March 17, 2020 / 12:45 PM / 20 days ago

Breakingviews - Corona Capital, March 17: AMS, IPOs, Exxon and oil

LONDON (Reuters Breakingviews) - Concise views on the pandemic’s financial fallout from Breakingviews columnists across the globe.

Passersby wearing protective face masks following an outbreak of the coronavirus disease (COVID-19) are reflected on a screen displaying stock prices outside a brokerage in Tokyo, Japan, March 17, 2020.

LATEST

– Virus infects AMS’ M&A rights issue

– IPOs for virus winners in Italy

– Exxon Mobil wakes up to oil’s scary new world

FLOUNDERING AMS RIGHTS ISSUE PUTS UBS AND HSBC IN THE FIRING LINE. The Austrian sensor maker’s 4.6 billion euro takeover of Germany’s Osram Licht has entered another circle of financial hell. With AMS shares trading at around 9 Swiss francs on Tuesday, below the 9.2 Swiss francs offer price for a 1.7 billion euro rights issue meant to pay for the deal, there’s every chance of the deal imploding.

That points to two outcomes. If underwriters UBS and HSBC stick to the script, AMS will get its cash. But the banks will then be 46% owners of the enlarged AMS. The alternative is the duo pulling the ripcord, citing market turmoil. Coronavirus certainly ticks that box. Less certain is how AMS would then repay the 4.4 billion euro bridging loan to Bank of America – and UBS and HSBC.

By Ed Cropley

ITALIAN IPO SHOWS FLIP SIDE OF LOCKDOWN ECONOMY. Europe’s virus quarantines are suffocating sectors including travel, tourism and hospitality. But the pandemic is a business opportunity for some. Tiny broadband provider Unidata defied a market rout by listing in Milan on Monday and saw its stock rise nearly 7% on Tuesday. Manufacturer GVS, which produces masks and kits to protect against biohazards like viruses, is also going ahead with a market debut.

Such listings benefit from a lockdown-induced surge in demand for internet and health services. This may be temporary. But while the war-footing economy won’t last forever, more widespread flexible working and a need for better health equipment to fight future diseases may stay.

By Lisa Jucca

EXXON MOBIL WAKES UP TO OIL’S SCARY NEW WORLD. The biggest U.S. crude producer on Monday said it will make “significant” cuts to spending, after oil prices dropped below $30 a barrel for the first time since 2016. One analyst told Breakingviews that the hit to oil demand could in April be as high as 10% – a drop to around 90 million barrels per day.

Exxon had planned on investing $30 billion to $33 billion in new projects this year, even more than the much-bigger Saudi Aramco. The latter has in part prompted the current slump by pledging to pump at full capacity, sending global oil supply way above 100 million barrels per day. Something had to give.

By George Hay

Breakingviews

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