Levine on Wall Street: Where to Buy Friends on the Internet
Cynk Technology Corp. is a company with a website that lets you pay to be friends with people, or charge them to be friends with you. Or actually not; I was unable to use the website to actually buy any friendships. But this shouldn't take away from the greatness of the idea. You could pay Justin Bieber some money, and then when your friends are like "I'm going to a Justin Bieber concert this weekend," you could be all "oh, yeah, I'm friends with him on Cynk, nbd," and how would that not be worth it? Or if you were the "Director of IT Purchasing, Starbucks," you "could wield enormous power for someone seeking an appointment and generate significant revenue." That one is actually Cynk's example from its prospectus.
Anyway Cynk is in the news for financial reasons: It has no assets, has never had any revenue, has only one employee who is also its founder and main shareholder, and its stock rarely trades. In all of May, for instance, only 1,875 shares traded (all on one day) at $0.06 a share -- $112.50 worth of stock -- giving the company, owned mostly by its founder, a market cap on paper of about $17.5 million, which frankly seems a little rich for a company with no assets or revenues or people or working website. But all of a sudden, in mid-June, Cynk started trading more shares, at prices in the $2 area, giving it a market cap in the hundreds of millions of dollars. And yesterday, on 132,111 shares' volume, Cynk closed at $14.71, making it worth, on paper, $4.3 billion.
Here is Business Insider doing its best not to say "this is coordinated illegal manipulation" in so many words. Here is Seeking Alpha saying that it's coordinated illegal manipulation. Here is Kevin Roose saying that maybe it's a tech bubble? You make the call! 1 All I will say is, there's a time to mine for social media apps on your computer, and there's a time to mine for social media apps on the floor of the stock exchange, and if you think that paying people for friendships is a good idea (it totally is!), maybe you should build an app that does it rather than pay $4 billion for a company that doesn't.
Did the Volcker Rule hurt bond market liquidity?
So, one, yes, but, two, this letter from Congressman Jeb Hensarling to Treasury Secretary Jack Lew is a little silly:
“It is incumbent upon you as Treasury secretary and chairman of the Financial Stability Oversight Council to ensure that regulation does not imperil, impede or disrupt the US capital markets,” Mr Hensarling wrote to Mr Lew.
“Your testimony last month denying the Volcker rule’s ill effects on liquidity in the corporate bond market – in the face of overwhelming evidence to the contrary – suggests that you are not fulfilling this responsibility.”
He added: “A lack of liquidity in the corporate bond market makes it more expensive for businesses to grow and create jobs.”
Like, if you stopped after the first two paragraphs, fine. People are worried about reduced liquidity in the bond markets; Volcker is frequently cited as a culprit; and there are reasons to be sad about reduced liquidity. One of them, in the long term, is that an illiquid market would end up being bad for issuers. But that's not the market we have: People want bonds, and illiquidity just means that the only way to get supply is by bidding up new issues, so it's really really really easy for companies to issue bonds right now. More people are worried that it's too easy than that it's too hard. I get that there's a congressional imperative to end every sentence with "and create jobs!" but here it just comes out sounding rote and unimaginative and unfactual and silly.
What's BNP up to?
Would you believe, pleading guilty to sanctions violations? "Didn't that already happen," you ask, and quite right: It pled guilty to New York State charges on June 30, but yesterday was for the federal charges. It would be funny if the deal with prosecutors was "you have to plead guilty to something once a month for the next five years." Elsewhere, "U.S. prosecutors are using a new tactic to crack down on banks that fail to fight money laundering: systematically asking suspects in a wide range of criminal cases to help them follow the money back to their bankers," and is it not a little weird to arrest like a drug kingpin or Ponzi schemer and be like "it's okay, Lefty, we don't want you, we want the guys who gave you a checking account"?
How's Argentina doing?
Well, here's an angry ad about "Vulture Funds" that contains this interesting passage:
Moreover, if 92.4% of bondholders that entered into the exchange were to demand the same [as the holdouts], under the "RUFO clause" which guarantees equal treatment for them, Argentina would face litigation in amounts which some specialists estimate at over USD 500 billion and which would be at least 120 billion.
This is a baffling strategy. The RUFO -- "rights upon future offers" -- clause might require Argentina to give exchange bondholders whatever it gives the holdout bondholders, but that's debatable. You don't want to admit it! This won't exactly help when you get sued under the RUFO. Here is a claim that Argentina is planning to pay the holdouts in full in bonds but I'm not holding my breath.
KKR is charging itself investment banking fees.
KKR, the private equity firm, raised a private placement for First Data, a portfolio company owned by KKR's funds. The firm charged a 2 percent fee on the capital that it raised from outside investors (though not on the capital it raised from KKR funds and their limited partners). That is work that investment banks do, and charge for, and usually charge more than 2 percent for, so KKR saved its funds some money. On the other hand this is not a great environment for the private equity business model of making portfolio companies use their sponsor for various services, and charging the companies for those services. If private equity firms are going to grow into more universal financial-services providers they'll need to overcome those worries about conflicts of interest, just like the banks have.
Adorable baby bankers.
I was totally charmed by this story about new investment bankers all excited for their training programs this summer. "You’re only working about eight or nine hours a day, so it really is your last chance to drink and party and meet people," says one of them, who did enough partying during his training program that "he overslept, skipping an important test on mergers and acquisitions." It's a big important test! Anyway. One fun thing is to try to list the jobs where "some people are starting this job today and there's a training program" is a news story. I posit that there are, like, fifty such jobs, with investment banking being the most boring. Meanwhile investment bankers still work too hard; maybe they should freelance.
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