Hygo IPO terms and other non-headline news +3

10:55 17-Sep-20

Golar has announced that its Hygo IPO should price just over 23M shares in the $18-21 range.  That's very good multiple implying a market cap around $2.4b for operations that generated $44M over the last year.  By my calculations, this should raise about $225M for Golar LNG, at the mid-point of the range.  GLNG is up 6% in early trading, since this secures its ability to gain full ownership of the Bacarena terminal, while GMLPP is still below my $20 mark. 

The question of which to buy is mainly a matter of whether one wants long or shorter term returns, with the ordinary or preferred shares, respectively.  I see far less risk with GMLPP, but the market appears to be focusing on natural gas down to $2.16 as a tailwind for GLNG lately, and I have to admit that the shale collapse is a plausible tailwind for alternative sources globally.  Within North America, I still see RNG as the trend, and note that Xebec's fund partner has hired a general manager.

Those looking to take nearer-term GRoDT chances might still consider RESN, though.  Verizon is planning to begin indoor 5G mmWave deployments by year-end with Samsung hardware.  That puts Resonant's make or break point near the middle of next year.  To me, it's a symbol of how backward American telecommunications are, with system that allows vendors to promote customer lock-in over efficiency and interoperability.  It's not certain that Resonant is the beneficiary of this particular deployment, but it's a chance worth taking to me, especially in light of recent market behavior.

This morning the market took another big step back, but I look for that to be followed by many baby steps forward.  Lacking original ideas and forward understanding, pundits are citing yesterday's FOMC statement, but there were no surprises there.  The Fed's charts show an expectation for GDP to recover next year, and employment over the next two.  At this point, nobody can say when the Fed will taper asset purchases, let alone raise rates.  For cynics like myself, the answer on the latter point is "never, meaningfully", which is negative for BGC and positive for Virtu. 

Instead, I see the market blowing off the improvement this morning's weekly jobless claims as a moment of doubt, inspired by bad American data and real troubles in Europe.  The Bank of England is considering negative rates as the Brexit train wreck plays out, and it's discouraging that the Swiss even have to vote on a ridiculous motion to violate agreements with the E.U., since immigration there is already at a pandemic-inspired all-time low for the free movement era.  In short, Europe is still not ready to take the financial leadership torch from America, leaving institutional investors a menu of bad options.  Bad or not, though, Wall St. (and London, and eventually Frankfurt, Amsterdam, etc.) are never going to stop doing what they do voluntarily, which means more upward pressure on stocks as bond yields shrivel or disappear entirely.  That's what's pushed CTL (LUMN as of tomorrow morning) above $11 against the market, and I stil expect it to be pushed further over time.  It also explains HYGO pricing; IPOs pretty much exist to rip off retail investors these days.  In the meantime, retail investors can take advantage of being able to go where Big Money can't, by taking meaningful stakes in niches like GMLPP, XEBEF and RESN, according to their individual tolerances.