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California marijuana company Vertical is talking to banks about an IPO for its CBD business and just raised a fresh $58 million in preparation

Tue, 04/02/2019 - 4:25pm  |  Clusterstock

Vertical, a California marijuana producer, closed a $58 million funding round to lay the groundwork for its hemp and CBD spinoff to go public on the NASDAQ this year.

The series A round was upsized from $20 million to $35 million last year and was still oversubscribed due to investor demand, the company said. The round was led by Merida Capital Partners, a New York City private equity fund that exclusively invests in the cannabis industry, with the rest of the capital coming from a mix of high-net-worth individuals and family offices.

Smoke Wallin, Vertical's president and the CEO of the incoming CBD spinoff, Vertical Wellness, told Business Insider in an interview that despite widespread interest from institutional investors, the bulk of the round came from family offices that aren't bound by the same rules that a large private equity fund or hedge fund typically is.  

Read more: Lawmakers just took a huge step toward passing a critical bill that could pave the way for banks to work with marijuana companies

Wallin said while they met with a lot of special situation groups at larger hedge funds — which he said have a "broader mandate" to pursue unique investments — they didn't end up participating in the round. 

"We got great meetings and spent a lot of time getting them up to speed on our industry and then obviously our company," said Wallin. "But at the end of the day, their in-house counsel and outside law firms couldn't see a way to go forward given the federal prohibition that it still exists. That was pretty much universal." 

Vertical will use the new capital to build out new grow facilities on their California campus, and finish building a food and beverage manufacturing facility, said Wallin. 

"These are some of these things you might say, well, why are you raising equity to do capex [capital expenditures] and to build buildings," said Wallin. "Well, that's because we're in cannabis, right? Like you can't go get a mortgage, you can't get normal financing on equipment" like in any other industry. 

Most THC-touching cannabis companies in the US are unable to use debt financing for any capital expenditures because THC is federally illegal, and banks are unwilling to risk working with the industry. 

Congress is debating a few pieces of legislation, namely, the SAFE Banking Act, that would alleviate some of these problems but the bill's path through the Republican-controlled Senate looks uncertain.

Read more: The CEO of Whole Foods just dropped a hint it could soon start carrying marijuana products. It's a sign the biggest consumer companies are 'looming' over the industry.

Since the Farm Bill passed last year, hemp and hemp-derived CBD were legalized in the US, and the Food and Drug Administration is working on a pathway to allow CBD to be added to food products

While Vertical will remain focused on California, which Wallin said is the biggest cannabis market, the company is also investing in assets in Arizona and Ohio which both recently legalized medical marijuana.

"But we eventually want to have a foothold in all the legal states," said Wallin.

What Wallin said sets Vertical apart from other cannabis companies — namely, the big publicly traded Canadian companies like Canopy Growth and Aurora Cannabis — is that they look for "distressed" deals, where the operators may hold a valuable license but may not be operating efficiently. 

"Then we'll step in and fix that," said Wallin. "The difference between me and the Canadians is that we don't overpay."

An IPO in the fourth quarter of this year 

Wallin said he's looking to raise another $50 million in a private round in the coming months to prepare for the initial public offering. He's aiming for the IPO to happen in the fourth quarter of this year, though he cautioned that "would obviously be very fast."

Though Vertical has not selected bankers for the IPO, Wallin said he's in talks with Cowen and Canaccord Genuity, which have been active in the sector. He's also had discussions with major bulge bracket banks who see the Farm Bill as a path to getting involved in the CBD side of the industry. 

"I think we'll meet all the criteria that NASDAQ would require," said Wallin. "So the idea is to get everything lined up and have scale. We'll be very, very profitable next year — so I think we'll have a great story to tell the street." 

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A $23 billion drugmaker and a $2 billion biotech upstart are racing to develop a type of 'silver bullet' drug for aggressive cancers that has eluded their industry for 30 years

Tue, 04/02/2019 - 4:20pm  |  Clusterstock

  • Pharmaceutical companies long wanted to develop a drug that would target KRAS, a common gene mutation seen in cancers. But every effort so far has failed.
  • The pharmaceutical company Amgen and biotech Mirati are backing two new drugs that are raising those hopes again, though it's still early days.
  • If these experimental products are successful, they could rake in billions in sales and help patients with few treatment options. 

The pharmaceutical industry has spent 30 years and wasted billions of dollars chasing a type of cancer drug in a quest that some have declared impossible.

Today, though, it's back, with two drugmakers racing to see if theirs is the winning approach. Though it's early days still, their focus and potential has the industry abuzz. 

There is "huge enthusiasm for figuring out how to drug that pathway," SVB Leerink analyst Andy Berens told Business Insider. He called this and another cancer-fighting approach "probably the silver bullet," adding that it "would be a tremendous victory for biotech and oncology, if it works."

Behind all this is the KRAS gene, which works in the body as a traffic light that signals the go-ahead for cells to grow and change. Mutations in the gene, though, could turn cells cancerous — and give them the green light to grow explosively.

Read: Pfizer has a new strategy for fighting cancer that could generate $5 billion a year. We got a look inside.

Indeed, KRAS mutations are common, seen in lung, pancreatic and colorectal cancers, among others. 

Stopping that mechanism has been the aim of scientists for a long time, but their lack of success has led many to think that it is "undruggable." 

One of those companies is also leading the renewed focus on KRAS: the $23 billion pharmaceutical company Amgen. Amgen has started testing its drug, AMG 510, in humans in a early-stage research trial, and initial results — expected this summer at a prominent cancer-research meeting — are hotly awaited.

If the drug is promising, Wall Street expects sales of at least $1 billion or $2 billion a year. 

The $2.5 billion biotech Mirati Therapeutics is also racing to develop its own KRAS-targeting drug, and its shares have surged nearly 65% since the start of the year, when Amgen began talking up the potential of AMG 510. Mirati hasn't yet tested its product in humans but isn't far behind, analysts say.

A discovery made from a 'library' of new potential drugs

Amgen believes that AMG 510 works in a unique way that makes it more powerful, and thus could set it apart from other, failed drug development efforts. 

The experimental drug came out of a collaboration that the pharmaceutical company had with the Berkeley, California-based biotech Carmot Therapeutics, developing "libraries" of new molecules that could one day be new drugs. 

The companies focused that effort on a specific mutation, KRASG12C. Amgen estimates that it is a relatively common mutation, making up about 12% of all KRAS mutations across different types of "solid tumor" cancers. 

Amgen is interested in studying the drug in lung cancer and likely in colorectal cancer, as well as other solid tumors.

What excited the company about AMG 510 was way it behaved with the protein, doing a type of dance that opened up a flap in the molecule and exposed a deep pocket.

That pocket lets the drug get in, where it should be able to keep a firm hold and prevent KRAS from giving that "green light," explained Dr. PK Morrow, Amgen global product general manager and team lead for AMG 510.

Potential in lung and colorectal cancers

If it works, it could be an option for patients with non-small cell lung cancer, the most common type, for example, as a second or third treatment option where "the options are often quite limited," Morrow said. 

"This has been a program that has created within our company such a sense of true excitement and gratification for being able to develop something that has the potential to help patients in such grievous need," Morrow told Business Insider. 

AMG 510 also has potential as a combination, Amgen believes, and is being studied in animal research with another Amgen drug, Vectibix, something that could potentially be used in colorectal cancer. 

But, like with all drug development, there's no guarantee that these results will be as promising in humans. 

And being able to block the KRAS pathway, meanwhile, "doesn't necessarily mean it’ll translate to the tumor dying and patients having improved outcomes," SVB Leerink's Berens said. 

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Boeing is ramping up inspections after the US Air Force rejected its new KC-46 tanker planes again (BA)

Tue, 04/02/2019 - 4:03pm  |  Clusterstock

  • The United States Air Force has once again rejected taking delivery of new Boeing KC-46 Pegasus tanker jets after discovering foreign object debris (FOD) left inside the aircraft by Boeing workers.
  • According to the USAF, its inspectors found tools and other debris inside the planes.
  • This is the second time in a month the Air Force has halted delivery of the KC-46 for the same reason.
  • Boeing delivered its first KC-46 tanker in January. 

The United States Air Force has once again rejected taking delivery of new Boeing KC-46 Pegasus tanker jets after discovering foreign object debris (FOD) left inside the aircraft by Boeing workers. This is the second time the USAF has stopped accepting deliveries of new KC-46s this year for the same exact reason, Reuters reported. 

The Air Force initially halted deliveries of the Boeing 767 airliner-based tanker planes for two weeks in early March. At the time, assistant secretary of the Air Force for Acquisition, Will Roper, told reporters that debris such as tools was left in parts of the plane that could be a potential safety hazard, Defense News reported. 

According to Reuters, the Air Force decided to halt deliveries again on March 23. 

"The Air Force again halted acceptance of new KC-46 tanker aircraft as we continue to work with Boeing to ensure that every aircraft delivered meets the highest quality and safety standards," a USAF spokesperson told the Air Force Times in an emailed statement. "This week our inspectors identified additional foreign object debris and areas where Boeing did not meet quality standards."

Read more: FAA expects Boeing to come up with new software to fix the grounded 737 Max in a matter of weeks.

"Resolving this issue is a company and program priority — Boeing is committed to delivering FOD-free aircraft to the Air Force," Boeing told Business Insider in a statement. "Although we’ve made improvements to date, we can do better."

"We are currently conducting additional company and customer inspections of the jets and have implemented preventative action plans," the Boeing statement went on to say. "We have also incorporated additional training, more rigorous clean-as-you-go practices and FOD awareness days across the company to stress the importance and urgency of this issue. Safety and quality are our highest priority."

Boeing commenced deliveries of the KC-46 tanker in January. The plane was originally slated for delivery to the Air Force in 2017. However, development delays pushed the plane's entry into service back. 

The KC-46 is expected to replace the USAF's aging fleet of Boeing 707-based KC-135 tankers.  

SEE ALSO: Boeing just unveiled how it's going to fix the 737 Max that was grounded after 2 fatal crashes in recent months

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Car insurance rates are going up for women across the US — here's where they pay more than men

Tue, 04/02/2019 - 3:43pm  |  Clusterstock

  • Men and women pay different car insurance rates in many US states.
  • In 2016, women's car insurance rates were higher than men's in 12 states, according to an analysis by car-insurance comparison site The Zebra.
  • By 2018, women paid more for car insurance in 25 states, and the cost disparity is growing.
  • California recently joined five other states in banning gender-based car insurance pricing.

It turns out many insurance companies care whether or not you drive like a girl. 

In 44 US states, insurance companies can use gender to determine a driver's car insurance rate. There's a lot of opposing data about whether men or women are riskier on the road, but insurers often use their own research to determine car-insurance premiums, which has led to widespread disparities. 

Car insurance rates are also based on age, credit, car make and model, driving record, and location. The average price of car insurance premiums nationwide is $125 a month.

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But a new analysis by car-insurance comparison site The Zebra reveals that in 2018 women paid more for car insurance on average in 25 states, while men paid more in 20 states and Washington DC.

Earlier this year, California banned gender-based car insurance rates, joining five states — Hawaii, Massachusetts, Montana, North Carolina, and Pennsylvania — that already prohibit the practice.

Here's who paid higher car insurance rates in every state in 2018:

Though the total number of states where women pay more versus where men pay more is nearly the same, it wasn't that way just two years ago.

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According to The Zebra, women paid more on average in just 12 states in 2016. The Zebra concluded that women's rates are increasing compared to men's in many places and the cost differences are also becoming more stark. In Nevada, for example, women paid just $14 more on average than men in 2016 compared to $121 more in 2018.

Here's who paid higher car insurance rates in every state in 2016 vs. 2018:

The Zebra's analysis used the following base profile to compare insurance rates: A 30-year-old single male or female driving a 4-year-old Honda Accord EX with a good driving history; coverage limits of $50,000 bodily injury liability per person, $100,000 bodily injury liability per accident, and $50,000 property damage liability per accident with a $500 deductible for comprehensive and collision.

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Senate investigating whistleblowers' claims that government safety inspectors who approved Boeing's 737 Max plane lacked sufficient training (BA)

Tue, 04/02/2019 - 3:07pm  |  Clusterstock

  • Senators wrote a letter to the Federal Aviation Administration on Tuesday saying that agency whistleblowers have come forward with potential safety issues.
  • The Committee on Commerce, Science and Transportation said the workers point to a lack of training in aircraft certification programs that lead to the approval of Boeing's 737 Max aircraft.
  • Boeing is the source of multiple government investigations after the plane crashed twice since October. 

The Senate transportation committee said Tuesday that multiple whistleblowers have warned of serious safety issues in the government’s safety inspection program for new aircraft, including Boeing's 737 max jet that’s crashed twice since October.

"Allegation from these whistleblowers include information that numerous FAA employees, including those involved in the Aircraft Evaluation Group (ARG) for the Boeing 737 MAX, had not received proper training and valid certifications," the Committee on Commerce, Science and Transportation said in a letter to the FAA’s acting administrator on Tuesday. 

"Some of these FAA employees were possibly involved as participants on the Flight Standardization Board (FSB)," the letter continued. 

The committee, led by Republican Roger Wicker of Mississippi, says it’s concerned this lack of training could have lead to "an improper evaluation" of the Maneuvering Characteristics Augmentation System (MCAS), which investigators have said is a leading suspect in the investigation of Ethiopian Airlines crash in March. The letter comes after the Department of Justice in March subpoenaed Boeing as part of a criminal investigation into how the deadly plane was certified to fly.

Read more: JPMorgan warns Boeing's 737 Max crisis could drag down the entire US economy

Last week, multiple reports said the FAA would soon announce changes to its aircraft certification program, which currently allows manufacturers to run some safety checks on their products in the FAA's name, in light of the crashes

"According to the information obtained from whistleblowers and a review of documents obtained by the committee, the FAA may have been notified about these deficiencies as early as August 2018,” the letter said. "Furthermore, the committee is led to believe that an FAA investigation into these allegations may have been completed recently."

You can read the Senate committee’s full letter below:

Wicker Elwell Letter by Graham on Scribd

 

SEE ALSO: Boeing's 737 Max crisis could have a bigger effect on the US economy than the government shutdown

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Here's the pitch deck a New York startup used to raise $5.5 million to expand its apartment-rental service

Tue, 04/02/2019 - 2:49pm  |  Clusterstock

  • UpTop, a New York startup, just unveiled its housing-rental service.
  • Renters can use UpTop's service to view listings, apply for apartments, and pay rent.
  • Landlords can use UpTop to manage their properties and do background checks on prospective tenants.
  • The company just announced that it had raised $5.5 million in seed funding to expand its service.

Landlords and tenants are often at odds, but the creators of UpTop think they've come up with a rental-market service that both groups will love.

Using the New York startup's app, renters can search for apartments, schedule times to view them, apply to rent them, sign leases, and even pay their rent. Landlords can list their properties in UpTop's marketplace and use its property-management service for free.

"It's not just a listing site. It's not just property-management software," Jonathan Foux, UpTop's chief marketing officer, told Business Insider, adding, "We combined it all into one."

CEO Frank Barletta got the idea for UpTop from his experience as a renter, Foux said. In one eight-year period, Barletta moved 10 times and was repeatedly frustrated with the rental experience, he said.

UpTop plans to make money in part by charging a convenience fee when people pay their rent through its service. Depending on what the landlord decides, sometimes renters will pay the fee, and sometimes the landlord will. It also plans to charge landlords for background checks on prospective tenants, something it will offer as an optional service.

The company has only about 1,000 listings so far, but that's because it just started publicizing its service, Foux said. Founded about three years ago, UpTop was until recently testing its offerings in Ithaca, New York.

It plans to soon offer its service in a lot more places. The company announced last week that it had raised $5.5 million in seed funding from KAL Investments. It's used that money to expand its team to 16 people, building out its product and business development teams, Foux said.

Read this: Here's the pitch deck a Virginia startup used to raise $6 million after seven years of bootstrapping its business

Though UpTop is based in Manhattan and is born out of Barletta's experiences in the rental market there, he and his team think the business has much wider appeal.

"This is not just a New York problem," Foux said, adding that it's a countrywide issue, "maybe an international one as well."

Here's the pitch deck UpTop used to raise its seed round:

SEE ALSO: Here's the pitch deck AI startup Skymind just used to scoop up $11.5 million in funding







See the rest of the story at Business Insider

There are 3 key questions you should ask before buying a vintage watch, according to a Christie's luxury watch specialist

Tue, 04/02/2019 - 2:22pm  |  Clusterstock

  • Ryan Chong, a watch specialist at Christie's Auction House, says there are three main questions you should ask when you're looking to buy a vintage watch.
  • The most important question is what kind of condition the watch is in, which includes whether it has all of its original parts as well as its box and paperwork.
  • You should also ask to see the service history to see if any original parts have been changed.
  • And finally, Chong says, you should ask yourself if you really love the watch, or if you just want to buy it in hopes of making money off it later.

The prestigious Christie's Auction House is known for curating some of the world's finest art, jewels, wines and spirits, and of course, watches

I recently visited Christie's at Rockefeller Center in New York City and met one of the auction house's watch specialists, Ryan Chong.

Christie's watches department comprises a global team of 30 people with auction sites in Dubai, Geneva, Hong Kong, and New York. The team sells about $100 million worth of watches each year from luxury brands that include Patek Philippe, Rolex, Vacheron Constantin, Omega, and Audemars Piguet, Chong said. 

The auction house's specialty, though, is vintage watches. 

"Our bread and butter at Christie's, as an auction house, are vintage watches," Chong said at a press event at Christie's. "Those brands, the top three are Patek Philippe, Rolex, and Audemars Piguet."

Anything over 20 years old is considered a vintage watch, he said.

Read more: The top 10 most expensive watches sold by Christie's in 2018, ranked

If you're in the market for a vintage watch, the first thing you should do is find a dealer or a store that has a good reputation, Chong says. Many dealers specialize in a certain brand.

"Work with a specialist, someone who knows vintage watches and what to look for," he said. "Because otherwise, it's a little bit like the Wild West."

Once you have your eye on a particular vintage watch, there are three main questions you should ask before you buy it, Chong told me. 

1. What kind of condition is it in?

"Vintage watches, the main thing with those to look for when purchasing, is condition," Chong said. "Condition trumps everything. That would mean unpolished, all original, with box and papers if possible."

That means the watch should ideally come with its original box and paperwork, which could include the manual, warranty information, and any certificates of authenticity. 

Having those is important "because it helps to back up where [the watch] comes from — where it was born, you could say," Chong said.

2. Is there a service history?

If there's a service history, you'll definitely want to see that, Chong said.

"You want to see if anything has ever been changed in terms of parts, if movement work has been done," Chong said. "Because as I mentioned, the biggest factor in value of vintage watches is condition, and that mostly applies to originality. So if the case is unpolished, if the hands are original, if the dial's been refinished, that could all affect the value."

3. And finally, do you really like it?

Vintage watches can be great investment pieces.

But Chong says you should always buy what you like instead of buying solely for investment purposes.

"Because if you buy for investment purposes and it goes down and you don't like it, then you're stuck with an asset that's decreased in value and that you don't like," Chong told me. "So you've got to make sure you love it."

Buyers are willing to drop some major cash on watches they love at Christie's.

In 2018, the 10 most expensive watches sold at the auction house ranged in price from $566,000 to $3.2 million. The year's most expensive sale was an 18K gold Patek Philippe chronograph watch, signed by Philippe and featuring a perpetual calendar and moon phases, which went for $3,234,905.

SEE ALSO: From a $100 Swatch to a $20,000 Rolex, these are the watches worn by the most powerful people in business and finance

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Regulators just gave some legal hope to food and drink makers using cannabis extract CBD

Tue, 04/02/2019 - 2:21pm  |  Clusterstock

  • In a statement on Tuesday, federal regulators hinted at the possibility of a future in which some foods and drinks made with the cannabis extract CBD could be legal.
  • The move is a slight departure from the Food and Drug Administration's previous messaging on the matter.
  • In the past, the agency suggested that CBD products would be banned because a CBD-based drug called Epidiolex also exists.
  • Valued for its purported wellness benefits, CBD is a $1 billion industry that some analysts predict could skyrocket to $16 billion by 2025.

The $1 billion market that includes creams and cupcakes made with the highly touted cannabis compound CBD has recently been clouded by a legal haze. But in a statement on Tuesday, federal regulators hinted that foods and drinks made with CBD could have some kind of legal future.

Although it doesn't get you high, CBD has been associated with therapeutic properties and is the main ingredient in the first federally approved cannabis-based epilepsy medication.

CBD can be derived from both hemp plants, which are legal, and marijuana plants, which are not. That's led to a flurry of expert speculation about how the industry — which some analysts have projected will soon blossom into a $16 billion market — will shake out.

In the statement, the outgoing US Food and Drug Administration (FDA) chief Scott Gottlieb hinted at the possibility of legal CBD-based foods and drinks at some point — so long as they meet or are below a level that the agency deems permissible.

"There are open questions about whether some threshold level of CBD could be allowed in foods without undermining the drug approval process or diminishing commercial incentives for further clinical study of the relevant drug substance," the statement said.

The announcement is a slight departure from the agency's previous messaging on the matter. In the past, the FDA has said available foods and drinks made with CBD are illegal because they have not gone through the same regulatory approval process as the CBD-based epilepsy drug Epidiolex. In that framework, a company making a CBD tea that claims to soothe anxiety would have to have their drink approved by the FDA.

But that framework is not yet set in stone and may be shifting.

From a 'warning shot' to a 'flexible' regulatory approach

Last winter, in what analysts called a "warning shot" to the CBD industry, the FDA released a statement saying it would police foods and beverages made with CBD. On the heels of that statement, state health departments in New York, Maine, and Ohio began cracking down on retailers that were selling unapproved cookies and beverages containing CBD.

But Tuesday's announcement suggests there could be a world in which CBD-containing teas, coffees, and desserts are sold legally. Analysts have previously called the approach "flexible."

Read more: On the heels of hemp legalization, regulators have fired a 'warning shot' to the $1 billion CBD industry

For example, the agency has formed an internal working group that will "explore potential pathways for dietary supplements and/or conventional foods containing CBD to be lawfully marketed," the statement said.

Still, the agency has some concerns about allowing foods and drinks made with CBD to be sold. Those include safety considerations when people are consuming CBD from various sources at once; how the way they're consumed (eaten vs. inhaled, for example) affects exposure; and how CBD products could interact with other substances, such as drugs and medications.

The FDA is holding a public hearing on cannabis at the end of May and taking comments from the public on the topic. Gottlieb officially leaves his post on Friday.

DON'T MISS: A mysterious syndrome that makes marijuana users violently ill is starting to worry doctors

SEE ALSO: Wall Street thinks the $1 billion market for CBD could explode to $16 billion by 2025

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Markets Live: Tuesday, 2nd April 2019

Tue, 04/02/2019 - 6:07am  |  FT Alphaville

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FAA expects Boeing to come up with new software to fix the grounded 737 Max in a matter of weeks (BA)

Mon, 04/01/2019 - 10:58pm  |  Clusterstock

  • The Federal Aviation Administration (FAA) expects Boeing to submit its package of software fixes for the 737 Max airliner "over the coming weeks."
  • The agency said on Monday that it won't approve the software until it's satisfied.
  • Most of the software updates will be to the 737 Max's Maneuvering Characteristics Augmentation System (MCAS).
  • Initial reports from the Lion Air Flight JT610 investigation, however, indicate that a faulty angle-of-attack (AOA) sensor reading may have triggered MCAS shortly after the flight took off. Observers fear Ethiopian Airlines Flight ET302 may have experienced a similar issue.
  • The US Department of Transportation is auditing the Boeing 737 Max 8's FAA certification process.

The Federal Aviation Administration (FAA) announced on Monday that it expects Boeing to submit the final software fixes for the 737 Max "over the comings weeks."

"The FAA expects to receive Boeing’s final package of its software enhancement over the coming weeks for FAA approval," the agency said in a statement. "Time is needed for additional work by Boeing as the result of an ongoing review of the 737 MAX Flight Control System to ensure that Boeing has identified and appropriately addressed all pertinent issues." 

Once Boeing's submission is complete, FAA is expected to conduct a review of the updated flight-control system. 

"The FAA will not approve the software for installation until the agency is satisfied with the submission," FAA said.

Until then, all 371 Boeing 737 Max airliners already in service will remain grounded. 

Read more: The Boeing 737 Max is likely to be the last version of the best-selling airliner of all time.

Most of the software updates will be to the 737 Max's Maneuvering Characteristics Augmentation System (MCAS).

To fit the Max's larger, more fuel-efficient engines, Boeing had to position the engine farther forward and up. This change disrupted the plane's center of gravity and caused the Max to have a tendency to tip its nose upward during flight, increasing the likelihood of a stall. MCAS is designed to automatically counteract that tendency and point the nose of the plane downward when the plane's angle-of-attack (AOA) sensor triggers a warning.

Initial reports from the Lion Air Flight JT610 investigation, however, indicate that a faulty AOA sensor reading may have triggered MCAS shortly after the flight took off. Observers fear Ethiopian Airlines Flight ET302 may have experienced a similar issue.

Read more: Boeing just unveiled how it's going to fix the 737 Max that was grounded after 2 fatal crashes in recent months.

The updated software will "provide additional layers of protection if the AOA sensors provide erroneous data," Boeing said in a press release last week. The updates are also geared toward reducing the workload on pilots during emergency situations.

Both Boeing and FAA have come under increasing scrutiny over the flight certification of the Boeing 737 Max.
On March 19, Secretary of Transportation Elaine Chao announced her agency's intention to audit the 737 Max 8's FAA certification process.

Last week, the Office of Inspector General at the Department of Transportation confirmed that it has initiated the audit. 

SEE ALSO: The Boeing 737 Max is now one of the most controversial airliners of all time. Here are 3 others.

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JPMORGAN: These 4 drivers are all you need to understand if you want to make a killing in markets this quarter

Mon, 04/01/2019 - 10:46pm  |  Clusterstock

  • JPMorgan lays out the four catalysts that investors should fully understand if they want to beat the market in the second quarter.
  • Multiple drivers broken down by JPMorgan circle back to the pace of global growth, which the firm says has a strong likelihood of recovering during the upcoming period.

Sometimes, with so much going on in the global marketplace, a bit of simplicity can go a long way towards helping an investor figure out what to do.

The cross-asset strategy team at JPMorgan realizes this and has arrived at a four-part framework to help traders wrap their heads around what will transpire in the second quarter.

At the core of the firm's outlook is the idea that fears surrounding the yield curve are overblown. To hear JPMorgan tell it, the relative levels of Treasury yields are not as closely tied to market action as many investors think.

"Since curve shape is a symptom of the macroeconomic setting and not the driver of financial conditions or returns, this Q2 outlook focuses instead on four underlying issues that will determine cross-asset performance," John Normand, JPMorgan's head of cross-asset fundamental strategy, wrote in a client note.

When viewed collectively, these catalysts should be all an investor needs to understanding in order to crush the market in the second quarter. And while fully comprehending them is easier said than done, perhaps the following commentary from JPMorgan will help.

1) Will global growth be revived?

JPMorgan says economic expansion might pick up in the coming months because of three main policy changes:

  1. A Fed pause that loosens financial conditions
  2. Easing in China that results in a high likelihood that the economy keeps growing at a consistent pace
  3. A US-China trade truce normalizes signals like corporate spending.
2) Will corporate earnings increase?

JPMorgan notes that if global growth recovers, that should also lift corporate profits. And given that earnings forecasts currently look rather low, the firm thinks there could be decent upside here.

Even the firm's biggest pessimists are finding it difficult to get too bent out of shape about the state of earnings.

"Within JPM there are differing views on margins, but even the most conservative view is for a bias lower rather than a multi-point contraction," Normand said.

He continued: "Importantly, some high-frequency monthly proxies for margins remain firm, and equities have tended to correlate slightly better with EPS growth that margins."

3) Will central banks validate the easing priced into yield curves?

After pricing in a set number of rate hikes for much of 2018, the market has changed course and now expects the Federal Reserve to cut lending costs this year.

"With the US curve pricing a cut by end-2019 and two more by end-2021, a Fed that does nothing can suddenly become a market event," Normand said. "Given that investors appear to be quite long of Treasuries and EM assets, the possibility of a destabilizing steepening of the US curve is a major risk for Q2."

JPMorgan says the following chain of events could occur during such a repricing: firmer US growth, no additional dovishness from the Fed, higher US rates, a stronger dollar, weaker EM assets, and weaker US stocks.

Normand added: "Though all of these corrections are probably only intra-month if growth supports earnings and the Fed continues signaling no hikes until well into 2020."

4) What's next on the political/geopolitical front?

When it comes to geopolitical drivers, it's really a grab bag that depends on the day.

There's the Trump administration, which appears to have dodged a bullet in the form of an underwhelming Mueller report. There's also the debt ceiling debate, but JPMorgan says that's more of a third-quarter concern than anything that will strike markets in the near term.

Looking globally, the firm expects the ongoing US-China trade conflict to be more of a drag on specifically vulnerable companies, rather than the entire market. There's also the Brexit fiasco.

JPMorgan also highlights the oil market as a potential flashpoint. Normand says a "destabilizing" move towards $80 a barrel for Brent crude could have wide-reaching effects.

SEE ALSO: There’s a swelling avalanche of evidence that investors are getting more and more worried about another stock-market crash

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A Disney heiress who has donated $70 million over the past 30 years says she would outlaw private jets if she could

Mon, 04/01/2019 - 4:56pm  |  Clusterstock

  • Private jets allow rich people to "get around a certain reality," the Disney heiress Abigail Disney told The Cut.
  • Disney said that though her family had a 737 private jet, she decided to stop using it once she considered her carbon footprint and the cost her trips incurred.
  • Private jets are popular purchases among many millionaires and billionaires looking for quick and easy travel.

Mark Cuban, Jeff Bezos, and other billionaires may own private jets, but the heiress Abigail Disney has a different set of thoughts on the topic.

"If I were queen of the world, I would pass a law against private jets, because they enable you to get around a certain reality," Abigail Disney recently told The Cut. "You don't have to go through an airport terminal, you don't have to interact, you don't have to be patient, you don't have to be uncomfortable. These are the things that remind us we're human."

Disney — who is the granddaughter of Roy Disney, a cofounder of The Walt Disney Co. — is an heiress to the Disney fortune. While she stayed mum on the exact size of her inheritance, she told The Cut that she could be a billionaire if she wanted to be and that she's donated more than $70 million since turning 21.

Her dad’s plane was a 737 with a queen-size bed and a shower, she said: "We would use the plane occasionally because I have four kids, so it was much easier, obviously, to ride on my dad’s plane with them. Then, at a certain point, I just said, 'No, I think this is really bad for everybody.'"

That defining moment, she told The Cut, came after thinking about her carbon footprint and the cost of her trip while riding on the jet alone for a quick trip from New York to California.

Read moreAn heiress to the Disney fortune has given away $70 million, and teaches her kids that money is the least important thing about them

Owning a private jet is typically a hallmark among millionaires and billionaires, especially high-powered executives and investors working in the tech industry. For them, a private jet can allow for quick and easy travel if they need to be on the other coast on the same day, according to Business Insider's Paige Leskin.

Even the notoriously frugal Warren Buffett has his own private jet. He once told CNBC it's "the only thing that I do that costs a lot of money."

But design trends in planes are evolving: Business Insider's Katie Warren previously reported that the super-wealthy no longer want their private jets to look like private jets. Instead, they want them to look like extensions of their homes or offices, and they are designing them in clean lines and cool color tones.

Read the full story on The Cut »

SEE ALSO: People born into massive family fortunes go down 2 different paths, says a Disney heiress who has donated $70 million over the past 30 years

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Lyft plunges below its IPO price (LYFT)

Mon, 04/01/2019 - 4:18pm  |  Clusterstock

  • Lyft shares plunged 13% Monday, the company's first full day of trading after debuting on the Nasdaq.
  • The stock traded below its initial public offering price of $72 a share.
  • Watch Lyft trade live.

Lyft plunged nearly 12% Monday in its first full trading session, closing at $69.01 a share, below its initial public offering price of $72. The company on Friday became the first ride-hailing company to hit the public market.

"Feels like just some of the faster money exiting the stock following the solid first-day pop," Tom White, an analyst at D.A. Davidson who has a "buy" rating on the stock, said in an email. "LYFT also caught a Neutral rated initiation today which probably isn't helping either."

On Monday, Guggenheim began covering Lyft with a "neutral" rating in part because of uncertainty surrounding the company's path to profitability and revenue-growth sustainability.

"We see four paths to profitability: cut driver pay, turn off incentives, reduce insurance costs or shift to self-driving cars," wrote Jake Fuller, an analyst at the firm. "The first two would be tough in a highly competitive category, the third might not be enough by itself and the fourth is likely 10 years out."

Lyft's initial public offering was oversubscribed, and shares opened for trading on Friday at $87.24 apiece, well above the $72 where they had priced the prior evening.

The debut, however, was ultimately something of a mixed bag. Though shares booked a 9% gain, they closed at session lows and turned negative in after-hours trading.

Other analysts are concerned about the risks surrounding the fledgling company. Lyft posted a $911 million loss last year, and faces stiff competition. Its rival Uber is expected to go public next month.

"While Lyft is purely a domestic vendor within the US, there remains some wild cards around the path of the company's autonomous vehicle ambitions, international expansion," as well as further market-share gains, Dan Ives, an analyst at Wedbush, wrote in a note to clients last week.

Of the seven Wall Street analysts covering Lyft shares, most are neutral. Five have a "hold" rating, and two say "buy." None recommend selling.

Now read more markets coverage from Markets Insider and Business Insider:

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Here's how much life insurance you need at every income level

Mon, 04/01/2019 - 4:05pm  |  Clusterstock

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, but our reporting and recommendations are always independent and objective.

  • Life insurance needs are based on myriad factors, from the size of your family, to whether or not you own a home or have debt, to how much money you're earning and saving.
  • Since life insurance needs are so specific to an individual or family, a life insurance calculator will typically yield the most accurate estimate.
  • Business Insider created three sample scenarios and ran them through SmartAsset's life insurance calculator to estimate life insurance needs in a high cost-of-living US city, a lower cost-of-living US city, and an average cost-of-living US city.
  • All three scenarios are for a hypothetical 35-year-old married homeowner with two kids and a working spouse.

It's not easy to put a price on your life. There's a lot to consider to find out how much life insurance you need, including whether or not you have kids, a working spouse, a mortgage or other debt, and savings or investments.

Not everyone needs life insurance. Insurance-comparison website Policygenius boils it down to a simple question to decide whether you need it: Does anyone rely on your income for their financial well-being? That could be children, a spouse, aging parents, or anyone else who could be considered some level of dependent. If someone else relies on your income, then you probably need life insurance.

In most cases, explains Policygenius, a limited-time, or term life insurance policy is a good fit for coverage, because life insurance gets more expensive the longer you wait to purchase it and the longer the term of coverage. Stay-at-home parents, retirees, and children generally don't need life insurance.

Read More: The insurance policy that can protect a family's future isn't nearly as complicated or expensive as you'd think

Typically, the higher your income and the more expensive the city you live in, the more money your family will need in your absence.

Business Insider created three sample scenarios to estimate life insurance needs for people at different income levels in a comparatively high cost-of-living city (Brooklyn, New York), lower cost-of-living city (Dallas, Texas), and average cost-of-living city (Denver, Colorado) and ran them through SmartAsset's life insurance calculator

Each calculation was based on a handful of assumptions, which you can see in full at the end of this post.* High-level, the hypothetical insurance-holder in this scenario is a 35-year-old with two kids and a working spouse, who owns a median-priced home in their city and has savings and investments.

The charts below show the estimated life insurance policy needed for five different income levels with the above assumptions:

It's important to note that these life insurance estimates are independent of group life insurance offered through an employer. If you're signed up for group life insurance through work, you only need to supplement that amount with an individual policy.

Many companies offer life insurance coverage for employees, but it's usually not enough to replace income for a family. According to NerdWallet, typical coverage amounts are $25,000, $50,000, or an employee's annual salary. The policy is often free and the money is guaranteed, so it's often worth taking.

Considering life insurance? Business Insider's partner Policygenius can help you find the best fit for you »

Some employers offer supplemental life insurance to make up the difference, but it's smart to compare rates with other insurers to find the best option.

Calculate your own estimated life insurance needs with SmartAsset's free calculator: 

*The above calculations are made using the following assumptions for a 35-year-old:

  • Spouse of the same age, earns $60,000 a year and lives to age 95
  • Two kids, birth years 2014 and 2012
  • Plans to pay for both kids four-year out-of-state public college tuition
  • Owns a median-value home with a mortgage (home value for each city sourced from Zillow)
  • Has current savings and investments equal to twice their salary (Fidelity recommendation for 35-year-old)
  • Savings and investments earn conservative 4% annual return
  • Beneficiaries receive Social Security
  • Family needs 50% of current income for 20 years
Considering life insurance? Business Insider's partner Policygenius can help you find the best fit for you »

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Slack is reportedly going for a direct listing on the New York Stock Exchange

Mon, 04/01/2019 - 3:44pm  |  Clusterstock

  • Slack is planning to direct list its shares on the New York Stock Exchange in the next few months, The Wall Street Journal says, citing sources.
  • Last year, Spotify became the first big technology company to direct list its shares.
  • Companies avoid paying fees by direct listing shares, but there are some risks. 

The workplace-messaging platform Slack is planning to direct list its shares on the New York Stock Exchange in June or July, according to The Wall Street Journal, citing sources. 

Doing so would make Slack the second big technology company after Spotify to bypass a traditional initial public offering. 

A direct listing differs from a traditional IPO in that it cuts out the usual underwriting process that involves lining up investors ahead of time and lets the open market play a larger role in setting the share price.

This will allow Slack to avoid paying the hefty fees that are involved in the process, and also can give shares more liquidity by avoiding the lock-up periods associated with going public through a traditional IPO.   

Read more: Here's how a direct listing works.

"When we think about why companies go public, they do it for liquidity, to raise their profile, for capital," John Tuttle, head of global listings at NYSE, told Business Insider in February 2018. "But for those companies that are well-capitalized, all they really need is liquidity."

Still, there are some risks involved with a direct listing. While Slack has name recognition and a private-market valuation of about $7 billion, there is still the chance that demand could be weak without a banking contingency doing the marketing behind the scenes. The process also doesn't involve underwriters generating interest among investors.  

Monday's report is another blow to the Nasdaq, which lost out on the Spotify direct listing. Last month, the exchange tweaked its rules, allowing it to provide more clarity around direct listings to compete with the New York Stock Exchange 

"The exchanges want to clarify the rules so that there is no ambiguity that might deter a company from listing on that exchange," Jay Ritter, a finance professor at the University of Florida, told Business Insider's Dan DeFrancesco.

"It's unlikely that Spotify is going to be a one-off direct listing. Some other prominent companies are very likely to use the procedure as well."

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Millennials are about to overtake Baby Boomers as the largest adult generation — and it could drastically alter the US housing market

Mon, 04/01/2019 - 3:36pm  |  Clusterstock

  • Millennials are projected to overtake Baby Boomers as the largest living adult generation.
  • As older generations age and look to sell properties, growth in the rental market could outpace homeownership over the next decade.
  • Americans have already begun to lean toward rentals, as softer construction activity and housing shortages price potential buyers out of the market.

Growth in the rental market could outpace homeownership over the next decade as older generations age and look to sell properties, according to analysts.

Home supply appears set to jump by more than two-thirds over the next 10 years, Morgan Stanley said in a new research note. But demand among generations Y and Z — which include those born between 1981 and 2012 — looks poised to edge just 7% higher over that period.

Millennials are projected to overtake Baby Boomers as the largest living adult generation this year, according to population projections from the US Census Bureau. And with new generations could come an increasing demand for rentals.

"Gen Z + Y are more likely to rent than own, and the bulge in supply when the Baby Boomers sell looks to dampen net single-family demand," the analysts said. "This drives a surge in rentership while ownership is challenged."

Certain real-estate markets could see more exaggerated shifts toward rental demand than others. New England and the Rust Belt have far more Baby Boomers than other generations, according to Morgan Stanley, while the opposite is the case for the Pacific and the West South Central.

Americans have already begun to lean toward rentals, as softer construction activity and housing shortages price potential buyers out of the market. While lower mortgage rates could pull some in from the sidelines, new tax laws have also reduced incentives for Americans to own homes.

"Home sales are set to tread water over the next couple of years, which is good news for the rental sector," Capital Economics economists Matthew Pointon and Andrew Burrell said in a research note. "If Americans aren't buying homes, many will look to rent one instead."

Still, some think demand for homes will hold up among younger generations over the next decade. Millennials still accounted for most of the growth in the overall homeownership rate in 2018, according to Mark Fleming, chief economist at First American.

“I believe millennials will be the most important generational source of demand in the housing market, as well as the general economy, for a number of years to come,” he said.

SEE ALSO: A housing-market slowdown could be bad news for renters

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Saudia Arabia's oil giant Aramco is printing money as the world's most profitable company

Mon, 04/01/2019 - 3:20pm  |  Clusterstock

  • Saudi Aramco, Saudi Arabia's state-owned oil company, filed for its international bond debut Monday with crazy high profits.
  • The company made $111.1 billion in net income last year, according to Moody's, making it more profitable than Apple, Amazon, and Alphabet (Google's parent company) combined.
  • Aramco is issuing a $10 billion bond to investors after doubling its profits in 2018 on the back of improved oil prices.

Saudi Arabia's state-owned oil giant blows the rest of the world out of the water with its gargantuan profits.

Saudi Aramco reported $111.1 billion in net income last year, according to Moody's, making it more profitable than Apple, Amazon, and Alphabet combined. The company filed for its international bond debut on Monday, a $10 billion issuance following a doubling of its profits after oil prices rose last year.

For context, Apple's earnings shot up to $60 billion last year, while Amazon brought in $10 billion in profits. Similarly, the oil giants Exxon Mobil and Royal Dutch Shell made profits of $20.8 billion and $17.5 billion in 2018.

The company's credit rating, A1 from Moody's, is tied to that of Saudi Arabia given the links between the two entities.

"The company is wholly-owned by the state and is expected to remain largely under government ownership even after any potential IPO in the future," Moody's said. "The oil sector also comprises a substantial portion of Saudi Arabia's GDP and dominates its exports."

It's the first major opportunity for investors to scrutinize the offering of one of the world's largest energy companies given the usually secretive nature of Aramco's disclosures. It's part of a transparency push on behalf of Saudi Arabia as part of a will-they-won't-they over the company's plans for an initial public offering, which it shelved last year. One of the main advantages of issuing the bond is to gain high ratings from the various credit agencies. (Aramco doesn't need the money, after all.)

Among the key risk factors purported by the company are environmental issues and other climate-change-related challenges indicating a broad understanding of the manifold demand constraints facing the oil and gas industry. Saudi Aramco accounted for approximately one in eight barrels of crude oil produced globally from 2016 to 2018, according to the prospectus.

Oil prices were boosted last year after Saudi-led efforts at a meeting of major oil exporters secured supply cuts in an attempt to improve languishing prices by taking approximately 1.2 million barrels a day out of the market.

Saudi Arabia is attempting to diversify its oil-heavy economy and attract new capital to the kingdom.

SEE ALSO: Oil set for strongest quarter in a decade on OPEC-led cuts and trade talk optimism

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Congestion pricing could mark the beginning of the end of New York's famous yellow taxis (LYFT)

Mon, 04/01/2019 - 3:14pm  |  Clusterstock

  • Congestion pricing in New York City will achieve the goal of reducing gridlock.
  • But the way it's structured could also spell the end of the taxi business.
  • Congestion pricing represents a hard bargain between well-capitalized ride-hailing companies, such as Uber and Lyft, and governments desperate for money to fix aging mass-transit systems.

Yellow taxi cabs and New York City — what could be more iconic?

Successfully hailing a cab has always been a rite of passage for New Yorkers. It has bewildered out-of-towners but was traditionally handled with little effort by seasoned residents of the Big Apple: spot an on-duty cab, raise a hand, hop inside, enjoy a potentially strange, yet authentic, experience.

The old-school taxi business has been under assault in New York for some time, however, as Uber and Lyft have spent half a decade rapidly expanding their operations. Ride-hailing has flooded Manhattan with cars and driven down the value of the city's allocated taxi medallions: There are 13,500 cabs in New York City — but there is something like 80,000 vehicles aligned with ride-hailing services, according to The Wall Street Journal.

Taxis now have a new challenge, and it could be an existential one: congestion charges in New York, which are set to be the first in a US city.

Read more: Trying to persuade Americans to stop buying cars won't save Lyft from being wildly unprofitable

The congestion-pricing scheme is now part of a New York state budget, with the fees to kick in by 2021. People driving into the congestion zone — Manhattan island below 60th St. — will be hit with a $12 to $14 fee (it will likely be assessed using the E-Z Pass system, which already covers many bridges, tunnels, and toll roads in the region). Taxis will be billed $2.50 per ride, while ride-hailing services will be billed $2.75.

Taxis don't cause congestion

But Uber and Lyft, for example, will be able to carve out a discount for a "pooled" ride, knocking the fee down to $0.75. Taxis won't be able to do this — and it could be impossible to monitor whether ride-hailed pools actually wind up transporting multiple passengers.

The whole thing is intended to generate $15 billion over five years for capital improvements to the city's mass-transit system (in one of those "only in New York" twists, the state government in Albany oversees mass transit in New York City). That's much-needed funding, and one hopes it will be wisely spent. But the most recent expansion of the city's subway, the Second Ave. line, took decades and cost a staggering $3.8 billion, so don't get your hopes up.

Congestion pricing, of course, should ease Manhattan gridlock, but it will do this at the expense of turning over the city's most lucrative sections to Uber and Lyft while continuing the destruction of the taxi business. It's a hard political bargain, which was forged by New York Gov. Andrew Cuomo.

As far as I can tell, the plan combines accepted economic theory about congestion caused by personal cars — it's an unpriced "externality" — with a cunning effort to get well-capitalized Silicon Valley companies to pay for upgrading mass transit.

Taxi drivers caught in the middle

Taxi drivers are caught in the viselike middle. They've persuasively argued that because their numbers have long been capped, they aren't part of the congestion problem. This is accurate — in fact, it's hard to see why taxis aren't exempt from the charge. They're sort of the longstanding third leg of a New York City transit stool, with buses and subways being the other two.

The taxi business has evidently lost that argument and could now have a tough time competing with Uber, Lyft, and others because ride-hailing services — already losing massive amounts of money as they chase the growth that investors desire — will simply cut prices to avoid any passenger sticker shock. 

The double standard at work here is actually so glaring that it's almost hard to believe it's real. Uber, Lyft, and other ride-hailing services simply deluged New York City streets with vehicles in an effort to rapidly build their businesses. And we know how big those businesses can be: Lyft's initial public offering last week valued the company at over $20 billion.

The taxi business is hardly pure — economists have often argued that it was a monopoly, and, at one point, taxi medallions were costing more than $1 million. But New York is now using its lawmaking and budgetary power to pick a clear winner in the transit game; the kind of money that the Ubers and Lyfts can bring to the table is simply too humongous to resist.

Pragmatists will tell you that the horse, so to speak, has left the barn anyway, so it makes sense for New York to effectively tax ride-hailing to make up for years of neglecting the transit systems that have nothing to do with gridlock. In that case, the taxi business, iconic or not, is expendable.

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Marijuana retailer Cresco Labs is buying up a competitor for $825 million in one of the largest US pot deals as the company looks toward a US listing

Mon, 04/01/2019 - 3:06pm  |  Clusterstock

  • Cresco Labs has agreed to buy Origin House in an approximately $825 million deal.
  • The deal would be the largest public acquisition in the US cannabis industry to date, according to Cresco.
  • Deals of nearly $1 billion are becoming common in the US cannabis industry as companies chase down what's set to be a $75 billion market.

The marijuana retail chain Cresco Labs has agreed to buy the marijuana retailer Origin House in an approximately $825 million deal.

The deal, expected to close in June, would be the largest public acquisition in the US cannabis industry to date, according to Cresco. It said that based on the terms of the deal, Origin House shareholders would receive 0.8428 subordinate voting shares of Cresco, which went public on the Canadian Securities Exchange in December.

The acquisition marks Chicago-based Cresco's push into the lucrative California market, where Origin House, formerly CannaRoyalty Corp, has a presence in more than 500 dispensaries.

Cresco Labs CEO Charles Bachtell said in a Monday interview that he was attracted to Origin House because of the company's deep expertise in California. And on the other side, Cresco will help Origin House distribute its California brands to other states, Bachtell said.

Read more: A hot marijuana startup fresh off a $75 million raise just scooped up an exec from ModCloth to lead its retail push, and it's part of a growing trend

"So the two companies kind of fit together like puzzle pieces," Bachtell said.

The California cannabis market is expected to be over $7.7 billion by 2022, according to the industry research firm BDS Analytics.

Once the deal closes, Cresco will have brands in over 725 dispensaries across the US, it said.

Cresco was advised by the investment bank Canaccord Genuity, and the Canadian law firm Bennett Jones acted as legal counsel. Origin House was advised by Cormark Securities, and Norton Rose Fulbright Canada served as legal counsel.

The deal will also give Cresco a retail footprint in Canada, though Bachtell said the company would remain "laser-focused" on the US market.

The opportunity in the US is "so, so challenging" and demands a full-time focus given that each state has different rules and market dynamics, Bachtell said, but Origin House's Canadian retail presence was a "very interesting and valuable additional component."

Buyouts of nearly $1 billion have become common in the US cannabis space as companies compete to capture a market that some Wall Street analysts say could hit $75 billion in the next decade as more states open their doors to commercialized pot.

In March, Harvest Health & Recreation announced its intent to acquire Verano Holdings in an approximately $850 million all-stock transaction. In October, a New York marijuana company called iAnthus acquired MPX Bioceutical in a $640 million deal, and MedMen, a California cannabis chain, acquired PharmaCann in a $682 million all-stock transaction.

The maturing of cannabis M&A

What separates this deal from the other multimillion-dollar marijuana mergers in the past months is that it's not just a play for scale.

"All of the M&A that's been done so far, including from us, has been sort of the land-grabbed geographic expansion," Bachtell said. "You know, acquire a company that gives you another license in another state."

Bachtell said this deal would allow Cresco to "execute better and deeper" in the California market.

"This was a more strategic acquisition than what's been done in the cannabis space so far," Bachtell said. "I think it's the maturing of M&A in the space."

Looking ahead, Bachtell said the company would like to pursue a listing on a US exchange.

"I think it's fair to say that the US capital markets are the goal," Bachtell said. "I don't know that that's too far off."

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Victoria's Secret's Pink brand is 'without fans and rudderless' (LB)

Mon, 04/01/2019 - 2:56pm  |  Clusterstock

  • Pink is the next sore spot for L Brands' Victoria's Secret, according to Jefferies analyst Randal Konik. 
  • He says sales for the brand fell by low double digits in the fourth quarter and are set to keep sliding.  
  • Konik went to a Pink event at Rutgers University that he says proved the brand is "without fans and rudderless."
  • Watch L Brands trade live

Pink is the next trouble spot at Victoria's Secret, according to longtime L Brands skeptic Randal Konik, who last week visited a brand event at Rutgers University. 

"Our visit to Rutgers University on 3/29 shows the PINK brand without fans and rudderless," he wrote in a note sent out to clients on Monday. "We believe PINK sales may be cut in half or more within the next 12-24 months creating further EPS cuts for LB so sell shares."

The problems at Victoria's Secret are nothing new, but what is new is that the Pink brand is struggling. Comp sales for Pink fell by low double digits during the fourth quarter, and Konik says that decline is set to continue. He added that the brand can't rely on heavy promos to keep driving traffic, and that the slowdown is coming as the Bath & Body Works brand also begins to wane. Bath & Body Works' comp sales weren't positive for just the second time in 24 months in February.   

But at least one investor thinks there's still hope at L Brands. Last month, in a letter to Leslie Wexner, the chairman and CEO of L Brands, the activist investor Barington Capital called on the company to quickly improve the performance of Victoria's Secret by "correcting past merchandising mistakes and ensuring that it communicates a compelling, up-to-date brand image that resonates with today's consumers."

Barington asked the company to unlock Bath & Body Works' value by launching an initial public offering for the brand or by spinning off Victoria's Secret. Barington also seeks a shakeup of the L Brands board of directors.

And while Konik thinks that an activist investor is a good thing, he disagrees on the value of L Brands. 

"The leverage is high, the VS brand is broken and they are not calculating the risk of PINK sales being cut in half which is real," Konik wrote. 

"Their view is BBW has all this value and to be fair BBW is a good biz for now but it’s cyclical and mall dependent which means the distribution model is flawed and business momentum not sustainable. Furthermore if the company were to be split all the debt has to be put on BBW not VS where losses are going to mount and cash flows can’t cover interest payments."

Konik has a $16 price target for L Brands — about 41% below where shares were trading on Monday — and "underperform" rating for the stock. 

L Brands was up about 6% this year, including Monday's 1.1% loss. 

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