WATCH LATEST EPISODE: DAVID ROSENBERG
Everyone calls David Rosenberg a permabear but he says he’s fully invested, just in completely different places than the consensus. On this episode of In the Money with Amber Kanwar, Rosenberg breaks down why he’s still in the market despite sounding the alarm on what he sees as extreme valuations, bubble-like behaviour, and a dangerous level of investor complacency. From a “teflon market” that shrugs off every shock, to an equity market where investors are effectively paying to take risk, he explains why this cycle feels eerily similar to the late-90s tech mania.
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So I fully thought yesterday was Friday which is why I wrote about the SpaceX IPO. I remember thinking to myself – how odd the ECB is making a rate decision on a Friday. I blame it on our feeble attempt to squeeze in our 10-year anniversary amidst the last day of school for my middle (11:30am dismissal!!!) and graduation ceremony for the youngest (yes, just from JK and yes, I cried.) Anyway, I apologize for the confusion!
Here are five things to know this FRIDAY:
Rocket man: Stocks are higher and ready to absorb the biggest IPO ever *today.* The market got a boost after US President Donald Trump signaled a peace deal with Iran could be signed as early as this weekend in Europe. Gold is surging 3% and gold stocks carried the day on the TSX yesterday. Oil is falling sharply for a second day in a row down 3% to $84/barrel. Energy stocks have held up well relative to the drop in crude. Pre-IPO trading suggests SpaceX will blast off when it finally lists today – indicating a gain of anywhere from 35-50%. The IPO will also officially make Elon Musk the world’s first trillionaire. Aside from this, tech stocks are broadly higher and shares of CoreWeave (+3%), Rocket Lab (+2%), Nebius Group (+3%), and Teradyne (+1%) are popping because they will be joining the NASDAQ 100 was Charter Communications, Cognizant Technologies, Insmed, Verisk, and Zscaler get booted.
Jumping ship: Adobe is down 9% after the CFO announced he was leaving to go to Marvell just a few months after Adobe’s CEO stepped down. To make matter worse, Adobe cut its annual recurring revenue forecast. This combined with the CFO departure has led to at least three downgrades this morning. Adobe cut its annual recurring revenue forecast because it is leaning into a freemium model to increase monthly active users amidst competition from AI LLMs. Investors can’t shake the feeling that AI generated images will disrupt Adobe, the stock is poised to open at an 8-year low and has lost 37% in value so far this year. “Consecutive quarters of key executive-level departures against deteriorating growth and seemingly weaker pricing power suggest disruption could be accelerating at Adobe,” wrote Citi’s Tyler Radke.
Sniffing around: Watch H&R REIT after confirming it has held preliminary talks with Blackstone regarding the potential sale of certain assets. The stock surged 8% late afternoon yesterday after Bloomberg reported Blackstone was in talks to buy the company. H&R seemed to dispel the notion that the entire company was up for sale acknowledging the media report but saying the discussions with Blackstone are for “certain assets.” H&R REIT has been in the midst of a strategic review since last year. The trouble is that it owns assets in multiple categories with a mix of office, industrial and retail and even US apartment assets making it difficult for an outright takeover according to many guests on the show. “We believe that it is unlikely that HR will continue in its current form,” wrote RBC’s Jimmy Shan in response to the announcement, “Whether there is an en bloc sale of the REIT, sale of certain of its core assets or any other strategic initiatives resulting from HR’s go-forward strategic plan, we think it is worth it for investors to ‘stick around’ given the current discounted valuation.”
Take root: Watch shares of Roots at the open after the Canadiana retailer reported continued sales momentum but erosion of gross margins. Margins declined because of heavier discounting to get rid of product before they transition to a new distribution centre and unfavourable currency swings. Shares of the company have been on a tear up 50% so far this year following the announcement of a strategic review – including possible sale – back in March. No update on that in the results, other than it has cost $600,000 in consulting and legal fees. But the results don’t suggest the business is in distress in the meantime. On the conference call there was discussion of the impact from the war in Iran but so far it hasn’t lead to material inflation for the business and no concerns about the strength of the consumer.
Let’s make a deal: TMX Group announced it is buying RAFI Indicies for $683 million in one of its biggest deals ever. This will expand its equity portfolio coverage of TMX VettaFI – an index services provider TMX bought in 2023. The move comes amidst volatile trading for TMX Group – and all exchanges for that matter – on concerns that data companies like exchanges can be disrupted or intermediated by AI. RAFI Indicies provides indexing services behind $182 billion in assets under management which will triple the TMX VettaFI assets under indexing. “We expect TMX shares to outperform tomorrow following the announced acquisition of RAFI Indices from Research Affiliates, which represents an accretive deployment of capital (transaction is debt financed), and is strategically sound with recurring revenue (we estimate ~61% pro-forma), revenue outside Canada, and revenue from Global Insights (we estimate ~45% pro-forma) all increasing,” wrote RBC’s Bart Dziarski.
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