Facebook repurchased some of its voting, Class A shares during the quarter ended March 31, 2017. Last fall, Facebook announced a $6 billion stock repurchase plan beginning in 2017.
So far this year, Facebook has purchased $228 million of the Class A stock. Facebook’s repurchased stock could later be used for another acquisition since founders, due to tax reasons, may prefer voting stock over cash.
While less than Apple, Alphabet’s latest 10-Q shows $92 billion in cash for the quarter ended March 31, 2017. $56 billion or more than half of Alphabet’s total cash is held overseas and the company is not planning any repatriations. During the quarter, Alphabet also spent $2 billion repurchasing some of its stock.
Apple doesn’t have a big cash hoard. Most of Apple’s cash is overseas, and it’s less than you think. By now, everyone realizes that repatriating Apple’s overseas cash means a large tax bill; so Apple has borrowed against the overseas cash to pay dividends and repurchase stock.
At the end of its last quarter, on December 31, 2016, Apple had cash of $245 billion, of which $230 billion was held overseas. On the other side of the ledger, Apple had $77 billion in long-term debt and if paid back today, Apple would have cash of about $170 billion.
Intel wrote-off $48 million of private company investments in the most recent quarter ending April 1, 2017. In addition, Intel made investments of $320 million in private companies during the same quarter.
Index providers – FTSE, MSCI, and S & P Dow Jones – are currently deciding whether and/or when Snap’s sole, zero-voting stock should be included in an equity index. After considering feedback from market participants, MSCI will deliberate Snap’s fate in May while FTSE will do the same in June. S & P Dow Jones’s decision will take a little longer.
S & P Dow Jones markets and maintains many indices, including its namesake, the S & P 500 Index. Inclusion in the index is done annually by committee. Currently, S & P is seeking comments from market participants on whether companies with dual class or non-voting shares should be included in the S & P Dow Jones indices. Market participants have until May 3, 2017 to complete a confidential online survey.
Pushing for index exclusion is the Council of Institutional Investors (CII), who is very angry with Snap. The CII does not like that Snap’s sole, zero-voting stock breaks with the tradition of giving investors a say in management in exchange for cash. In addition, the CII does not like that Snap’s stock lacks financial disclosure which was made permissible under the Jumpstart Our Business Startups Act of 2012.
On April 27, 2017, the CII made public its confidential feedback to S & P Dow Jones. Besides Snap, the CII is very angry with the NYSE for listing Snap’s sole, zero-voting stock and letting the dogs loose. The CII fears that other companies will issue non-voting stock or “Snap-lite” securities. Since stock exchanges are financially motivated to list companies, the CII believes index providers are their last chance to catch the runaway dogs.
Alphabet’s earnings press release didn’t talk about it. Alphabet CFO, Ms. Porat, did say that revenues increased 22% from the prior quarter, making it a “terrific start to 2017”. You’ll need to wait until Alphabet releases its next quarterly 10-Q to find out about the Waymo v. Uber lawsuit.
Filed in February 2017, Waymo v. Uber avoided disclosure in Alphabet’s last filing for the quarter ended December 31, 2016. What’s known about the case has come mostly from court filings, but we have not heard much official from Alphabet. That should end when Alphabet files its 10-Q for first quarter of 2017.
Legal proceeding can be boring, but when money is at stake, then the bottom line can be impacted. Alphabet recently escaped paying billions in damages to Oracle in another lawsuit over intellectual property. Waymo v. Uber should prove that tech companies not only fight in the marketplace, but also in the courtroom.
Inside Intel’s recent earnings filings was more information on its Mobileye acquisition. Intel expects to close the deal later this year after purchasing all of Mobileye’s stock for about $15 billion.
All those billions are coming from Intel’s overseas operations, which have only $14 billion in cash as of April 1, 2017. So Intel needs an extra billion to buy Mobileye.
Silver Lake Partners closes yet another tech fund. This time, this fund raised about $15 billion and joins other tech funds with lots of “dry power”, such as the $100 billion Softbank Vision Fund. Unlike the Vision Fund, Silver Lake’s latest fund will focus on US tech deals rather than international ones.
With billions following into tech, Samantha Greenberg of Margate Capital, predicts consolidation in the semiconductor and software sectors. Ms. Greenberg made her forecast in January, before the closure of Silver Lake’s latest fund.
Whether Ms. Greenberg’s thesis works out, money will continue to flow into tech companies and could dramatically increase assets prices. Toshiba recently received multiple offers for its memory unit from public companies, such as Apple, and private equity firms including Silver Lake Partners.
Blackstone hints at a venture capital unit in this week’s earnings call. Stephen A. Schwarzman, Blackstone co-founder, now follow his peers – KKR and TPG- into an another asset class. Early in their founding cycle, Airbnb and Uber received TPG’s money and most recently, Lyft got money from KKR.
No should ever doubt Blackstone performance in leveraged buyouts. In fact, Blackstone has also been successful applying private equity strategies to real estate under the guidance of Mr. Jonathan Gray.
Unfortunately, private equity firms have not been successful in other alternative assets, such as hedge funds.
In the past several years, private equity firms – KKR, TPG, and Carlyle – have shut down some or all of their hedge funds. In December 2016, Blackstone ended its $1.8 billion hedge fund, Senfina.
Now Blackstone may be successful in venture capital- it has venture veteran Jim Breyer on its boards – but time will tell.
On May 10, 2017, Snap reports its first quarter earnings as a public company and also as a Emerging Growth Company. That latter designation was one Snap received from filing under Jumpstart Our Business Startups (JOBS) Act of 2012.
Snap and other companies filing under the JOBS Act can take advantage of limited disclosure requirements that were enacted to encourage private companies to go public. For example, Snap is not required to have its internal controls audited, which is normally required of public companies after the Sarbanes Oxley Act of 2002.
On a quarterly basis, Snap’s filings will be similar to other public companies; on an annual basis, Snap will be different from other public companies. A year from now, Snap will need to present three year audit financial statements, but it is not required to report executive compensation information as long as it remains an Emerging Growth Company under the JOBS Act.