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Jun 3, 2020

Bitcoin 'Bart Simpson' trading pattern returns with volatility

Lorne Steinberg discusses cryptocurrency

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Warner Music Group Inc. rose in its trading debut after its shareholders raised USUS$1.93 billion in an upsized initial public offering, the biggest U.S. listing this year.

Shares of the music label opened at USUS$27 at 11.52 a.m. in New York, giving the company a market value of USUS$13.8 billion. They climbed as much as 16 per cent to USUS$28.97.

Existing investors earlier sold 77 million shares at USUS$25 apiece, above the midpoint of a marketed range, Warner Music said in a press release Wednesday. Its backers were earlier marketing a sale of 70 million shares at USUS$23 to USUS$26 each.

The listing signals the renewed strength of U.S. offerings after a hiatus brought on by the pandemic. With homebound consumers looking for entertainment, the New York-based company’s emphasis on streaming revenue has resonated with investors. Another IPO, Pliant Therapeutics Inc., which develops treatments for fibrotic diseases, soared as much as 63 per cent in its Nasdaq debut Wednesday.

Entities controlled by majority owner Len Blavatnik and current executives are sellers in the stock sale and Warner Music will not receive any proceeds, according to a filing with the U.S. Securities and Exchange Commission. Blavatnik, through Access Industries LLC, holds Class B shares and retains about 99 per cent voting power in Warner Music after the offering, the filing shows.

Warner Music and its shareholders delayed the IPO pricing by one day to avoid selling shares on “Blackout Tuesday,” which saw entertainers and celebrities call for online musical performances and related events to be canceled to show support for the protests across the U.S. against police brutality, people with knowledge of the matter said.

Warner Music and Blavatnik’s family foundation on Wednesday launched a USUS$100 million fund to support charitable causes related to the music industry, social justice and campaigns against violence and racism, according to a separate press release.

Warner Music’s catalog covers a sprawling range of artists, from Lizzo, Dua Lipa and Ed Sheeran to Coldplay, Prince and Neil Young. Its roadshow presentation included screenshots of quarantine concerts streamed on Instagram Live, as well as popular clips on TikTok.

The offering was led by Morgan Stanley, Credit Suisse Group AG, Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. The shares are trading on the Nasdaq Global Select Market under the symbol WMG.

Bitcoin’s quick rise and subsequent fall this week had some investors scratching their heads.

The world’s largest digital token breached the US$10,000 level this week but fell below it shortly after, forming a so-called “Bart Simpson” pattern. Named for its resemblance to the cartoon character’s hairstyle, the pattern traces an upward swing, some uneven -- or spiky -- sideways trading, followed by a swift drop.

The pattern has a higher probability of establishing when it comes to cryptocurrencies due to significant short-term changes in demand, increasing use of derivatives and shifts in correlation to and from traditional assets, says Marc Grens, co-founder and president of DigitalMint.

“As a result of substantial short-term shifts and increases in liquidity, this pattern will continue to rear its Bart Simpson head several more times during the current global recession and potential recovery following the lockdown orders,” said Grens.

It’s a familiar occurrence for Bitcoin, one noticed by investors time and again during volatile trading stretches. Many were quick to point it out on Twitter, superimposing Bart’s famous head shape over a chart of the token.

Bitcoin rose as much as 1.3 per cent Wednesday to trade around US$9,544 as of 11:55 a.m. in New York. It’s up more than 30 per cent for the year. The Bloomberg Galaxy Crypto Index, which tracks some of the largest cryptocurrencies, also gained. The index advanced as much as 1.7 per cent in Wednesday’s session and is up 40 per cent in 2020.

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