Bundle of investment news: the success of GlobalFoundries and Shell's move to London

Пачка инвестновостей: успехи GlobalFoundries и переезд Shell в Лондон

GlobalFoundries finds unexpected success – even if it was expected. Shell is planning to move to the UK – and this is rather a plus for investors.

Disclaimer: when we talk about, that something has grown, we mean comparison with the same quarter a year earlier. Since all US issuers, then all results are in dollars. When creating the material, sources were used, inaccessible to users from the Russian Federation. Hopefully, you know, what to do.

"Why yes why? To make ham": how GlobalFoundries are doing

In October, we did a business review of semiconductor company GlobalFoundries. (NASDAQ: GFS) ahead of her IPO. More than three weeks have passed since the company went public., so we can draw some intermediate conclusions about the present and future of GFS.

Solid guessing. Among stock market analysts, there is a common habit of guessing about the future of issuers' quotations based on the results of their IPO. If during the day the placement of shares ends with an increase in their price above the original, then the near future of these shares will be positive - so, investors showed significant interest in the stock, which will be preserved and, may be, even grow for a while. But if the share price by the end of the trading session will fall below the placement price, it means, that strong growth should not be expected, because investors showed no interest.

Well, generally, kind of like with marmots, garuspitsia and augurs. GFS started trading on 47 $ per share and by the end of the day was cheaper, than when placed — 46,4 $. So by all indications it was a sluggish IPO., did not foreshadow much success for the shares afterwards. But in the week following the IPO, GFS shares rose from 46.4 to 63,83 $ - that is, almost on 34% just, without any significant news!

That tells us that., that the exchange is always guessing and asking about, why the target price in the investmentide of shares is such-and-such, pointless. Such an increase in GFS quotations after such an IPO defies any explanation from the point of view of technical analysis., complex formulas and other dances with tambourines. It just happened..

Пачка инвестновостей: успехи GlobalFoundries и переезд Shell в Лондон

Tricks and tricks. Success of GFS shares, albeit belated, confirms, that the assumption we made in the review that, that the company's shares are waiting for artificial pumping in order to attract capital in the field of semiconductor production in developed countries, was right.

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GFS has too many problems, to attract investors "naturally": it is unprofitable even in the face of wild demand for semiconductors, while its competitors have huge bottom margins. Actually, the lack of growth on the day of the IPO and indicates the lack of natural investor interest in these shares. Such an increase in shares shows, that interested investors pumped up the company's quotations for political reasons - to attract private capital to the field of semiconductor production and create such production in developed countries far from China., reducing the dependence of the developed economies of the West on the situation in East Asia.

Why do Western countries need all this?, already visible on the news: Ford (NYSE: F) yesterday concluded a strategic agreement with GFS on cooperation in the production of semiconductors in the United States. After all, now it is a big problem to get new chips for the production of cars.. GFS will help solve this problem — and, most likely, cheap - because it is a loss-making company, as we remember. To make there more such GFS, and needed to pump up its shares.. Building a new chip factory is very expensive — and if you don't do it in China or its dangerous proximity., then the cost will be very high. It could happen, that profits will not be in a reasonable time. Shares of GFS from the news about Ford rose slightly - only by 3%.

But in general, the success of GFS on the stock exchange allows us to hope for pumping up quotations of already existing manufacturers of semiconductor products and equipment from developed countries..

Your residence permit is at risk: Shell wants to move to London

Anglo-Dutch oil and gas company Royal Dutch Shell (NYSE: RDS.A) decided to become less Dutch and move its headquarters from Amsterdam to London. Shell's announced relocation plans have the following objectives:.

Simplify the ownership structure of the company – the company intends to create one class of shares instead of the current two. Now the company has Dutch shares (RDS.A) and English (RDS. B).

Facilitate share buybacks. The Dutch shares of the company are subject to a special tax 15% on dividends. This tax does not apply to the Company's English shares., which means, the company will have more money, which she can spend on the redemption of shares. Now, eg, regulators forbid Shell to buy more 25% the average daily trading volume of the company's shares per quarter is approximately $2.5 billion per quarter., — and after the move, the ban will disappear. In theory, the move will help increase Shell's share buybacks to $5 billion a quarter — almost in the 2 times. Some particularly brazen shareholders believe, that the volume of buybacks may grow to 6 billion per quarter.

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Strengthen the competitiveness of the company. This is the most mysterious moment., left without specifics. There is a theory, that the company is moving to the UK, in order to avoid stricter supervision by environmental regulators from the continent. But I doubt it..

Firstly, Shell is one of the leaders in the oil and gas industry in investing in clean energy. It is in second place after Total and by a wide margin from the next company on the list of Equinor..

Secondly, its plans to reduce emissions meet the wishes of environmentally friendly investors much more than other oil and gas companies.. By the way, MSCI's Shell ESG rating is higher, than her colleagues in the oil and gas shop.

Yes and, judging by the news from the environmental summit in Glasgow, the UK government will adhere to an equally progressive agenda compared to its former EU neighbours.. Moving the company to London will not solve the problem with its onsling court cases on the part of ecology..

To a large extent, the decision to move was dictated by the start of the campaign of the investment fund Third Point. Let me remind you, that Third Point offered to split the company into two parts in the hope of, that two different issuers separately will grow more vigorously. Then we talked, that Shell, most likely, "will understand the hint" correctly. After all, shareholders are dissatisfied with the stagnation of quotations in the presence of objectively good business., and Shell will do something for them, from what shares will grow. Actually, that's what happened.

And one moment: when moving to London, Shell will remove the words "Royal Dutch" from the name. On trading in Dutch, American and British stock exchanges moving will not affect - they will remain there. Only now there will be not two classes of them., and one.

Shareholders vote on moving to London will take place 10 December. The move may not take place, if a 75% investors will vote against. But, considering all of the above, think, that among investors, most will welcome the relocation of the company. Anyway, no reason to think otherwise: moving the company is beneficial to investors.

Another thing, that the Government of the Netherlands is extremely dissatisfied with the situation. There is a risk, that it will decide to punish Shell with a large move tax. At one time, Unilever left the Netherlands for the UK and was also threatened with such a tax - the amount was about 11 billion euros.. truth, then the threat never materialised., because the dutch did not adopt a law on such a tax to change the corporate registration.. But for the sake of Shell, such a law can be adopted on an emergency basis.. Or maybe, the Dutch government will make concessions to the company with a tax on dividends, because of which Shell, in fact, and moves. Anything is possible.

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For Shell shareholders, the company's move to London is considered rather positive.. I do not approve of share buybacks – it would be better if the company spent more on business development, - but it reduces its P / E and makes stocks more attractive to third-party investors. All this artificially creates demand for its shares., which contributes to the growth of quotations.

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