.875% -5 years) and $250.0
(5.375% - 10 years)
52

FINANCING AT LOW COST
 Oct 2010:
 Wal-Mart: 750 mio $, 3-year, 0.866% (30 bp over
treasuries)
 Microsoft: 1 bio $, 3-year, 0.931% (25 bp over
treasuries)
 Long terms (end of 2010)
 JP Morgan Chase: 5.5%, 30 years
 Goldman Sachs: 6.125%, 50 years
 Rabobank: 5.8%, 100 years
53

!

CASH GIANTS S&P500 STOXX600
Source: De Tijd

WHO MASTERS THE FIELD OF FINANCE?
FORBES: World’s Billionaires
69
Rank Name Citizenship
Net Worth
($bil)
1 Carlos Slim Helu Mexico 53.5
2 William Gates III United States 53.0
3 Warren Buffett United States 47.0
4 Mukesh Ambani India 29.0
5 Lakshmi Mittal India 28.7
6 Lawrence Ellison United States 28.0
7 Bernard Arnault France 27.5
8 Eike Batista Brazil 27.0
9 Amancio Ortega Spain 25.0
10 Karl Albrecht Germany 23.5

INVESTMENTS
 Best NASDAQ performers since December 2000,
annual return:
 Monster Beverage: 60%
 Apple: 44%
 Priceline.com: 36%
 Amazon.com: 17%
 eBay: 11%
72

FIRMS IN TROUBLE / BANKRUPTCIES / CH11
 Philips considers selling TV business
 Saab
 Eastman Kodak
 American Airlines
 Baseball club LA Dodgers
 Chapter 11
 Borders (second largest brick-and-mortar bookseller)
 Chapter 11
 Closing 200 shops
 Focus on Borders.com
76

JOB CUTS ANNOUNCED IN LAST MONTHS
 HSBC: 30,000; Lloyds: 15,000; UBS: 3,500
 Bank of America: 40,000
 Goldman Sachs & JP Morgan: 1,000
 Unicredit: 5,200 jobs
 RIM/Blackberry: 2,000; Yahoo: 2,000
 Philips: 4,500; Nokia Siemens Networks: 17,000
 Astra-Zeneca: 7,300 / Novartis: 2,000 jobs / Roche:
4,500 jobs
 Pfizer
 Patents expire, eg Lipitor (peak sales: 12.9 bio/year;
cumulative 117 bio $)
 Procter&Gamble: 5,700
 American Airlines: 17,000
77

TOP COMPANIES: HIGHEST PROFITS 2010
82
Rank Company
Profits 2010 ($
millions)
1 Nestlé 32,843.0
2 Gazprom 31,894.5
3 Exxon Mobil 30,460.0
4 Industrial & Commercial Bank of China 24,398.2
5 Royal Dutch Shell 20,127.0
6 China Construction Bank 19,920.3
7 AT&T 19,864.0
8 Petrobras 19,184.0
9 Chevron 19,024.0
10 Microsoft 18,760.0

TOP COMPANIES: MONEY LOSERS
Source: CNNMoney.com83
Rank Company
Loss 2009 ($
millions)
1
American International
Group
99,289
2 Fannie Mae 58,707
3 Freddie Mac 50,119
4 General Motors 30,860
5 Citigroup 27,684
6 Merrill Lynch 27,612
7 ConocoPhillips 16,998
8 Ford Motor 14,672
9 Time Warner 13,402
10 CBS 11,673

CORPORATE GOVERNANCE
 Corporate governance, VW: Ursula Piëch (55)
joins VW Board – Fernand Piëch is 74
 Porsche-Piëch family has 5/20 seats
 New York Times: cumulative profit last 4 years:
3 mio euro, CEO Janet Robinson got sacked and
got golden parachute of 23.7 mio dollar
 Tim Cooks made 378 mio $ in 2011 (Jobs 2006:
647 mio $)
 Bettencourt (89) leaves l’Oréal Board
84

ACCOUNTING FRAUD
 Olympus
 Japanese company, prefer to hide fraud than to
lose face/reputation
 Decades of manipulated figures
 CEO Michael Woodford was critical, got sacked
 -29% (maximum Tokyo allows) on announcement
 Issues regarding consultancy fees, especially
regarding M&A, payments to Cayman islands,…
 Due diligence, corporate governance:
underdeveloped, lack of transparency (keiretsu –
cross-participations), often no independent
directors
85

JÉRÔME KERVIEL
Source: Financial Times87
Kerviel found guilty
in SocGen scandal
Jérôme Kerviel, the rogue
trader, was sentenced to three
years in prison and ordered to
pay €4.9bn ($6.75bn) in
damages to Société Général for
taking risks that could have led
to the collapse of his former
employer, France’s second
biggest bank.

FEEL LIKE SOME MORE?
 Executive Master Class Corporate Finance (Fall
2013)
 Executive Master Class Controllership (spring
2014)
 Financial Management for Non-Financial
Managers (September 2013)

Experience Vlerick Day - Wouter De Maeseneire

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