Corona Capital is a daily column updated during the day by Breakingviews columnists around the world with short, sharp pandemic-related insights. Sweden's 17 billion euro EQT has been investors' favoured punt on the private equity sector this year. A warning on Thursday by Chief Executive Christian Sinding, who said that the group likely wouldn't have the ability to sell many portfolio firms in 2020 amid the outbreak, has dented its darling status. Shares were down up to 10 percent in morning trading.
There's scope for additional disappointment given EQT's puffed-up valuation. Even after the collapse, Sinding's business trades in 33 times next year's forecast earnings, with all Refinitiv quotes, compared with business behemoth Blackstone's multiple of 19. The premium is partly premised on rapid growth as EQT raises new funds and rakes in profit from its older ones. The additional Sinding pushes out his objectives, the larger the gap between reality and investors' high expectations will be. (From Liam Proud)
VEERING OFF Program. For a couple months Australia was the envy of this virus-hit world. But the airline sector's current struggles Down Under illustrate how Canberra has taken a bumpier route. Competition officials are looking into Qatar Airways and many others for prioritising business travelers over market course. It is a side effect of the country's draconian policies about the motion of people.
Super-strict restricts on arrivals are at the origin of this issue: Sydney airport, as an instance, is permitted 350 passenger arrivals every day, making it desperately hard for citizens to return. For carriers, however, the wrong mix of fare-payers can make flights even more commercially unviable. That creates the Gulf network airlines' capacity more important. Australia has kept its fatality rate low, but the price of success is mounting. (From Una Galani)
ROSY-FINGERED YAWN. European credit markets are shrugging off the coronavirus. Rating agency S&P Global stated on Wednesday that it anticipates the European corporate default rate to hit 8.5percent by June 2021, up from just over 3% today, as firms struggle with a slow debt and recovery in the pandemic. In a pessimistic scenario, which comprises a longer recession along with another wave of Covid-19, defaults might attain 11.5%.
Bond traders do not seem fussed. The return investors demand to hold speculative debt has fallen lately, since central banks pumped liquidity into banks and markets. That is sufficient to pay losses if defaults reach around 5%, according to Breakingviews estimates. Investors may be betting on a vaccine and a speedy recovery, or may be just desperate for return. Either way, a second wave could be painful. (By Neil Unmack) A decision by the U.S. Food and Drug Administration puts additional pressure on drugmaker Gilead Sciences to get the most from its Covid-19 therapy remdesivir. The U.S. watchdog has declined to approve filgotinib, a drug for arthritis developed by Gilead using Galapagos, a Belgo-Dutch biotechnology company, citing safety issues.
It's a rather major setback for Galapagos, a rare big European biotech, whose shares were worth 10 billion euros before falling around a quarter Wednesday. For remdesivir, however, Gilead is the sole supplier. Its commercial success is uncertain. O'Day will be hoping that it actually prevents deaths and does not only accelerate recovery.
There's scope for additional disappointment given EQT's puffed-up valuation. Even after the collapse, Sinding's business trades in 33 times next year's forecast earnings, with all Refinitiv quotes, compared with business behemoth Blackstone's multiple of 19. The premium is partly premised on rapid growth as EQT raises new funds and rakes in profit from its older ones. The additional Sinding pushes out his objectives, the larger the gap between reality and investors' high expectations will be. (From Liam Proud)
VEERING OFF Program. For a couple months Australia was the envy of this virus-hit world. But the airline sector's current struggles Down Under illustrate how Canberra has taken a bumpier route. Competition officials are looking into Qatar Airways and many others for prioritising business travelers over market course. It is a side effect of the country's draconian policies about the motion of people.
Super-strict restricts on arrivals are at the origin of this issue: Sydney airport, as an instance, is permitted 350 passenger arrivals every day, making it desperately hard for citizens to return. For carriers, however, the wrong mix of fare-payers can make flights even more commercially unviable. That creates the Gulf network airlines' capacity more important. Australia has kept its fatality rate low, but the price of success is mounting. (From Una Galani)
ROSY-FINGERED YAWN. European credit markets are shrugging off the coronavirus. Rating agency S&P Global stated on Wednesday that it anticipates the European corporate default rate to hit 8.5percent by June 2021, up from just over 3% today, as firms struggle with a slow debt and recovery in the pandemic. In a pessimistic scenario, which comprises a longer recession along with another wave of Covid-19, defaults might attain 11.5%.
Bond traders do not seem fussed. The return investors demand to hold speculative debt has fallen lately, since central banks pumped liquidity into banks and markets. That is sufficient to pay losses if defaults reach around 5%, according to Breakingviews estimates. Investors may be betting on a vaccine and a speedy recovery, or may be just desperate for return. Either way, a second wave could be painful. (By Neil Unmack) A decision by the U.S. Food and Drug Administration puts additional pressure on drugmaker Gilead Sciences to get the most from its Covid-19 therapy remdesivir. The U.S. watchdog has declined to approve filgotinib, a drug for arthritis developed by Gilead using Galapagos, a Belgo-Dutch biotechnology company, citing safety issues.
It's a rather major setback for Galapagos, a rare big European biotech, whose shares were worth 10 billion euros before falling around a quarter Wednesday. For remdesivir, however, Gilead is the sole supplier. Its commercial success is uncertain. O'Day will be hoping that it actually prevents deaths and does not only accelerate recovery.