Gapping down
(note - With US futures trading 2-3% lower, most stocks are trading down. The following represents decliners that have identified catalysts)Select ETFs showing early weakness:
- QQQ -3%, IWM -2.5%, SPY -2.3%, DIA -1.9%
Other news:
- ASTR -21.8% (tweets "We had a nominal first stage flight. The upper stage shut down early and we did not deliver the payloads to orbit. We have shared our regrets with NASA and the payload team. More information will be provided after we complete a full data review")
- COGT -12.7% (commenced an underwritten public offering of $125 million of shares of its common stock)
- DWAC -8% (provides investigation updates)
- USEG -4.9% (files for 19905736 share common stock offering by selling shareholders)
- CRGY -4.4% (files for 5 mln share common stock offering)
- SOL -3.5% (reports award of 20-year renewable energy credit contracts for two solar projects in New York and Illinois)
- PLAB -3.3% (files to delay its 10-Q as the information required is not available as of the 10-Q required filing date)
- CVE -3.1% (to purchase the remaining 50% of the Sunrise oil sands project in northern Alberta from bp)
- GMAB -3% (reports late-breaking Phase 2 trial results of investigational Epcoritamab)
- NVO -2.9% (reports Investigational phase 3 data for Sogroya)
- HZNP -2.9% (reports pooled data from TEPEZZA)
- BGNE -2.4% (has extended the Prescription Drug User Fee Act goal date by three months to January 20 2023 for the supplementary new drug application for BRUKINSA as a treatment for adult patients with chronic lymphocytic leukemia or small lymphocytic lymphoma)
- GS -2.1% (report SEC is investigating ESG funds according to WSJ)
Analyst comments:
- VLTA -10% (downgraded to Neutral from Overweight at Cantor Fitzgerald)
- ZEN -6.1% (downgraded to Equal-Weight from Overweight at Morgan Stanley)
- DOCU -5.8% (downgraded to Underperform from Peer Perform at Wolfe Research)
- KOS -5% (downgraded to Hold from Buy at Berenberg)
- MU -4.2% (downgraded to Hold from Buy at Summit Insights)
- TROW -3.3% (downgraded to Market Perform from Outperform at BMO Capital Markets)
- NRZ -2.7% (downgraded to Underweight from Neutral at Piper Sandler)
- IVZ -2.5% (downgraded to Market Perform from Outperform at BMO Capital Markets)
Gapping up
News:
- DAWN +67.7% (Initial Data from Pivotal FIREFLY-1 Trial of Tovorafenib (DAY101) in Relapsed Pediatric Low-Grade Glioma)
- GRCL +12.1% (Presents Updated Clinical Data for BCMA/CD19 Dual-targeting FasTCAR GC012F in RRMM at EHA2022 Congress, Highlighting 100% MRD Negativity Rate in All Treated Patients)
- VXX +6.1% (trading higher with US futures down over 2%+)
- CHH +5% (acquires Radisson Hotel Group Americas for $675 mln)
- OPTN +2.7% (top-line results of ReOpen2, its second phase 3 clinical trial of XHANCE for treatment of chronic sinusitis)
- IONS +2.6% (treatment for Angelman syndrome receives orphan drug and rare pediatric disease designations from U.S. FDA)
- APLS +2.3% (receives FDA orphan designation for Pegcetacoplan, treatment of immune complex-membranoproliferative glomerulonephritis)
- MUDS +0.7% (Blue Nile to combine with Mudrick Capital Acquisition Corporation II )
- SKIL +0.6% (to sell SumTotal to Cornerstone for $200 mln)
Analyst comments:
- EDU +9.8% (upgraded to Overweight from Neutral at JP Morgan)
Early premarket gappers
- Gapping up:
- DAWN +28.2%, GRCL +11.8%, VXX +6.7%, APLS +2.4%, SKIL +1.8%, MUDS +0.7%
- Gapping down:
- COGT -16%, DWAC -7.7%, USEG -6.3%, CRGY -4.4%, CVE -4.2%, HZNP -2.9%, QQQ -2.8%, NVO -2.4%, IWM -2.3%, SPY -2.2%, GMAB -2.2%, GS -2.1%, DIA -1.8%, PLAB -1.2%
US unions accuse hedge funds of misinformation campaign to beat finance rules
SEC has proposed measures to increase stock market transparency after collapse of Archegos
America’s largest trade unions have accused hedge funds of falsely claiming to have their support in a misinformation campaign to fight new financial regulations.
The Securities and Exchange Commission proposed a series of new rules in December to increase stock market transparency in the wake of the collapse of Archegos Capital Management.
The plans have already provoked a backlash from hedge funds and a stand-off between investment funds and many of the large companies in which they invest. But the fight escalated last week as the labour movement complained it was being unfairly dragged into the fray.
Brandon Rees, deputy director of corporations and capital markets at the AFL-CIO trade union federation, said labour activists “wanted to put the record straight” after press reports and rumours around Capitol Hill claimed they were also opposed to the rules.
“Activist hedge funds don’t view themselves as being particularly sympathetic parties so they’re seeking strange bedfellows to support them, but they should be honest and forthright in expressing their concerns and not be creating false narratives,” added Rees.
Andy Stern, former president of the Service Employees International Union, said he had been contacted by a group of academics earlier this year who encouraged him to “add my voice” to an alleged chorus of opposition from workers, before he realised the concerns were not accurate.
The Managed Funds Association, which represents hedge funds, declined to comment.
The AFL-CIO and 11 unions wrote to the SEC last week — two months after the initial deadline for comments — to “clear up any misunderstandings” and express their strong support for the regulator’s plans.
The SEC has been pushing to reform swaths of the financial landscape since President Joe Biden named Gary Gensler as its new chair last year.
The first set of proposals, put forward in December, would stop investors from using swaps — derivative products tied to the value of an underlying asset — to secretly build up holdings in public companies without disclosing their positions. Further proposals put forward in February would halve the amount of time investors have to reveal large stock holdings, and make it harder for multiple investors to work together to build large stakes.
Opponents fear the changes would strangle activist investing, create excessive logistical burdens for investors and make it impossible for them to engage in legitimate communication with each other.
Activist funds and their supporters have repeatedly stressed that their actions benefit the broader market and economy by investing on behalf of groups including workers’ pension funds, and holding bad management teams to account. Paul Singer’s Elliott Management argued in a recent letter that activists were “one of the few independent voices in the marketplace to protect shareholder interests and enhance market efficiency”.
Americans for Financial Reform, a left-leaning lobby group, countered that view. “This is the [hedge fund industry’s] go-to argument but people who represent workers and save for them do not agree,” it said.
Musk’s $44bn Twitter deal is an M&A arb dream — or nightmare
Most arbs seem to think that discretion is the better part of valour
Elon Musk’s fitful attempt to take over Twitter is shaping up to be the event of the year for hedge funds that bet on takeover deals going through or collapsing.
Musk’s marijuana-inspired $54.20-a-share offer has helped keep Twitter’s shares aloft, even as the rest of the technology complex has been taken to the woodshed in recent months.
For example, shares in Snap, another advertising-dependent social media company, have fallen 66 per cent since Musk first announced he had acquired a big chunk of Twitter in early April. If Musk succeeds in walking away from the agreed $44bn acquisition — as he now seems to be trying — then the collapse in Twitter shares will be the stuff of legend.
On the other hand, Twitter is at pixel time trading at $38.98 a share because of Musk’s prevarication, an exceptionally fat discount to an agreed and theoretically binding takeover price. That makes it a tempting target for M&A arbitrage hedge funds, who make money from predicting whether deals will succeed or not — the kind of situation that can make or break someone’s year.
“This is an arb traders dream,” said Felix Lo, portfolio manager at Trium Capital. Musk’s erratic tweeting means “there’s practically a news item every day. Price fluctuations are good for us.”
However, the reality is that Musk is simply so unpredictable that most of the M&A arbs FT Alphaville talked to are staying well away. It seems that the money to be made on successfully betting on the deal collapsing or going through is simply not enough to compensate for comical uncertainty stirred up by Tesla’s technoking.
Take Musk’s belated insistence on finding out how many of Twitter’s user’s are bots. Whether or not the social media company’s subsequent pledge to share the “fire hose” of user data will placate the errant billionaire remains unclear. Musk could close his $44bn deal tomorrow. Or he could take Twitter to court.
M&A arbs typically chase low-risk, market-neutral strategies, and spend time trawling through antitrust issues, legal fine print, political opposition or rival bids. Elon’s id is unfamiliar territory.
Gambling on Musk’s Twitter deal is a bit like “picking up five dollar bills in front of a steamroller with a Ferrari on the back”, said one arbitrage specialist. Compare that with a relatively “safe” deal like Microsoft’s acquisition of Activision, they added: “I’d take that 10,000 times before I put money on Twitter and Elon.”
Twitter’s shares stand to roughly halve in value if the deal collapses but could double if it goes through, said Tancredi Cordero, chief executive at Kuros Associates. “A two-to-one risk reward profile isn’t bad, but it’s not great.”
That might explain why data from S3 Partners show short interest in Twitter shares has barely budged from around 5 per cent since early February, for an overall notional short position of $1.35bn.
“My sense is that a lot of traders are steering clear given the unpredictable nature of what seems to be going on here,” said Scott Kessler, an analyst at Third Point. “People don’t feel like they’ve got good information, there’s a lack of transparency, and so they’re not really sure whether to be involved.”
Having signed the agreement and waived due diligence, Musk should in theory be locked into his deal, though he could yet walk away just $1bn worse off if the banks who agreed to provide a $13bn chunk of the financing package get cold feet.
Alternatively, he could take a leaf out of Thoma Bravo’s book. The buyout group last week trimmed its offer for US software company Anaplan, which agreed to the amended terms “to avoid the risk of lengthy litigation”. Legally this is difficult, but some think it is how the Twitter saga will be resolved.
“That certainly requires some legal heavy lifting but if anyone is capable of that it’s Musk,” said Benjamin Kelly, a trader at Louis Capital. “I see he recently put out a job advert for a super elite legal team and he’s gonna need it if he keeps up with these crazy tweets.”
If Musk was a mere mortal, Twitter would win in a hypothetical court battle “every time,” Kelly added. “But he’s not, so I guess a lowered bid is a possibility.”
>>> Up
* Aker BP Raised to Hold at Berenberg; PT 390 kroner
* Jadestone Energy Raised to Buy at Berenberg; PT 140 pence
* JPMorgan European Growth & Income Raised to Buy at Investec
* Orange Raised to Outperform at Bernstein; PT 13 euros
* Rolls-Royce Raised to Overweight at Morgan Stanley; PT 118 pence
* Scandic Raised to Hold at SEB Equities; PT 45 kronor
* Tesla Raised to Outperform at RBC; PT $1,100
* Tritax Big Box Raised to Buy at Numis; PT 285 pence
>>> Down
* Gulf Keystone Cut to Hold at Berenberg; PT 300 pence
* Kosmos Energy Cut to Hold at Berenberg; PT 670 pence
* LondonMetric Cut to Hold at Numis; PT 300 pence
* Maisons du Monde Cut to Hold at SocGen; PT 12.40 euros
* TAG Immobilien Cut to Underweight at Barclays; PT 16 euros
>>> Initiation
* Demant Reinstated Equal-Weight at Morgan Stanley; PT 319 kroner
* GN Store Nord Reinstated Equal-Weight at Morgan Stanley
* Helios Underwriting Rated New Hold at Jefferies; PT 154 pence
* Rheinmetall Reinstated Buy at Goldman; PT 298 euros
* Saab Reinstated Sell at Goldman; PT 352 kronor
* Shell Rated New Outperform at Bernstein; PT 3,100 pence
* Thales Reinstated Buy at Goldman; PT 146 euros
>>> Call
* It’s Time for Buybacks in Europe, Goldman Sachs Strategists Say (+)
* EDF Nationalization Could Help With Restructuring Process: Citi (+)
* European Oil & Gas Stocks Still Have Room to Run, Berenberg Says
* Rolls-Royce Shares Clearly Mispriced, Morgan Stanley Upgrades
- GSK PLC (GS7 TH) +2.3%
- Sanofi-GSK: Covid-19 Booster Delivers Strong Immune Response
- Rheinmetall (RHM TH) +2%
- Rheinmetall Reinstated Buy at Goldman; PT 298 euros
- Rheinmetall CEO Sees Revenue Boost on Defense Demand: BamS
- RELX (RDEB TH) +1.4%
- Stellantis (8TI TH) +1%
- Imperial Brands (ITB TH) +0.9%
- Poste Italiane (7PI TH) +0.8%
- Bayer (BAYN TH) -3.1%
- ING (INN1 TH) -3.1%
- ING Targets Avg Annual Total Income Growth of 3% for 2022-2025
- Commerzbank (CBK TH) -3.2%
- K+S (SDF TH) -3.4%
- Glencore (8GC TH) -3.5%
- Adyen (1N8 TH) -3.8%
- Prosus (1TY TH) -3.8%
- HelloFresh (HFG TH) -3.9%
- Telefonica (TNE5 TH) -4.8%
- Predica Among Bidders for Telefonica’s Rural Fiber: Expansion
- Delivery Hero (DHER TH) -5.2%
DAX:
- Qiagen (QIA TH) -0.8%
- Deutsche Telekom (DTE TH) -1%
- MTU Aero (MTX TH) -1%
- Vonovia (VNA TH) -1.1%
- Vonovia Open to Selling Adler Stake, CFO Tells Boersen-Zeitung
- Allianz (ALV TH) -1.2%
- Daimler Truck (DTG TH) -2.6%
- RWE (RWE TH) -2.7%
- HelloFresh (HFG TH) -2.8%
- Bayer (BAYN TH) -2.8%
- Delivery Hero (DHER TH) -3.2%
MDAX:
- Rheinmetall (RHM TH) +2.1%
- Rheinmetall Reinstated Buy at Goldman; PT 298 euros
- Rheinmetall CEO Sees Revenue Boost on Defense Demand: BamS
- Fraport (FRA TH) -2.5%
- Freenet (FNTN TH) -2.6%
- Commerzbank (CBK TH) -2.9%
- K+S (SDF TH) -3.5%
- Aixtron (AIXA TH) -3.9%
SDAX:
- Encavis (ECV TH) -2.2%
- Bilfinger (GBF TH) -2.8%
- SMA Solar (S92 TH) -3.1%
- flatexDEGIRO (FTK TH) -3.1%
- Deutsche PBB (PBB TH) -4.1%