Welcome to Read Sunday, your essential source for a concise and impactful weekly Business & Finance recap. Dive into the pivotal market highlights from the week, distilled for your convenience, and stay tuned for the thought-provoking editor's piece that rounds off your Sunday with insightful perspectives.

Market Recap

This Week’s Headlines

Public Markets

• Arm, the chip design firm under the ownership of SoftBank, has officially submitted paperwork for an initial public offering (IPO) on the Nasdaq exchange. This move is anticipated to result in one of the most substantial IPOs in recent times. This action follows the decision by Silicon Valley chip manufacturer Nvidia to withdraw its $40 billion bid to acquire Arm, a development that occurred around 18 months ago. The proposed acquisition had been challenged by the Federal Trade Commission, leading to its abandonment. The company's financials indicate a revenue of $2.68 billion for the fiscal year concluding in March, slightly below the $2.70 billion of the previous year. Arm's last quarter showed a net income of 10 cents per share, a decline from the 22 cents per share reported in the prior year.

• Teva Pharmaceuticals, a drug manufacturer, has agreed to a payment of $225 million in criminal fines spread out over five years as a settlement for charges connected to price fixing involving three medications. This resolution includes a generic cholesterol drug, which Teva intends to divest. The U.S. Department of Justice has confirmed this development. Glenmark Pharmaceuticals will pay $30 million to settle charges that it colluded with Teva to manipulate prices for the cholesterol drug pravastatin. As part of this settlement, Glenmark will also divest its own version of the drug.

• Lowe's earnings for the second quarter of 2023 presented a mixed picture. As consumers engaged in springtime projects, they provided a counterbalance to the weakening demand for home improvement. While the company exceeded Wall Street's earnings estimates, it fell slightly short in terms of expected sales. Looking ahead, Lowe's maintains its full-year forecast, with anticipated total sales ranging between $87 billion and $89 billion for the specified period. The projection includes a predicted 2% to 4% decrease in comparable sales for the fiscal year, alongside an expected range of adjusted earnings per share between $13.20 and $13.60.

Economy

• Highlighting that the economy's growth has outpaced initial expectations and consumer spending has remained robust, Powell acknowledged the potential for sustained inflationary pressures. He reaffirmed the Federal Reserve's commitment to maintaining a heightened benchmark rate until inflation subsides to its targeted 2%. Since his address at the Jackson Hole conference in the previous summer, the Federal Reserve has elevated its benchmark rate to a 22-year peak of 5.4%. Inflation, which reached a pinnacle of 9.1% in June 2022, has slowed down to 3.2%, although it remains above the Federal Reserve's intended 2% target.

• At the start of the week, the average interest rate for 30-year mortgages saw another significant spike, reaching 7.48%. This figure represents the highest peak recorded since November 2000. Over the course of a couple of years, mortgage rates have undergone an almost threefold increase from the exceptionally low levels witnessed during the height of the pandemic. As recently as January 2021, the average rate for a 30-year mortgage was as low as 2.65%.

• In July, existing home sales in the U.S. reached their lowest point in six months. This decline can be attributed to homeowners with low-interest mortgages opting to hold back from selling their properties. The reason behind this reluctance is the significantly elevated cost of new mortgages for potential buyers aiming to acquire another home, which has reached levels not seen in decades.

Mergers & Acquisitions

• On Thursday, Roark Capital, a private equity firm, entered into an agreement to acquire Subway. The deal places an estimated value of up to $9.55 billion on the U.S. sandwich chain, encompassing its debts. This valuation is contingent upon the attainment of specific financial performance goals.

• On Wednesday, privately owned steel firm Esmark announced its decision to abstain from engaging in the acquisition proceedings of U.S. Steel Corp (X). Esmark also conveyed its deference to the stance taken by the United Steel Workers (USW) union, which is backing the offer presented by Cleveland-Cliffs (CLF). In the previous week, Esmark had put forth an offer to acquire U.S. Steel for $35 per share, translating to an equity valuation of $7.8 billion.

• The U.S. Justice Department has given its approval for the acquisition of ForgeRock, a prominent identity and access management company, by Thoma Bravo for a sum of $2.3 billion. This move clears the path for Thoma Bravo, a technology & software focused private equity firm, to integrate ForgeRock with its earlier acquisition, Ping Identity.

Read Sunday - Opinion

Exploring Growth Equity Investing and its Impact on Established Companies

Growth equity investing is an investment strategy that directs capital towards established companies demonstrating a certain level of success and potential for further expansion. In contrast to traditional venture capital, which typically targets early-stage startups with significant growth potential, growth equity investments are primarily directed at more mature companies that are already generating revenue and may even be profitable.

The core objective of growth equity investing is to facilitate the growth and expansion of these established companies. Investors inject funding in exchange for an ownership stake, often taking the form of equity or convertible securities. These recipient companies are generally past their initial startup phase but still harbor opportunities for scaling operations, entering new markets, creating fresh products or services, or otherwise enhancing their market share…

Read More

Earnings

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