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Dear LIBOR Members,
Welcome to the first issue of the LIBOR Financial for the Spring semester. We have all been working diligently over the past week to report on interesting and impactful events across financial markets, with special focus given to rising energy prices, US debt ceiling negotiations, and significant M&A activity in the healthcare space.
We also highlight the thoughts of Michael Margolis, Co-Head of Healthcare Investment Banking at Oppenheimer, in this issue's Alumni Spotlight in an extended interview, giving you greater insight into his work in healthcare banking and his time at Rutgers.
Thank you for joining us and please be on the lookout for upcoming LIBOR events!
With best regards,
Matthew Rossi
LIBOR Financial Editor-In-Chief
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Alumni Spotlight: Michael Margolis
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 Michael Margolis R.Ph., MBAOppenheimer | Senior Managing Director, Co-Head of Healthcare Investment Banking | Class of 1997 | LinkedIn
Michael graduated from Rutgers in 1997 with a bachelor’s degree in pharmacy, an education that served him well over his 25+ years of working in healthcare/finance roles. After working as a pharmaceutical sales rep and completing his MBA in Finance, he gained experience in healthcare related finance roles such as a life sciences-focused hedge fund and global business development for Novartis Pharmaceuticals. He began his career in investment banking in 2006, working at a few smaller firms prior to joining Oppenheimer & Co. He is currently a senior managing director and the co-head of healthcare investment banking at Oppenheimer, leading the firm’s efforts in the life sciences area.
You come from quite a unique background, given you didn’t major in finance or any related field (accounting, math, econ, etc.). You graduated as a pharmacy major. What made you pursue finance and led you to your current role at Oppenheimer?
I definitely took an indirect route in getting to where I am today, but my path was paved with a bit of luck and a lot of networking. Coming out of college, I learned what I didn’t like before I learned what I really loved. From my standpoint, I’ve always loved pharmaceuticals, life sciences, and healthcare. My family’s been in that business for a long time and my initial intentions were to eventually go to medical school. But after a few experiences in the pharmaceutical industry, I came to realize medical school wasn’t for me. At the same time I knew I’ve always had an interest in the stock market, so finance from that perspective held a strong attraction. I was lucky enough to have the opportunity to find work with a hedge fund, where I gained exposure to smaller capitalization, emerging growth healthcare companies. It was very interesting work. I especially enjoyed participating in investment transactions to help companies further their research and that’s what led me to investment banking. My experience as a banker executing transactions has certainly been fulfilling and I’ve been doing it now for almost 17 years. I will absolutely say that the typical tenure of investment bankers is definitely less than 17 years. It’s a rigorous job, emotionally and physically, and not for the faint of heart: but I love what I do. I appreciate both the variety of companies and transactions one gets to see and the interactions with people. I have made the most of this opportunity, met many interesting people, forged a lot of relationships and become a trusted advisor to hundreds of clients over the years.
What does success mean to you and how do you measure it?
Success can be defined in many different ways. Having worked for over 25 years, I’m proud of my accomplishments. I’m proud of my professional success, my family, friends that I have made and relationships I’ve built. One of the key factors that is important to success and something I learned from several mentors of mine early on was to build relationships and never burn bridges. I have relationships that go all the way back to Rutgers and I’ve worked to maintain those relationships. I’m also proud of the impact that I’ve had on my clients and companies that I work with. At the end of the day, we obviously work to make money, but my work is also important to me as it has a direct impact on patients and their well-being. Several of my clients have been fortunate enough to get their drugs approved by the FDA and I’ve seen firsthand the impact that has on the industry and patients. It’s important to look past the money and to see these greater outcomes when measuring success in whatever career path one takes. It’s easy to lose sight of being a banker but the impact of my work, whether it be on patients/people, healthcare professionals or the industry as a whole is something to be proud of. An example I can point to came during the pandemic. I was fortunate enough to be an underwriter on the Moderna initial public offering. Moderna was not particularly a household name before, but once the pandemic started, they used their mRNA technology to rapidly develop an effective COVID vaccine potentially saving millions of lives and improving countless others. I played a role in helping that company go public. In addition to building relationships, getting to use my professional degree as a pharmacist to make a greater impact has been truly rewarding.
Within the financial services industry, what changes have you seen that you believe Rutgers students looking to break into hyper-competitive finance roles should be aware of?
First of all I actually want to compliment Rutgers, LIBOR, and the Business School. The finance students especially have done extremely well. I’ve hired several Rutgers students and they have passion, they have grit, they’re smart, not afraid to ask questions and that to me is very important. The reality is the finance and financial services world is rapidly changing. So I believe the ability to successfully adapt to change is critical. Coming out of COVID there’s also been many changes. So be flexible and be willing to put the time in and work hard. What I’ve seen, especially from some younger people, is reluctance to put in the time or work necessary to succeed. One has to do it, especially as a banker. Banking is an apprenticeship job and that’s truly important to recognize. There’s a reason that you start off as an analyst, then become an associate, then a vice president, then a director before becoming a managing director. It takes time, and there’s no substitute for the experience you get. Every transaction one works on, every client one interacts with, it’s another experience that can build expertise and effectiveness.
What’s one piece of advice you would offer to your younger self?
This hits close to home because I also happen to have an 18 year old son who’s a senior in high school and he’s about to go to college. When I think about myself and what I would tell my younger self, I would say to have passion. Having passion is of the utmost importance. Whatever you do, do it a hundred-and-ten percent. The world is becoming increasingly competitive, especially in investment banking, so strive to work harder than the person next to you. Second, you must differentiate yourself. Don’t be afraid to ask lots of questions, network, and meet people, that’s how you’ll become an expert in whatever field you are interested in. And don’t be afraid to make mistakes. I think that’s a big thing. As a recent graduate or someone entering a new career, you will make mistakes and that’s okay. I tell people who work on my team, mistakes are learning experiences, just don’t make the same mistake twice. And I will tell you in a job like banking or within finance, attention to detail is incredibly important. It’s the little things that matter.
Suraj Nemani
Alumni Spotlight
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Weekly Recap
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Markets: Turkish Financial Markets Dealt Crushing Blow
Following an unprecedented earthquake within Turkey and neighboring Syria, the Turkish stock market has dropped 16% over the course of a week, with borrowing costs also rising half a percentage point. Following a recent currency crisis, record inflation, and the geopolitical uncertainty of the neighboring Syrian regime, the record earthquake was another blow to the reeling economy, leaving millions displaced, infrastructure ruined, and an obvious humanitarian crisis. With long-time Turkish Prime Minister Recep Tayyip Erdogan facing an upcoming election, the Turkish government’s response to the crisis will in large part determine whether new political leadership emerges in the country of 85 million.
Inside Washington: Debt-Ceiling Negotiations Unfold
Following President Biden’s annual State of the Union address, Congressional Republicans led by Speaker Kevin McCarthy (R - CA) have urged for large spending cuts in exchange for raising the nation’s borrowing limit. McCarthy has stated all programs excluding Social Security and Medicare are on the table for potential cuts, including potential cuts to defense spending. Some key points on the negotiations include:
- Republicans are urging for a balanced budget through spending cuts only, proposing no new tax increases.
- Biden has asked Congress for a “clean” debt-ceiling increase, with no spending limitations attached.
- The Committee for a Responsible Federal Budget, a nonpartisan budget group, has estimated that balancing government spending and revenue over 10 years — without any new tax increases — would require cutting 25% of government spending.
News & Noteworthy: CVS Enters Primary Care Space with $10.6 Bln Acquisition
CVS has initiated a comprehensive plan to enter into the primary care health space, acquiring Oak Street Health in an all-cash deal totaling $10.6 bln. The move diversifies CVS’s portfolio, allowing them to move away from their health insurance unit which has “faced challenges from lower ratings on its Medicare Advantage insurance plans and the end of a major pharmacy benefit management contract,” according to CNBC. The deal opens CVS up to Oak Street’s portfolio which includes about 600 physicians across 169 medical centers located in 21 states. It's expected to grow to over 300 centers by 2026. CVS expects the merger to drive more than $500 million in synergy potential over time, bolstering its long-term growth goals.
What's the Big Picture?
The start of 2023 has been a bright spot for financial markets, led by the NASDAQ being up 14% YTD. FED chair Jerome Powell has remained steadfast in his commitment to restoring price stability, emphasizing how future returns are still largely dependent on the verbiage and actions coming out of the FED. With rate-hikes being tamed down in their aggressiveness, but a recession still seemingly on the horizon, markets are trying to accurately sort out the severity of a potential recession and the severity Powell is willing to inflict on the market to regain his stated objectives.
Evan Yerman
Weekly Recap
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Global Economics
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Earthquake Damages
The 7.8-magnitude earthquake that hit Turkey and Syria has killed more than 33,000 people and has made Turkey declare a three-month state of emergency. Turkey’s Ceyhan port, which is a critical hub for the discharge of crude oil and helps load Azeri oil, was damaged.
- The Ceyhan port transports state-owned refiner Azerbaijani Socar’s and Tupras and the pipeline has not sustained damage from the earthquake
- The region most affected by the earthquake contributes 8.5% to Turkey’s exports
- The earthquake has caused around $4 billion in economic damage
- UN aid convoy has entered northwest Syria and the World Bank has offered $1.78 billion in aid
China IPOs
Chinese startups are raising millions of dollars in the U.S. stock market. The Hesai Group, a self-driving car technology company, has raised $190 million in a U.S. IPO. This IPO is the largest by a Chinese company since 2021.
- Chinese IPOs came to a halt after Didi Global went public last year in June
- This week U.S. solar energy firm Nextracker became the biggest public offering in four months.
What's the Big Picture?
According to the US Geological Survey (USGS), scientists have failed to predict a single major earthquake. Seismologists say that statistical models help determine the probability of an earthquake occurring in a specific region within a few years, but cannot immediately determine when an earthquake will hit and whether people should evacuate their homes. Turkey and Syria have faced a lot of economic hardship in the aftermath of the earthquake. On Wednesday Turkey’s stock exchange suspended trading. The currency crisis in 2021 wiped more than half the value of the Lira. Currently the inflation rate stands at 57% and the earthquake will place more people in poverty. In northwestern Syria 4.1 million people already depend on humanitarian assistance and more aid will need to be sent this week and in the weeks to come. It will be difficult for the people and economy to recover from the effects of the earthquake.
Rishitha Annamaneni
Global Economy
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US Economics
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January Job Gains Crush Expectations
On February 3, the Labor Department released the January 2023 jobs report detailing the strength of the U.S. Labor Market. Despite modest gains expected by economists, job figures smashed expectations and provided evidence of a strong U.S. economy. Inflation is also declining, with January’s CPI report expected to show further declines.
- 517,000 jobs were added vs. 187,000, estimated by economists
- The unemployment rate fell to 3.4%, the lowest level since May 1969
- Labor force participation increased to 62.4%
- Inflation fell to 6.5% in December 2022 vs. December 2021
U.S. Economy Grows in 4th Quarter of 2022, Despite Recession Fears
The U.S. Gross Domestic Product rose by 2.9% in the fourth quarter of 2022, despite fears of a looming recession. This is less than the 3.2% increase in the third quarter of 2022, following a drop in consumer spending.
- Consumer spending, which accounts for 68% of GDP, fell 0.2% quarter-over-quarter
- Government spending, which accounts for roughly a quarter of GDP, rose 6.2%
- The housing market further weakened, burdened by high-interest rates.
What's the Big Picture?
With Russia’s energy cut to the West, oil prices are again rising. In response to Western sanctions, Moscow announced a cut of 500,000 barrels of oil daily, roughly 5% of its total output. As the world’s third-largest producer, Russia has been forced to sell its crude oil at a significant loss, in some cases as much as 50% to buyers in Asia, as sanctions imposed by the European Union and the United States make it harder for the war-provoking country to do business.
Vijay Talluri
US Economy
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Healthcare
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Pharmaceutical Executives On a Deal-Making Hunt
Many executives at Pfizer Inc., Merck & Co., and Novartis AG have commented that they are looking for innovative drugs to add to their portfolio and replenish their revenues as the best-selling products lose patent protection in the coming years. After a lot of years of robust dealmaking activity, big pharma companies dialed back their acquisitions in recent years. The main premise behind these actions is a need for new products. For example, Amgen’s osteoporosis remedies, Prolia and Xgeva, are being enhanced for lower-price versions. According to Eric Tokat, a partner at Centerview Partners LLC, who works on biotech deals, “There is a lot of appetite. People want to do deals, and I think we’ll see deals.”
CVS to nearing acquisition of Oak Street Health for $10.5 Billion
CVS Health Corp. is near a formal agreement to acquire primary care provider Oak Street Health Inc. in a $10.5 billion deal, and is expected to come up with a price around $39 per share, as early as this week. CVS is also in another agreement of acquiring Signify Health Inc., in an $8 billion deal. According the CVS chief, Karen Lynch, “primary care and home-based care are key growth areas for the company.” The deal with Oak Street is expected to expand the company’s footprint of primary care doctors with an extensive network of senior-focused clinics.
What's the Big Picture?
Since 2022, there has been a surge in dealmaking activity for healthcare and pharmaceutical companies. Amgen Inc. agreed to buy Horizon Therapeutics PLC for $27.8 billion, and there were major contenders prior to the acquisition. AbbVie’s CEO Richard Gonzalez mentioned that “the company doesn’t need to make deals, but has the capacity to make acquisitions if it finds drugs that fit.” This indicates a robust market for M&A in 2023. However, it is important to note that macroeconomic forces, such as high interest rates, could negatively affect these prospects. Additionally, due an increasing level of antitrust scrutiny, it is best to take the dealmaking data with a grain of salt.
Neha Thakur
Healthcare
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Technology & Media
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Artificial Intelligence Search Engines
After promises of major changes in their search engines from both Google and Microsoft, both tech giants are trying to integrate these changes into their engines. Both companies have invested heavily in their respective artificial intelligence (AI): Microsoft in OpenAI (the ChatGPT creators) and Google into the former OpenAI employees. So far, it looks as though Microsoft is winning the race. Google announced its new chatbot “Bard” just last week. In an advertisement campaign for this experimental AI system that painted it out to be “a launchpad for curiosity,” a major factual error was made regarding the discovery of exoplanets. Following the error, Google’s stock price slid by 9%, causing Microsoft shares to rise by 3%.
What's the Big Picture?
In the next few years, competition between companies like Google and Microsoft will drive AI innovation and change the landscape of this industry. Google, known for its search engine dominance, is focusing on incorporating AI into its products and services, with the goal of creating a more sophisticated search engine that can understand the context and intent behind a user's query. Meanwhile, Microsoft is leveraging its cloud computing platform, Azure, to offer AI-based solutions to businesses, with a particular emphasis on improving data analysis and decision-making. As the competition between these companies heats up, we can expect to see even more advancements in the field of AI. Google and Microsoft are investing heavily in research and development, hiring top AI talent, and acquiring startups to strengthen their AI capabilities. This competition will lead to new AI technologies that are more sophisticated and accessible to a wider range of people and organizations. These companies will also focus on developing AI that is more transparent and ethical, with a focus on reducing biases and ensuring data privacy. In conclusion, the competition between Google and Microsoft in the AI space is a positive development for the industry as a whole. As these companies race to create powerful AI technologies, we can expect to see significant advancements in the field and increased access to AI-based solutions for the masses.
Luke Wernyj
Technology & Media
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Consumer & Retail
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Bed Bath & Beyond Receives $1 Billion Lifeline from Hedge Fund Hudson Bay Capital, but Canadian Division Faces Bankruptcy Protection
A lifeline has been granted to Bed Bath & Beyond, a struggling home goods retailer, to help the company stay afloat. The company reached a rescue agreement with hedge fund Hudson Bay Capital Management, which will provide a financing package totaling more than $1 billion. In order to stay afloat, Bed Bath & Beyond has announced plans to shut down dozens of stores while keeping around 360 of its flagship locations and 120 Buybuy Baby stores open. This is roughly half the number of stores the company had just a year ago. The Bed Bath & Beyond Canadian division has filed for chapter 11 Bankruptcy under the Companies’ Creditors Arrangement Act. The company plans to close 54 Bed Bath & Beyond stores and 11 Buybuy Baby locations in Canada, affecting over 1,000 part-time and full-time employees. Even with the recent equity raise, the company has concluded that there is insufficient capital available to both restructure its U.S. and Canadian business.
- Bed Bath & Beyond secured a $1 billion financing package from Hudson Bay Capital Management, consisting of preferred stock and warrants that will provide the company with immediate funds of $225 million, and up to $800 million.
- The company has been closing stores and slashing jobs to lessen losses and has been trying to woo back vendors of brand-name goods.
Future Outlook for Bed Bath & Beyond
The future of Bed Bath & Beyond will be determined by how well the company can navigate these challenges and adapt to the changing retail market. Significant investments and decisions will be required to position the company for long-term success and recovery. Bed Bath & Beyond may struggle to stay afloat if it fails to adapt and evolve in this rapidly changing environment.
What's the Big Picture?
The retail industry is undergoing a major transformation, fueled by the rapid rise of e-commerce and shifting consumer behaviors. Many traditional retailers have struggled to keep up with the changing times, and Bed Bath & Beyond has found itself in a similar situation. The ongoing effects to the global markets from the COVID-19 pandemic have only accelerated this shift, with consumers demanding a smooth and integrated shopping experience, both online and in-store. Those retailers who can successfully bridge the gap between online and offline shopping will be most successful in the future.
Teddy Kesoglou
Consumer & Retail
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Industrials
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- As a private company, SpaceX does not release public financial statements. However previous years’ operations depicted losses or small operating profits
- In addition to Starlink, SpaceX expects its rocket launch offerings that NASA relies on to be earning revenue for the company this year
Ford Releases Disappointing Quarterly Earnings
American automaker Ford Motor Company (NYSE:F) announced $1.3 billion in net income for Q4 which is an 89% drop from its Q4 income the previous year. Supply chain issues, quality problems, and structural deficiencies resulted in underwhelming earnings this quarter.
- Ford’s CEO, Jim Farley responds to the results by working on simplifying goals and performance metrics for the company.
- The automaker is aiming to cut over $3 billion in costs through increased belt-tightening this year.
What's the Big Picture?
The industrial industry, specifically within the aerospace and automobile industry, is an extremely expensive industry due to high costs associated with heavy equipment, technology, supply chain, etc. Therefore, it is not uncommon for companies such as SpaceX to have low profit margins or negative cash flows. Supply chain and structural issues are costly problems for industrial companies to have which attributes to the disappointing performance of Ford Motor Co. this quarter.
Muneeba Tariq
Industrials
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Dealbook
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Apollo Shows Interest in Credit Suisse's Potential Advisory Group
American private-equity firm Apollo Global Management, continues to seek investment positions with Credit Suisse’s potential “CS First Boston Group” – an investment banking entity composed of Credit Suisse Advisory operations. This CS spinoff has discussed capital raising with Apollo and many other financial firms to restore the Credit Suisse brand that saw financial headwinds in fiscal year 2022. Furthermore, Apollo Global Management purchased a large part of Credit Suisse’s securitized product group at the end of 2022, and looks to continue doing business with the multinational investment bank.
- CS First Boston looks to be valued around $4 billion, seeking $500 million from investors
- Apollo reduced Credit Suisse securitized products from $75 billion to $20 billion in FY22
CVS Acquires Oak Street Care Health in a $10.6 Billion Deal
This past week, the medicare-focused provider Oak Street Health was acquired by the American healthcare giant CVS for $10.6 billion or at $39 per share. This strategic acquisition allows CVS to gain clinics and primary care doctors that are focused on the medicare population. Oak Street Health is a Chicago-based clinic that plans to open 300 primary care centers and 600 physicians in 2026 in order to rival CVS’s main competitor, Walgreens. CVS expects Oak Street to see $500 million in synergy potential through their medicare centers and physicians. CVS plans to continue their M&A activity with a pending acquisition of Signify Health for $8 billion following their deal with Oak Street Care.
What's the Big Picture?
Credit Suisse faced setbacks and challenges throughout 2022, and by planning to bring CS First Boston into the private market and facilitating deals with financial firms like Apollo, conveys the restructuring and high-risk sentiment. In hopes to rebuild their brand, deal-making will look attractive to private-equity firms because of the retained talent at Credit Suisse, and investments will likely be inexpensive due to the negative investor outlook. Contrastingly, CVS remains active with deal-making, illuminating the resilience of the healthcare M&A market into 2023, regardless of economic and geopolitical headwinds in 2022. Their recent acquisition of Oak Street and closing on Signify Health will help them advance their technology systems and expand their target market in the healthcare industry.
Kevin Ruple
Deal Book
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Energy
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- According to Russian Deputy Prime Minister Alexander Novak, the country's production cut is voluntary and solely a result of Western price caps
- As global demand recovers and OPEC+ remains determined to maintain strict control over production, conditions are now more favorable for a price rally
Big Oil Brings Home A Record $200 Billion for 2022
The five largest oil companies earned combined profits of almost $200 billion in 2022, leading to growing demands for governments to impose more severe windfall taxes. TotalEnergies, the last oil giant to report earnings, announced a full-year profit of $36.2 billion, doubling the previous year's total. Shareholders are benefiting, as Chevron and Exxon announced plans to buy back shares, with Chevron purchasing $75 billion and Exxon buying $50 billion back in shares. Shell distributed $6.3 billion to shareholders in 2022 and plans a $4 billion share buyback while TotalEnergies raised its dividend and announced a $2 billion share buyback.
- Exxon had earnings of $55.7 billion
- BP had earnings of $27.7 billion
- Shell had earnings of $39.87 billion
- Chevron had earnings of $35.5 billion
What's the Big Picture?
As energy prices continue to rise, major oil corporations are facing increased scrutiny. During his recent State of the Union address, President Biden commented on the situation saying, “They invested too little of that profit to increase domestic production and keep gas prices down. Instead, they used those record profits to buy back their own stock, rewarding their CEOs and shareholders.” The record profits brought in by these corporations in the past year have generated renewed questions about the efficacy of previous climate-centered policies, and further increases the possibility of a US Windfall tax or similar measure aimed at major energy companies.
Ryan Rybka
Energy
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Earnings
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Alphabet Misses Expectations due to YouTube Shrinkage
description Alphabet Incorporation (NASDAQ: GOOGL) missed Wall Street expectations resulting in the company’s stock dropping around 4% after hours. Alphabet reported Q4 earnings after the bell Thursday, February 2nd , and revealed the weakest period of expansion since 2013. In contrast to the analysts’ expectations of YouTube growth, YouTube revenue declined significantly amidst strong competition from other platforms including TikTok. The YouTube advertising revenue was reported at $7.07 billion versus the $7.42 billion expected. The company’s revenue growth saw a large decrease from 41% the year prior to 6% in 2022. Alphabet is not the only technology company struggling with advertising revenue at the moment, both Snap Inc. and Meta are also predicted to report a decline in revenue. In addition, Google is planning to lower its hiring rates and shift company focus to moderating operating expenses.
- Earnings Per Share for Q4 were reported at $1.05 compared to the $1.18 expected
- Announced layoffs of 12,000 employees during the month of January
- Google Cloud brought $7.32 billion in revenue
- Operating expenses increased by 10% to $22.50 due to an increase in headcount, legal fees, and lower advertisement spending
Shell Oil Company Continues to Thrive as it Reports a Record Annual Profit
Shell PLC (NYSE: SHEL) reported its Q4 earnings on Thursday, February 2nd before market open. Shell CEO, Wael Sawan stated that “It is a huge year for Shell and a huge year to look back on as well,” further illustrated by the company’s soaring revenues. Shell reported its adjusted earnings for the year 2022 at $39.9 billion, and Q4 adjusted earnings came in at $9.8 billion. In addition, the company shared its plans for a $4 billion share buyback program which will be out by early May alongside a 15% dividend increase per share for Q4. Other oil giants are thriving as well, Exxonmobil and Chevron also have exceeded analyst expectations and reported combined profits of around $200 billion. On the earnings call, Shell acknowledged that higher tax rates could be placed on the oil giants to help people pay their energy bills but the company is prepared to deal with the ramifications of higher taxes.
- After earnings were announced, shares increased 4.5% in trading in London on February 2nd
- The profits earned in Q4 were almost double what they were reported one year ago
- The company expects to take a $2 billion hit in Q4 2022 due to new tax laws in Europe
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Tara Chilton
Earnings
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What's Next?
If you're reading this, thank you for making it this far! If you missed a previous issue, feel free to check out our archive. Don't forget to keep an eye out for next week's Alumni / Student Spotlight and make sure to sign up for our future LIBOR workshops and events!
Special thank you to our assistant editors Sean Li and Heli Sheth.
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