NEWSLETTER of November 3, 2023

The following content has been added at finexpert:

Lazard
EUROPE´S STOCK MARKETS: CHALLENGING MISPERCEPTIONS
In the gap between widespread perception and reality can lie investment opportunity. We believe multiple misperceptions exist around the European stock market, the region’s economies and its companies. Many of these misperceptions or stereotypes are often rooted in an outdated understanding of the European corporate and investment landscape. By hanging on to these outmoded perspectives, investors may be missing out on structural investment opportunities and exposure to Europe’s world-class companies in long-term growth sectors. We set out to challenge these stereotypes below and encourage a more contemporary understanding of Europe’s stock market scene. >more

BlackRock
2023 GLOBAL INSURANCE REPORT
This year’s report comes in the second post-Covid year marked by stubbornly persistent inflation, materially higher interest rates, and greater market volatility. For insurers, these challenges are coupled with upcoming changes to regulatory and accounting regimes, creating new challenges and opportunities as they adapt to these new market and business conditions. >more

Amundi
GLOBAL INVESTMENT VIEWS - NOVEMBER 2023
Markets have remained range-bound in the past few weeks as they try to judge the direction of monetary policies, economic growth, and the inflation trajectory, regarding which the assessment is further complicated by the Israel-Hamas war. We continue to expect a mild US recession in H1, higher-for-longer rates and tight financial conditions. >more

Kroll
GLOBAL SOFTWARE SECTOR UPDATE — FALL 2023
Higher for longer — three simple words that marked a disappointing conclusion to Q3 as expectations diminish for a return to more accommodating monetary policy. Recent economic data points to ongoing tension in labor markets and the Fed is signaling they will continue to be cautious in the fight against inflation. This dampened the outlook for a software market that was energized by public markets' recovery and ongoing AI hype built up over the summer. >more

DO INVESTORS OVERVALUE STARTUPS? EVIDENCE FROM THE JUNIOR STAKES OF MUTUAL FUNDS
Vikas Agarwal, Brad M. Barber, Si Cheng, Allaudeen Hameed, Harshini Shanker, and Ayako Yasuda
2023
We show that mutual funds report their junior stakes in startups at 43% higher valuation than model fair values that consider multi-tier capital structures of startups. The latest-issued and most senior security is worth 48% per share than junior securities held by mutual funds, implying that mutual funds mark junior securities close to par with the senior securities. Our findings are robust to model assumptions. Identical valuations reported for dual holdings of senior and junior securities imply 37% discrepancy in implied values of the firm. Overvaluation is lower for fund families with longer experience in private startup investments, and higher for junior securities purchased in secondary transactions. Overvaluation declines after down rounds (new financing rounds with purchase prices lower than previous rounds) and near IPOs. The results are consistent with mutual funds neglecting the probability of negative outcomes in which junior securities are paid less than senior securities and overweighting successful exits where all securities convert to common equity and are valued equally. >more

CALL ME MAYBE? BONDHOLDER RELATIONSHIPS AND CORPORATE CALL POLICY
Paul Beaumont, David Schumacher, and Gregory Weitzner
2023
When a firm refinances a bond by calling it, existing bondholders are forced to sell their bonds back to the firm at a below-market price. Do these bondholders replace the bond that was just called by buying the newly issued one? This paper shows that calls have a large impact on firms' bondholder relationships. After a call, existing bondholders are far less likely to participate in the firm’s subsequent bond issuances. Funds that are most valuable to firms (i.e., top bondholders or large funds) are more likely to exit, consistent with them exerting market power. In turn, firms are more likely to delay calling their bonds when they have more attractive investors in their bondholder base. Finally, we show that firms' borrowing costs are affected by their reputation for call delays. Our results show how call policies affect firm/bondholder relationships and highlight the role of both firm and investor reputation in financial markets. >more