Upstarts Advise Companies on Securities Offerings, Challenging Investment Banks

Wall Street Journal writers Maureen Farrell and Liz Hoffman reported last week that, “When Twitter Inc. was looking to raise $1 billion from investors earlier this month, it put out the usual calls to Wall Street banks.

“The social-media company also called Vijay Culas, who works out of rented office space on a busy stretch of highway in San Mateo, Calif.

“A former Goldman Sachs Group Inc. banker who hung out a shingle in 2014, Mr. Culas helped Twitter negotiate with its banks and ultimately sell a type of hybrid bond for a 1% fee, one of the cheapest offerings in recent memory.”

The Journal writers explained that, “Mr. Culas is among a handful of upstart advisers who are challenging investment banks on turf once thought impenetrable: the $7 billion-a-year business of handling complex stock-related transactions.”

“Jason Wood, who spent nine years at JPMorgan Chase & Co., went solo in 2013. A year later, Mr. Culas launched Matthews South, named for his Harvard University dorm,” the article said.

Farrell and Hoffman pointed out that, “Without underwriting or trading arms, these advisers say they can give unbiased judgment and help clients wrangle a horde of hungry bankers. Their pitch is resonating, especially in Silicon Valley, where finance departments tend to be less robust and more suspicious of Wall Street.

“All told, Messrs. Wood and Culas have worked on one-third of the roughly 30 convertible bond sales by U.S.-listed tech companies this year, including offerings by Square Inc., Etsy Inc. and Twilio Inc.,according to people familiar with the deals.”

Last week’s article added, “Their success is the latest sign that Wall Street’s moat is shallower than it used to be. Investment banks were once one-stop shops, controlling each step of a big securities offering. Now they look vulnerable to the same unbundling that has hit cable television, challenged by a growing number of a la carte in-home entertainment options.

“Cheaper computing power and reams of market data allow solo bankers to compete with big banks. Mr. Wood, who works out of his Bay Area house, and Mr. Culas have about a dozen employees between them.”

 

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HomeFundMe, Among Growing Services to Help Borrowers Buy Homes

Christina Rexrode and Laura Kusisto reported late last week at The Wall Street Journal Online that, “Reese and Kyle Rademacher weren’t sure how they would afford a down payment to buy a home until their real-estate agent mentioned an offbeat idea: crowdfund the money from friends and family.

“Mrs. Rademacher, a 28-year-old construction technician, set up an online profile with a program called HomeFundMe to solicit donations. Her parents and a few others responded, and in March the Rademachers closed on a $320,000 home in Cheyenne, Wyo.

“HomeFundMe, a service launched by lender CMG Financial last year, is among a growing suite of services that help borrowers cobble together the funds to buy homes. These companies — startups and established players in the housing market alike — say they’re offering options for borrowers who have good credit and income but are struggling to save.”

The Journal writers stated that, “Rising consumer debt and high prices have made it tough for first-time buyers to save for a home. Nearly 40% of renters ages 25 to 34 said they were saving nothing each month for a down payment, according to a survey last year by rental-listing company Apartment List.

“One startup, Loftium, will supply up to $50,000 for a down payment if the homebuyer agrees to rent out a room on Airbnb and share the income.”

Last week’s article added that, “About 400 borrowers have used HomeFundMe to help buy homes since the program launched in October. On average, they raise about $2,500, though CMG also can kick in matching grants, and most borrowers have some of their own money saved as well, said chief marketing officer Paul Akinmade. Friends and family can also make their gifts conditional, meaning borrowers won’t get the money unless they actually purchase the home.”

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Smithfield Foods Inc. Hit in Federal Nuisance Lawsuit

Wall Street Journal writer Valerie Bauerlein reported on Friday that, “Chinese-owned pork giant Smithfield Foods Inc. lost a pivotal legal battle on Friday, as a federal jury awarded $25 million to a rural couple for the nuisance caused by living near a Smithfield contractor’s hog farm.

“The lawsuit is the second in a series of complaints brought by 500 rural North Carolinians who live near Smithfield contractors storing manure in open pools.

“Smithfield lost the first case earlier this spring, when a jury in the U.S. District Court for the Eastern District of North Carolina awarded $50 million to 10 families in Bladen County in the eastern part of the state. That amount was reduced to $3.25 million to align with state caps on damages.”

The Journal article noted that, “The earlier case was chosen by plaintiffs’ attorneys as their best argument in the bellwether cases setting the tone for the handling of the hundreds of others.

“Friday’s verdict was a particular blow for Smithfield because the company chose the case as its best chance to convince a jury that its contract farms did not pose a nuisance.”

Friday’s article also pointed out that, “Earlier this week, North Carolina’s legislature adopted a law restricting future lawsuits over hog farm nuisances. The new law does not affect the ongoing complaints.”

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Hog Production: North Carolina Lawmakers Pass Measure to Reduce Nuisance Complaints

The Associated Press reported this week that, “North Carolina lawmakers are making it harder for neighbors of agribusinesses to file complaints about smells and other nuisances.

“Democratic Gov. Roy Cooper vetoed the wide-ranging farm bill, which contains language sought by pork producers after numerous lawsuits.

“The Senate overrode the veto on Tuesday; the House did so on Wednesday.”

The AP article noted that, “Smithfield Foods was hit recently with a nearly $51 million verdict — cut to about $3 million because of state limits on punitive damages. The new law all but blocks lawsuits against farm operations in the future.”

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Case-Shiller Home Price Index Rose 6.4% in April

Wall Street Journal writer Laura Kusisto reported this week that, “Home-price gains moderated edged lower slightly in April, a sign that rising mortgage rates may be putting slight downward pressure on what consumers are able and willing to pay for homes.

“The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the U.S.nation, rose 6.4% in April, down from a 6.5% year-over-year increase reported in March.

“The 10-city index gained 6.2% over the year, down slightly from 6.4% the prior month. The 20-city index gained 6.6%, down from 6.7% the previous month. Economists surveyed by The Wall Street Journal had expected stronger home price growth in April, with the 20-city index gaining 6.8%.”

The Journal article added that, “While the price gains lost a bit of momentum last month, prices continue to grow faster than both incomes and inflation. Half of the U.S. housing markets in the country are now above their 2006 peaks. (Accounting for inflation just three markets are above that peak.)

“The biggest price gains remained are concentrated in the West. Seattle saw a 13.1% annual gain in prices in April, compared with a year earlier, while Las Vegas prices increased 12.7% and San Francisco saw a 10.9% increase.”

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Study: Bumblebees May Be Faring Better in Cities Than in the Countryside

JoAnna Klein reported yesterday at The New York Times Online that, “Cities are filled with buildings, people and concrete — usually not seen as the ideal place for anything wild but nightlife.

“But then there are the bumblebees of London. They may be faring better than their relatives in the English countryside, suggests a study published Tuesday in Proceedings of the Royal Society B.

“‘We’re not saying from this that urban areas are the solution to bumblebee declines or that urban areas are the ideal habitat,’ said Ash Samuelson, a graduate student at Royal Holloway University of London in Britain and lead author of the study. ‘But given the choice of two unnatural situations, they’re actually able to exploit that city environment, which is very different to what they evolved in.'”

The Times article stated that, “Bumblebees are important pollinators for flowers and crops that benefit from their vibrating pollination style. But pesticides, disease and habitat loss are wiping out all types of bees, worldwide. Oddly, as sprawling cities and vast agricultural fields replace forests and meadows, people have noticed more bumblebees buzzing around cities. Dr. Samuelson wanted to know if these bees were simply traveling to cities when agricultural fields ran out of food or if they actually were surviving better there and having more babies.

“In the past 80 years, expanding urban areas in England have been found to host more species and lose fewer pollinators than agricultural areas. City parks and gardens provide a variety of flowers and foraging opportunities for bees throughout the season. Most agricultural fields offer bees only one type of flower, for a limited time. Some biologists have suggested that cities may provide refuge for bees.”

Ms. Klein also explained, “The new research offers a relief and a warning: It is positive that bumblebees can exploit city resources, but agricultural fields of the future should be more bee friendly. That may require extra landscaping for farms; research has shown that planting wildflowers or flowering hedgerows near crop fields can help restore pollinator habitat and foraging opportunities.”

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Partnership Forms to Promote Large-Scale Organic Corn and Soybean Farms

Bloomberg writer Lydia Mulvany reported last week that, “A group representing American farmers is partnering with an agricultural adviser to help promote more large-scale organic farms that produce corn and soybeans, the largest U.S. crops.

“Farmer’s Business Network, Inc., which shares best-practices and data among thousands of growers, is investing in Arlington, Nebraska-based AgriSecure, according to a statement released Wednesday. AgriSecure specializes in helping growers transition from conventional farming to organic with more profit and less risk.

“The terms of the deal aren’t being disclosed. Through the investment, FBN members will have priority access to the AgriSecure platform.”

Ms. Mulvany added that, “Bumper grain harvests have kept prices low for years, spurring increased interest in organic and other specialty production because of the hefty premiums consumers are willing to pay for such food. But it’s difficult for farmers to convert, and U.S. production lags far behind the growth in demand.

“Fields have to be free of conventional fertilizers and chemicals for three years before any crops can be certified organic, which often results in lower yields during the transition period. In addition, record-keeping requirements are onerous, and farmers basically need to overhaul their operations with new methods and equipment.”

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USDA to Help Producers Prepare for Addition of Seed Cotton to Two Key Safety Net Programs

A news release yesterday from the U.S. Department of Agriculture’s Farm Service Agency (FSAS) stated that, “[USDA] is sending acreage history and yield reports to agricultural producers with generic base acres covered by the Agriculture Risk Coverage (ARC) and Price Loss Coverage (PLC) programs. This information will help producers decide the best options for how to allocate generic base acres, given the addition of seed cotton as a covered commodity in the programs.

“‘We’re sending this information to make sure farmers and ranchers have the data they need to make critical decisions about these USDA programs,’ said Richard Fordyce, administrator of [FSA]. ‘It’s important that producers take a few minutes to compare the information they receive with their farm records. If something is incorrect, we encourage them to contact their local USDA office.’

“The Bipartisan Budget Act of 2018 amended the 2014 Farm Bill, adding seed cotton as a covered commodity under the ARC and PLC programs. This week, FSA will start sending producers information on current generic base acres, yields and 2008-2012 planting history.”

Yesterday’s release added that, “All producers electing to participate in either the ARC or PLC program will be required to make a one-time, unanimous and irrevocable election, choosing between ARC and PLC for the 2018 crop year for seed cotton only. Producers who elected ARC with the individual farm option will continue with that option since that election is applicable to all base acres on the farm. The final step to participate requires producers with farms with seed cotton base acres to sign contracts for ARC or PLC for 2018 this summer.

“The anticipated timeline is:

  • June 29: Producers are mailed letters notifying them of current generic base acres and yields and 2008 to 2012 planting history.
  • July: An online decision tool for ARC and PLC becomes available. Producers have opportunity to update yields and allocate generic base acres for ARC and PLC.
  • Late July: ARC and PLC one-time elections occur for seed cotton.
  • Late July: ARC and PLC sign-up for 2018 starts for farms with seed cotton base acres.

“‘For all farmers and ranchers with questions, we encourage you to reach out to your local FSA office,’ Fordyce said.

“FSA will provide updates as dates solidify. For more information, visit FSA’s ARC and PLC webpage or contact your local USDA service center.”

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Single-Family Home Sales Up in May

A news release yesterday from the U.S. Census Bureau indicated that, “Sales of new single-family houses in May 2018 were at a seasonally adjusted annual rate of 689,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.7 percent above the revised April rate of 646,000 and is 14.1 percent above the May 2017 estimate of 604,000.

Monthly New Residential Sales, May 2018- Release Number: CB18-97 (June 25, 2018).

“The median sales price of new houses sold in May 2018 was $313,000. The average sales price was $368,500.

“The seasonally-adjusted estimate of new houses for sale at the end of May was 299,000. This represents a supply of 5.2 months at the current sales rate.”

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Iowa Supreme Court: Large Animal Feeding Operations Retain Protection From Nuisance Lawsuits

Des Moines Register writer Stephen Gruber-Miller reported late last week that, “Iowa can shield large animal feeding operations from lawsuits brought by neighbors who say they are no longer able to enjoy their property, the Iowa Supreme Court ruled Friday.

“The shield law is a valid use of the state’s power to pass laws that promote public health and safety, even though individual producers, not the public, directly benefit, the court said in its unanimous ruling.”

The Register article stated, “But the court reaffirmed that there is some recourse for neighbors to sue if they can successfully prove that:

  • The animal operation’s immunity from nuisance lawsuits has not in fact benefited the neighbors.
  • They have sustained significant hardship.
  • They lived on their property ‘long before’ the CAFO began operating.

“The test for plaintiffs to successfully sue was laid out in a 2004 Iowa Supreme Court decision, Gacke v. Pork Xtra.”

Last week’s article added, “Kristine Tidgren, director of the Center for Agricultural Law and Taxation at Iowa State University, called the decision a win for animal producers who still have a shield from nuisance lawsuits. The plaintiffs had asked the Supreme Court to declare the law unconstitutional in all circumstances.

“‘The plaintiffs just wanted this statute gone, and the court said no,’ she said.

“But by leaving the Gacke test in place, the court’s ruling means CAFO operators will have to continue to show up for potentially costly court proceedings to prove they were operating within the law.”

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