These are stories Report on Business is following Thursday, May 19. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.
LinkedIn soars on debut The debut of LinkedIn Corp. on the New York Stock Exchange today was nothing short of a spectacle, one that raises questions about the valuation of the professional networking site and, perhaps, other social media that will follow.
LinkedIn priced its IPO late yesterday at $45 (U.S.) a share, valuing the company at more than $4.3-billion, at that point deemed rich by some observers. By the time anyone had a handle on the frenzied trading today, the stock had surged well past $100. It settled back somewhat to close at $94.25, for a valuation more in the area of $9-billion.
Anyone remember Alan Greenspan's "irrational exuberance?" How about the Dutch tulip bubble of the early 1600s? Or African ostrich feathers in the early 1900s?
Some believe the valuation is much, much too rich.
"This is a very rich valuation which is reminiscent, to say the least, of the year 2000 exuberance," Michael Yoshikami, chief investment strategist at YCMNET Advisors, a wealth management firm, told The Financial Times. "To some extent, investors are buying LinkedIn because they cannot get into Facebook. People are just really desperate to get into social media."
Michael Carnegie, an industry professor at the DeGroote School of Business in Hamilton, noted LinkedIn's revenue of $243-million and profit of $3.4-million last year, questioning the value.
"The market must be expecting a huge growth in revenue and profit to justify that level of market cap, especially since the company is not expected to show a profit again for at least several quarters," he said.
CMC Markets analyst Michael Hewson cited the "IPO-induced sugar rush" surrounding LinkedIn on the markets today, noting that its shares "opened up nearly 95 per cent at the open at $83 raising concerns about the equity market being in bubble territory."
Michael Moe, chief investment officer of GSV Capital Management in Woodside, Calif., told Bloomberg Television yesterday that it was out of hand.
Note that was yesterday, before today's pop on the New York Stock Exchange."To earn the valuation, it has to continue to grow very, very fast," he said.
As The Globe and Mail's Simon Avery reports today, the LinkedIn IPO and debut is a test case for other social media services such as Facebook, Twitter and Groupon.
"LinkedIn's IPO is a litmus test for the other social networking platform companies," said Bill Buhr, IPO strategist for investment research firm Morningstar Inc. He added: "The market is very frothy."
Of course, one successful IPO does not a bubble make. Google certainly wasn't in 2004. There's a lot riding on LinkedIn, some observers said, in anticipation of other market debuts.
"In Silicon Valley, everyone wants this to be a success," lawyer Victor Shum of Jeffer, Mangels Butler & Mitchell in San Francisco, told The Wall Street Journal.
"More success means there will be more investments in new companies. If it works, there's going to be a big push from a lot of social media companies to try to get out before Facebook does. Because once Facebook comes out, they're not going to be able to get any analyst attention."
(For the record, here's what Mr. Greenspan said in 1996, sending markets into a tizzy: "But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?")
- LinkedIn debut lives up to the hype
- David Berman's Market Blog: LinkedIn doubles, but this ain't the '90s
- LinkedIn IPO a 'litmus test' for social networkers
- LinkedIn prices IPO at $45 a share
- LinkedIn boosts IPO price range
- David Milstead's Vox: LinkedIn IPO: An expensive and unproven venture
Pilots reject proposed deal Pilots at Air Canada pilots have rejected a tentative labour agreement that called for the creation of a low-cost carrier and pension reforms, Globe and Mail transportation writer Brent Jang reports.
Of the 2,831 ballots cast, 66.6 per cent voted against the tentative pact.
Members of the Air Canada Pilots Association finished the 10-day voting process today. The tally showed 1,885 votes against the proposed collective agreement and 946 votes in favour.
Jockeying for the IMF The resignation of Dominique Strauss-Kahn as chief of the International Monetary Fund has kicked off a scramble for his successor. Notable this time is that the emerging nations of Asia are asking why the position must be filled by a European.
A European has always held that post, and EU leaders are calling for that tradition to be maintained.
"Naturally the developing countries have a claim on the highest position of the IMF or World Bank but the current situation speaks for a European candidate given the considerable problems of the euro," Ms. Merkel told reporters in Berlin, according to Bloomberg News.
By many accounts, France's Finance Minister Christine Lagarde is the top contender to succeed Dominique Strauss-Kahn as chief of the International Monetary Fund. She's already finding support among the Europeans, and is a highly regarded monetary official, though Asian countries also believe it may be their time to lead.
As The Globe and Mail's Kevin Carmichael reports today from Washington, Mr. Strauss-Kahn, who is charged in an alleged sexual assault and is in jail in New York, resigned. He has denied all allegations, and no charges have been proved in court.
If betting is any guide, Ms. Lagarde is also the leading contender for British book maker William Hill today.
Ms. Lagarde is given 6-to-4 odds on the book maker's web site. Others on the list include Montek Singh Ahluwalia, a former IMF director (5-to-1), Singapore's Finance Minister Tharman Shanmugaratnam (8-to-1), Kemal Dervis, former Turkish finance minister (5-to-2), and Bundesbank chief Axel Weber (7-to-1). The longest shot is Bank of Mexico Governor Augstin Carstens, at 25-to-1.
Bank of Canada Governor Mark Carney is given 10-to-1 odds in betting that runs until tomorrow.
What that means is that if you wanted to bet on Mr. Carney, who adeptly guided Canada through the financial crisis and recession, $1 would bring you $10 plus the original bet of $1 if he's picked as the next chief.
- Dominique Strauss-Kahn resigns as IMF chief
- Europe says next IMF chief must come from EU
- Europe moves to protect claim to top IMF job
- Race to replace IMF head takes a wider path
- The next question: Who will replace IMF's Strauss-Kahn?
- Who will succeed Dominique Strauss-Kahn?
Carney paints stark picture Bank of Canada Governor Mark Carney painted a stark picture of the global recovery at a private event last night, saying the United States probably won't address its fiscal troubles, which he has warned could threaten Canada's economy, until after next year's election, The Globe and Mail's Jeremy Torobin writes.
Mr. Carney also told guests at a closed-door dinner held by the United Jewish Appeal that judgment on how well Canada emerged from the recession shouldn't be made for several years because the financial crisis is not really over, according to an account by an economist at the event in Toronto.
IEA urges producers to act The International Energy Agency is pleading with energy producers to take action to head off a hit to the global recovery from high oil prices .
"Additional increases in prices at this stage of the economic cycle risk derailing the global economic recovery and are neither in the interest of producing nor of consuming countries," the Paris-based adviser said in a statement today after its board meeting.
"Oil importing developing countries are most likely to be seriously affected by high oil prices, undermining their economic and social well-being," it said in what was an unusual move for the group.
"In these circumstances, enhancing consumer-producer dialogue is urgently important to reach both short- and long-term solutions. The governing board urges action from producers that will help avoid the negative global economic consequences which a further sharp market tightening could cause, and welcomes commitments to increase supply."
The group said oil prices have declined by 10 per cent since May, but are still high, held aloft by market fundamentals, political uncertainty around the world, and simply future expectations.
"The IEA governing board expressed serious concern that there are growing signs that the rise in oil prices since September is affecting the economic recovery by widening global imbalances, reducing household and business income, and placing upward pressure on inflation and interest rates," it said.
"As global demand for oil increases seasonally from May to August, there is a clear, urgent need for additional supplies on a more competitive basis to be made available to refiners to prevent a further tightening of the market."
CPP Fund's assets grow The Canada Pension Plan Fund's assets rose to $148.2-billion at the end of March, up from $127.6-billion a year earlier, as its investment portfolio returned 11.9 per cent, The Globe and Mail's Tara Perkins reports.
That performance is down from the prior fiscal year, in which the fund returned 14.9 per cent. But, between investment income and CPP contributions, the fund took in an all-time record of $20.6-billion in new assets in the fiscal year ending in March.
Japan's economy shrinks Japan has plunged back into recession after the devastating earthquake and tsunami in mid-March did more damage to what had already been a faltering economy.
The economy shrank by 0.9 per cent in the first quarter, or 3.7 per cent at an annual pace, according to official data released today, marking the second consecutive quarter of contraction to meet the technical definition of a recession. While the disaster in Japan came at the end of the quarter, it dealt a hefty blow.
"While a further contraction was expected as Japan faced a triple threat of earthquake, tsunami and nuclear problems in mid-March, Q1 GDP contracted at a much faster pace than expected, falling by 3.7 per cent quarter over quarter annualized (-0.9 per cent quarter over quarter) versus expectations of an annualized decline of 1.9 per cent (-0.5 per cent quarter over quarter)," said Scotia Capital economists Karen Cordes Woods and Derek Holt.
"... While we are expecting to witness a rebound in Q3 as reconstruction begins, growth for the year as a whole will be quite modest."
EI claims decline Claims for regular jobless benefits in Canada fell again in March, by 3 per cent, marking the sixth monthly decline in a row.
Over all, initial and renewal claims were 226,600, Statistics Canada said today, down by 4.4 per cent or almost 10,500 from February.
"With this decrease, the number of claims received is the lowest since August 2008, just prior to the start of the labour market downturn," the federal agency said.
It does not say why those claims have declined.
Unemployment in Canada now stands at 7.6 per cent.
In the United States, weekly jobless claims fell to 409,000, a better sign but still above the 400,000 mark.
"Jobless claims continued to descend from their recent spike, but at 409,000 in the latest week, are still at levels consistent with moderate job growth and little progress in bringing unemployment down," said Avery Shenfeld, chief economist at CIBC World Markets.
Glencore has strong debut Glencore International had a fairly strong debut in London today, rising about 3 per cent in unofficial trading as the world's biggest commodities trader joined the stock market. It also turned its partners, led by chief executive officer Ivan Glasenberg, into Europe's newest billionaires or multimillionaires, Globe and Mail European correspondent Eric Reguly reports.
Glencore sold 1.14 billion shares at £5.30 each (about $8.60 U.S.), raising about $10-billion and marking the biggest initial public offering so far this year. The share price came at the mid-point of Glencore's original range, but slightly less than the guidance price issued early this week.
TD trims Dorel target Toronto-Dominion Bank has shaved $2 off its price target for shares of Dorel Industries Inc. after the Montreal-based company's first-quarter earnings miss yesterday.
TD Newcrest analyst Jessy Hayem's new target is $36, still with a "buy recommendation."
"Given the difficulty in passing through price increases, we believe that Dorel must resort to further squeezing suppliers or, at worst, continue absorbing the cost pressure to keep its offer in the opening-mid price point range," she said in a research report.
National Bank Financial analyst Hugues Bourgeois, on the other hand, maintained his $36.50 target and "outperform" rating.
"The challenging U.S. retail environment (in Juvenile) and cost inflation are expected to remain. Raising prices seems to remain a difficult task. On the other hand, Recreational is expected to continue to perform well as it reaps the benefits of its new product line and brand building initiatives."
Dorel is involved in everything from car seats and strollers to furniture and bikes and scooters.
Yesterday, it posted a drop in profit to $31.2-million (U.S.) or 94 cents a share, from $38.2-million or $1.15.
In Economy Lab today
It may be his most important task, and setting Canada's GHG policy course for the next four years will not be an easy one for Environment Minister Peter Kent. By his own admission, meeting Canada's GHG goals will be a daunting challenge and will require stringent regulations on oil and gas, electricity generation, transportation, and other industrial sectors. Andrew Leach examines the issue
In International Business today
With many of its 48 economies rebounding from the crisis faster than the rest of the world, sub-Saharan Africa is increasingly viewed as an opportunity rather than a burden. It is rising rapidly up the agenda for global investment managers and is talked about as never before in almost every big financial centre. The Financial Times reports
When it comes to hot real estate markets, Norway wouldn't be the first place to pop into the thoughts of most investors. But when Brian Milner asked top analyst Jan Willem to name his favourite under-the-radar market in the world, he didn't hesitate.
In Personal Finance today
What can you do about fees as an investor? Read the Fund Facts sheets being introduced across the mutual fund industry. They can help investors with key facts such as a fund's fees, a risk scale and deferred sales charges, Rob Carrick reports.
Making changes to the grounds of larger properties can help qualify them as 'principal residences.' Tax Matters columnist Tim Cestnick explains.
A new survey shows most customers of group-buying websites purchase deals because of irresistible prices, not because they need the product, Home Cents blogger Sonali Verma writes.
From today's Report on Business
- Target's Canadian foray hits cost hurdle
- Google's big bet on Canada
- For new industry minister, a steep learning curve
- Eric Reguly: If only the EU had listened to Strauss-Kahn's rescue plan