🎙️ Sell My Votes

Global education data may not seem directly relevant to markets, but of course, education levels drive innovation and productivity, which drive economic growth, and that matters a lot to markets 🎓

On that note, education is uneven globally — no surprise. More interesting is that governments’ ROI on educational expenditures varies widely for the same amount of spending, according to new McKinsey research.

👉 Our Chart(s) of the Day show more.

— Matthew & Shawn

Here’s today’s rundown:

Today, we'll discuss the biggest stories in markets:

• Disney’s proxy battle

• NYCB’s fall, rescue, and valuation surge

This, and more, in just 5 minutes to read.

Chart(s) of the Day

In The News

🗳️ Selling Shareholder Votes Upends Disney’s Proxy Battle

Can you buy shareholder votes in a company, hoping to influence its corporate governance decisions, without buying more shares of stock explicitly?

Yes, and it’s actually legal to do, though not hugely popular. Well, except in niche situations.

One such niche situation has been making headlines: There’s a three-way fight for clout over Disney, with the company pushing back against two competing hedge funds that have accrued shares and made their own Board of Directors nominations.

• As financial writer Matt Levine puts it, “This isn’t a proxy fight between an activist with a big stake and a CEO with a big stake, where each side already owns a lot of shares, but a battle of persuasion where three smallish shareholders (counting Disney’s CEO) will try to get the rest of the shareholders to vote for their platforms.”
  

• Thus, many shareholder votes are up for grabs — and someone is grabbing them — a new marketplace called Shareholder Vote Exchange allows investors to sell their voting rights in companies while retaining ownership of their stocks.

Why it matters:

Sell my votes: It’s a no-brainer for some individual investors who aren’t concerned about being involved in corporate decision-making; it's a chance to pick up extra yield at seemingly little cost.

But for those vying for power in a proxy fight, buying voting rights is a chance to magnify their influence for cheap.

• With about one-third of Disney’s stock owned by individual investors—an unusually high amount—there’s a significant opportunity to acquire voting rights.

Shocker: An undisclosed bidder is offering to pay $100,00 for 500,000 proxy votes (20 cents per vote), which would cost about $54.6 million at current prices to gain the same voting power from buying stock outright.

• Genius! There's one problem, though. As of earlier this week, just over 12,000 Disney share votes were listed on the exchange.
  

• Even if you did buy 500,000 votes, that’s a drop in the ocean of the company’s 1.8 billion shares outstanding (about 0.0027% voting power).

Read more

Together With Masterworks

This 77% Return Is An Outlier — But The Rest May Surprise You

The news is true: Masterworks’ 15th sale just weeks ago returned an impressive 77% to investors. While such a high return is an outlier for the blue-chip art investing platform, you might be wondering what their prior sales delivered 🎨

Glad you asked… 

Every one of their sales has returned a profit to investors, with 12 of them delivering double-digit returns, and 1 delivering triple-digit annualized returns. 

In full, Masterworks has over 300 paintings and their 16 exits have delivered: 32%, 39.3%, 36.2%, 27.3%, 9.2%, 33.1%, 21.5%, 17.8%, 13.9%, 35%, 10.4%, 325.5%, 4.1%, 17.6%, 77.3%, and 13.4% net annualized returns. 

Every sale but one outperformed the stock market in the period from when it was offered to when it was sold. 

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🏦 NYCB’s Fall, Rescue, and Valuation Surge

Investors took to X (formerly Twitter) early this week, as one stock cratered from about $10 per share to under $2 in about a month. No, it wasn’t a cryptocurrency or meme stock—it was a regional bank: New York Community Bancorp (NYCB). 

The regional lender has faced weeks of fears over real-estate loan losses, internal controls weakness, and a cratering stock price. 

Then, on Wednesday, a Wall Street Journal article posted around noon said NYCB was “seeking to raise equity capital in a bid to shore up confidence.” That news drove an additional 40% drop in its stock in minutes. 

Sufficient capital at last: So, the bank acted quickly in desperation, cutting its quarterly dividend from 5 cents a share to 1 cent per share as part of an overhaul to shore up that confidence. More important, NYCB also raised $1 billion from investors, led by former Treasury Secretary Steve Mnuchin, and revamped its management. 

That cash infusion is designed to seed the bank, and its shares soared Wednesday into the close. The $1 billion in cash effectively raised the bank’s market valuation by over $2 billion by restoring confidence in its continued operations.

• “With the over $1 billion of capital invested in the bank, we believe we now have sufficient capital should reserves need to be increased in the future to be consistent with or above the coverage ratio of NYCB’s large bank peers,” Mnuchin said in a statement. 

Why it matters:

You might recall the regional banking crisis of early 2023, when the unexpected collapses of three banks — Silicon Valley and Signature in March 2023, then First Republic in May — punctuated how U.S. regional lenders face ongoing challenges from rising deposit costs and risky office-building loans. 

• 2023 saw the biggest bank failures since 2008 after the Federal Reserve raised interest rates aggressively to cool inflation. 

Big picture: NYCB’s struggles also stemmed from its business model: It finances offices in a region (NYC) heavily hampered by office vacancies in the work-from-home era. It’s also a major lender to owners of apartment buildings subject to challenging New York rent laws, which limit the revenue units can make. 

NYCB’s capital infusion—the bank selling new shares, in effect—is thought to improve its regulatory ratios. It might also revive its credit rating and provide much-needed relief to investors. 

• “While painful for existing shareholders, it should quiet systemic concerns for NYCB,” analysts noted. “This should help broader sentiment for the bank group.”

Read more

More Headlines

🇪🇺 Europe’s central bank maintained record-high interest rates while cutting inflation outlook

📲 NYT Games (home to Wordle) debuts redesigned app

🗣️ Previewing President Biden’s State of the Union address

🛢️ Russian government nearly doubles oil revenues by raising taxes on domestic oil producers

🗯️ The public is quickly souring on AI, according to new polls

Quick Poll

Yesterday, we asked: How often do you use AI tools like ChatGPT?

— Wrote one reader who’s uninspired by AI tools, “I haven't found a need yet.”

— Said a daily user, “In so many ways - helping me draft content, review content, brainstorm, fact finding to name a few. It’s not great at everything but no one tool ever will be…”

— Here’s a novel use: “I started using, frequently, for complex Excel formulas but have moved on to helping me create scenarios of how Purdue could clinch the B1G basketball title and will try to see if it can help me win my fantasy baseball league. #Boilerup”

— And lastly, "It has drastically helped my writing, Python programming and understanding of topics. It’s like having a genius next to you at all times for most of my important tasks.”

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See you next time!

That's it for today on We Study Markets!

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