Gapping up
In reaction to earnings/guidance:
- MSTR +15%, SWKS +12.6% (also approves a new $2 bln stock repurchase program), ERIC +12.3%, WDC +9.8%, RHI +8.8%, ABCB +8.7%, X +6.7%, FHI +5.8%, HLI +4.4%, MATW +4.2%, HTH +3.2%, LYB +3%, DLB +2.9%, LLY +2.9%, ETH +2.8%, FFBC +2.4%, NATI +2.3%, PKX +2.1%, SF +1.9%, SYF +1.7%, FICO +1.6%, AJG +1.4%, JCI +1.3%, PSXP +1.3%, WY +1.2%, CE +1.1% (also increases dividend), TEAM +0.9%, CAT +0.8%
Other news:
- GME +76.7% (extends momentum)
- AMC +43.2% (extends momentum)
- BLCM +38% (FDA lifts clinical hold on Phase 1/2 trial evaluating BPX-601)
- NVAX +37.4% (says its COVID vaccine candidate shows efficacy of 89.3% in Phase 3 trial in the UK)
- ALUS +21.8% (FREYR to List on NYSE through a business combination with Alussa Energy Acquisition Corp)
- BIIB +11.8% (Biogen and Eisai (ESALY) announce FDA's 3-month extension of review period for the Biologics License Application for aducanumab; PDUFA action date is June 7, 2021)
- CBMG +8.9% (received written notice from CFIUS that it had concluded its review of the CBMG Holdings merger and there were no unresolved national security concerns associated; continues to target completion in February 2021)
- PACE +6.4% (Nerdy to become public company via business combination with TPG Pace Tech Opportunities)
- FUBO +5% (prices $350 mln of 3.25% convertible senior notes due 2026)
- BTAI +4.3% (FDA grants orphan drug designation for BXCL701)
- TTI +4.2% (divests interests in CSI Compressco LP And Related Assets for $30.7 mln, provides Q4 guidance)
- ACIU +3.3% (reports progress for therapeutic programs targeting the NLRP3 inflammasome pathway)
- OSUR +3% (OraSure subsidiary DNA Genotek's OMNIgene ORAL included in EUA granted to ambry genetics for use in COVID-19 RT-PCR saliva test)
- NBTX +2.3% (first patient has been injected in a phase I study evaluating NBTXR3)
- RDHL +2% (announces positive DSMB futility review for Phase 2/3 COVID-19 study of opaganib)
- ABG +1.4% (increases its share repurchase authorization)
Analyst comments:
- SLM +6.5% (upgraded to Outperform from Sector Perform at RBC Capital Mkts)
- ICHR +2.9% (upgraded to Outperform from Market Perform at Cowen)
- UCTT +2% (upgraded to Outperform from Market Perform at Cowen)
- BA +1.4% (upgraded to Overweight from Underweight at Morgan Stanley)
Mystery surrounds huge rise in Huawei executives’ social media followings
Twitter takes action after some of Chinese company’s employees in Europe gain outsized audiences
Mike Bai, Huawei’s president of strategy marketing for western Europe, joined Twitter last March, with an anodyne call to “bring digital to every person” to create a “fully connected intelligent world.”
Since then, Mr Bai has not posted a tweet on anything remarkable; mainly a combination of Huawei press releases, links to articles praising the company and criticisms of the US government for its campaign against the Chinese telecoms equipment company.
But Mr Bai has attracted nearly 900,000 followers to his account. In one week in mid-April, he gained more than 160,000 followers in a week, according to Social Blade, a social media analytics company. He now has 18 times the audience of Huawei’s official EU account, which is seven years old.
Mr Bai is not the only Huawei employee with outsized followings on the social media platform. At least six other Huawei employees in Europe created accounts in early 2020 and went on to enjoy apparently huge popularity, gaining thousands or tens of thousands of followers within weeks.
Wells Li, president of human resources for Huawei in Western Europe, joined Twitter in February 2020 and quickly gained his 831,000 followers.
All of the accounts, which often post the same content and almost always retweet each other, also saw a drop of thousands of followers on Wednesday, after the Financial Times asked both Twitter and Huawei about the phenomenon.
Experts said it was unclear why the accounts were so popular, and there was no suggestion that Huawei or any of the employees had done anything wrong.
But Twitter said on Thursday that it had taken action on “thousands of accounts in this instance” that were following the Huawei employees. “Attempts to inauthentically increase followers are not permitted under the Twitter rules,” it said, but added that it was unable at this point to work out who was responsible for creating such large followings and what their motivation was.
Marcel Schliebs, a researcher at the Oxford Internet Institute, said it seemed “suspicious” for “little-known executives of a Chinese firm” to amass such followings so quickly.
He suggested that a third party might have engineered a social media campaign, or perhaps that Huawei had paid to have its employees feature on Twitter’s recommendation lists, and that this had attracted bots, or programs that automatically follow accounts.
The activity on Twitter came at a time when Huawei was attempting to boost its standing in Europe, where its 5G business has been labelled a national security threat by the US. Many of the accounts shared links to Huawei’s website promoting its work in the region and calling for the 5G debate not to be politicised.
The FT also found a handful of what appeared to be fake accounts dedicated to reposting Huawei content. One such account, for example, only had four followers including Huawei’s verified German account. Several bot accounts were suspended by Twitter after the FT flagged them.
The New York Times reported on Friday that a number of Twitter accounts with GAN-generated faces were also linked to a pro-Huawei influence campaign.
Huawei said: “Some social media and online activity has been brought to our attention and it’s suggested we may have fallen short of these policies and of our wider Huawei values of openness, honesty and transparency.”
It said the company had begun an investigation to determine if there was “any inappropriate behaviour with regards to social media”, adding that Huawei had contacted Twitter for help.
Mr Bai and Mr Li did not respond to requests for comment.
GameStop Frenzy Causes Glitches for High-Speed Traders
Brokers were unable to route investors’ orders to Susquehanna and Wolverine
High-speed trading firms that execute orders for individual investors faced technical hiccups this week because of exploding volume in GameStop Corp. GME -44.29% , AMC Entertainment Holdings Inc. AMC -56.63% and other popular stocks.
Brokers that route investors’ orders to Susquehanna International Group LLP and Wolverine Trading LLC had difficulty connecting to the firms on Wednesday and routed their trades elsewhere, people familiar with the matter said.
The two firms, though low-profile, play a key behind-the-scenes role in U.S. stock and options markets, executing orders submitted by investors using online brokerages such as Fidelity Investments, TD Ameritrade and Robinhood Markets Inc. The electronic-trading industry has faced a wave of consolidation in recent years, leaving investors and brokers reliant on a handful of trading behemoths.
Susquehanna informed its clients on both Wednesday and Thursday that it was anticipating heavy load and that they should route orders elsewhere, as the firm bolstered its stock-trading systems to handle the traffic, a person close to the firm said.
Wolverine’s trade-execution platform was stable on Wednesday, according to a person close to Wolverine, though he added that some clients appeared to have difficulty connecting.
About 24 billion shares changed hands in the U.S. equities market on Wednesday, a record, data from Rosenblatt Securities show. Volume in the options market also hit a record of 59 million contracts, Trade Alert data show.
The extraordinary volume occurred as the S&P 500 tumbled 2.6% in its steepest one-day drop since October and day traders piled into stocks and options of GameStop and other companies that have become favorites of Reddit’s WallStreetBets forum.
Two Sigma Securities LLC, which also fills orders for individual investors, faced technical difficulties because of the heavy load, a person familiar with the matter said. The trading firm is affiliated with quantitative hedge fund Two Sigma Investments LP.
Virtu Financial Inc.’s retail platform had an isolated issue that prevented it from accepting orders in all stocks with tickers starting with the letter “A” for about two hours around midday Wednesday, a person familiar with the issue said.
Online brokerages route many of their customers’ orders to electronic trading firms such as Citadel Securities, Susquehanna and Virtu in exchange for cash, a controversial arrangement called payment for order flow.
Critics say such payments skew brokers’ incentives, encouraging them to seek the highest payments rather than ensuring their customers get the best price on each trade.
Brokers and traders say the arrangement benefits investors, who get better prices than they would if their orders were routed to public marketplaces like the New York Stock Exchange or the Nasdaq Stock Market. Payment for order flow is legal in the U.S. and has been a widespread industry practice for years.
Online brokerages themselves have struggled to keep up with the flood of trading activity. In recent days, clients of Fidelity, E*Trade Financial Corp., Charles Schwab Corp. and Vanguard Group have experienced various levels of service disruptions.
Early premarket gappers
- Gapping up:
- GME +99.4%, BLCM +60.2%, AMC +53.2%, NVAX +34.6%, ALUS +29.4%, SWKS +12.6%, ERIC +10.8%, MSTR +10.7%, WDC +10.2%, ABCB +8.7%, RHI +8.4%, FHI +5.8%, FUBO +4.9%, HLI +4.4%, NATI +4.4%, MATW +4.2%, BTAI +3.3%, HTH +3.2%, OLN +3.2%, LHX +3%, X +2.9%, DLB +2.9%, ETH +2.8%, FFBC +2.4%, NBTX +2.3%, MITK +2.2%, WY +1.7%, OSUR +1.6%, JCI +1.5%, ABG +1.4%, AJG +1.4%, RDY +1.3%, CE +1.1%
- Gapping down:
- OTLK -18%, EVLO -11.9%, ADMP -11.4%, DS -11.1%, DLX -10.7%, DNMR -9.3%, STIM -8.1%, EGLE -5.7%, BZH -5.5%, JNPR -4.3%, DX -3.7%, EGHT -3.7%, PLL -3.3%, MDLZ -3.1%, FICO -2.3%, DCT -1.2%, LAZR -0.9%, SHOP -0.6%, EQNR -0.6%
Prosecutors delayed arrest warrant for Wirecard’s Jan Marsalek
German law enforcement authority faces parliamentary scrutiny over decision
Criminal prosecutors in Munich decided not to request an arrest warrant against Jan Marsalek and other executives on the day Wirecard disclosed that €1.9bn of cash was missing. They argued that the potential crime was not serious enough to justify immediate police custody, people briefed on the investigation told the Financial Times.
One day after Wirecard on June 18 last year announced the cash hole in Asian operations overseen by Mr Marsalek, the then-suspended chief operating officer absconded to the Belarusian capital Minsk, where all trace of him was lost.
A week later, Wirecard collapsed into insolvency in one of Europe’s biggest postwar accounting frauds that is sending shockwaves through Germany's financial industry and political establishment.
Munich’s chief prosecutor Hildegard Bäumler-Hösl, who is in charge of the Wirecard investigation, will face questions from MPs in a parliamentary hearing in Berlin on Friday afternoon.
Munich prosecutors also decided against an immediate raid of Wirecard’s headquarters on June 18, the people said. After discussing the logistics with local police, they postponed this by two weeks due to a lack of resources. The premises were eventually raided on July 1.
As well as the prosecutors in Munich, several other institutions face questions over errors of judgment in the Wirecard case. Wirecard’s auditor EY, Germany’s financial regulator BaFin, financial reporting watchdog FREP and German auditor oversight body Apas, as well as anti-money laundering authority FIU, are all under pressure for acting late and indecisively.
BaFin and prosecutors long focused on investigating short sellers and journalists rather than Wirecard executives. A criminal investigation against two FT reporters following accusations of market manipulation was finally dropped several months after Wirecard went bust. From February to April 2019, BaFin also imposed a controversial ban on the short selling of Wirecard shares.
“It would be tragic if Mr Marsalek eluded investigators because they underestimated the magnitude of the criminal case even on June 18,” Florian Toncar, a former Freshfields lawyer who is now an MP for the pro-business Free Democrats, told the FT. He added that neither BaFin nor authorities in Wirecard’s home region, Bavaria, cracked down on the fraudulent company in time.
People familiar with the details of the case said that when Munich prosecutors opened an investigation into the missing cash on June 18, they initially did not suspect that felonies such as aggravated fraud or embezzlement might have been committed by Wirecard executives.
Instead, investigators only looked into a potential misrepresentation of Wirecard’s financial affairs. Under German commercial law, this is an offence punishable with up to three years in prison. On June 18, prosecutors argued that this maximum sentence was too low to justify arrests.
Mr Marsalek is now on Interpol’s “most wanted” list. Investigators suspect the company was looted in the months before its collapse.
Wirecard’s former chief executive Markus Braun, who had travelled to his Austrian home city, Vienna, after resigning at Wirecard on June 19, voluntarily returned to Munich and gave himself up to police.
Fabio De Masi, an MP for the leftwing Die Linke party, told the FT that, in his view, prosecutors acted far too timidly. “When €1.9bn in cash is missing, and the prosecutors are leaning towards the assessment that the executive board acted criminally, one needs to crack down immediately. Every shoplifter receives tougher treatment.”
A spokesperson for the Munich prosecutors declined to comment on specific questions, but said that “Ms Bäumler-Hösl on Friday will surely be able to clear up these misunderstandings” when she answers questions from MPs.
A lawyer for Mr Marsalek did not respond to a request for comment.
Documents seen by the FT show that BaFin’s decision on the short selling ban was based on flimsy oral evidence from Mr Marsalek and a lawyer working for Wirecard. BaFin declined to comment.
In February 2019, the lawyer told Munich prosecutors that “one or several Bloomberg employees” in previous days had called the company, demanding a payment of €6m.
These people allegedly threatened that otherwise Bloomberg would “take up an offer from the FT” and join the British news organisation in its “negative reporting”, as FT employees had offered “significant financial benefits” to the Bloomberg staff.
BaFin and the Munich prosecutors apparently considered this credible, and within three days the regulator imposed the two-month short selling ban, brushing away concerns about it expressed by the Bundesbank.
A Bloomberg spokesperson told the FT there was no evidence that this incident as described by Wirecard ever happened: “This suggestion would be laughable if it weren’t so offensive.”
A spokesperson for the FT said that Wirecard’s allegations that any of its journalists colluded with short sellers or reporters elsewhere were “completely false” and have been refuted.
Danyal Bayaz, an MP for the Greens, accused Munich prosecutors and BaFin of falling into a “siege mentality” as “Jan Marsalek only needed to tell a few bizarre stories about purportedly mean journalists and hedge funds” to prompt the short selling ban. “BaFin had already been keen to believe this fairy tale,” he said.
In recent months BaFin president Felix Hufeld has repeatedly defended the short selling ban, pointing out that based on similar information, he would take the same decision again.
r/WallStreetBets throws down challenge to regulators
What is fairer: making certain speculation illegal, or letting some speculators get crushed?
The simplest and most common form of stock fraud is the “pump and dump.” It has three parts. Someone gets hold of some cheap shares; tells lies about why they are going to rise; and when they do, sells them, before the lies are discovered and the shares fall. This is against the law.
But what if we take out the middle step — the lying? Instead of spinning falsehoods about the shares, our perpetrator shouts to anyone who will listen: “If we all buy these cheap shares, then the price will go up, and we’ll make money.”
The reason to write about this now, of course, is Robinhood, Reddit and GameStop.
The third step still has to happen, of course. When everyone sells to take profits, the shares will fall, and some people will lose a bundle. So far from denying this fact, however, our perp points it out. “This is a dangerous game,” he says, “your timing better be good.”
This form of stock manipulation may seem unlikely to succeed, but it has been done. The most famous proponent was Jesse Livermore, considered the greatest stock trader in the world in the first two decades of the 20th century. His biography, Reminiscences of a Stock Operator, in which he is given the paper-thin alternative identity of “Larry Livingston”, might be the best book ever written about the market.
Reminiscences describes how Livermore ran stock “pools” in the 1920s. These were groups of well-financed shareholders, often company insiders, who had big blocks of stock they wanted to unload on the public. They did this by trading the shares back-and-forth among themselves, creating the appearance that the stock was liquid and on a bull run, drawing in speculators. The pool would then sell their stock into this feverish environment.
Livermore was such a good trader that pools often hired him to execute their plans, in return for a big slice of the profits. Surprisingly, the presence of the master manipulator made the speculators more likely to jump on board. Newspapers would breathlessly report that Livermore was running a bull pool, and it would take off, no deception involved. “After all is said and done,” Livermore said, “the greatest publicity agent in the wide world is the ticker.”
This was before the Securities Exchange Act of 1934. Section 9 of the law seems to aim directly for Livermore. It made it illegal to “to induce the purchase or sale of any security” by claiming that the price of the security “is likely to rise or fall because of market operations . . . conducted for the purpose of raising or depressing the price of such security”. That is, you are not allowed to pump up stocks simply for the sake of pumping them, as Livermore did (“market operations” is exactly how he described what he did). Deception is not required for manipulation.
If what the Redditors of r/WallStreetBets are doing is saying “let’s all get together and pump up the stock of GameStop”, either to squeeze out some big shot short-sellers, or even just to make a buck, there is a risk they could be breaking the law. There is some question (a big shot securities lawyer tells me) about the word “inducement” — whether the Redditors were in fact using their trades to make others trade — but the spirit of the law is clear enough. These kinds of games are not allowed.
But many well-intentioned laws are not enforced, for good reason. Should this one be? There are two arguments in favour of doing so.
One is that allowing the stock market to become a self-contained speculative game, unrelated to the value of underlying companies, will discourage companies from wanting to list — thus defeating the market’s purpose, which is forming and allocating capital. Given the long history of speculative secondary market excess alongside successful primary market offerings, this is unconvincing. If wild speculation was poisonous to capitalism, capitalism would have died centuries ago.
Then there is the idea that retail investors who are drawn into the frenzy will get badly hurt. They undoubtedly will. GameStop stock was always going to fall hard, because the company is not valuable enough to support it. The question is what is the fairer, more efficient way of discouraging dangerous behaviour: making certain types of speculation illegal, or letting some speculators get crushed as the public looks on? On the whole, I favour the second path, so long as rules are in place — high margin requirements, and so on — to protect the market itself from collapsing.
Livermore would probably agree with me, were he alive. But he died broke, by suicide, in 1940.
>>> Up
* Avance Gas Raised to Buy at Cleaves Securities
* Brewin Dolphin PT Raised to 405 pence at Peel Hunt
* BW LPG Raised to Buy at Cleaves Securities
* Cargotec Raised to Outperform at Credit Suisse; PT 45 euros (+)
* Daily Mail Raised to Equal-Weight at Barclays; PT 775 pence
* Genus Raised to Buy at Investec; PT 5,289 pence (+)
* Komax Raised to Buy at Stifel; PT 265 Swiss francs
* Mitie Raised to Buy at Stifel; PT 58 pence
* Mitie Raised to Buy at Stifel; PT 58 pence
* Prysmian Raised to Accumulate at Banca Akros (ESN) (+)
* Saint-Gobain Raised to Outperform at Davy (+)
* Sandvik Raised to Buy at Deutsche Bank; PT 250 kronor
* Shop Apotheke PT Raised to 250 euros from 180 euros at Citi
* Synthomer Raised to Add at Peel Hunt
* Thyssenkrupp PT Raised to 12.60 euros at Baader Helvea (+)
* WDP Raised to Buy at KBC Securities; PT 32 euros
* Zalando Raised to Hold at Berenberg
>>> Down
>>> Down
* Barratt Cut to Hold at Berenberg
* BBVA Beats on Improvements in Impairments, Fee Income, RBC Says (+)
* Boeing Cut to Sell at Nord/LB; PT $165
* Fresenius Medical ADRs Cut to Underperform at Jefferies
* Howden Joinery Raised to Buy at Berenberg
* Husqvarna Cut to Hold at DNB Markets; PT 113 kronor
* Husqvarna Cut to Hold at DNB Markets; PT 113 kronor
* Ibstock Cut to Hold at Berenberg
* Imperial Brands Cut to Neutral at Citi
* Nokia Cut to Hold at LBBW; PT 4.20 euros
* Rational Cut to Sell at Deutsche Bank; PT 460 euros
* Telefonica Deutschland Cut to Equal-Weight at Morgan Stanley
* Trainline Cut to Underweight at Barclays; PT 360 pence
* TUI Cut to Reduce at HSBC; PT 170 pence
* Zur Rose Cut to Neutral at Citi; PT 445 Swiss francs
>>> Initiation
* Zur Rose Cut to Neutral at Citi; PT 445 Swiss francs
>>> Initiation
* Flow Traders Rated New Buy at Jefferies; PT 34 euros
* Nibe Rated New Underweight at Morgan Stanley; PT 237 kronor
* TeamViewer Rated New Buy at Deutsche Bank; PT 65 euros
>>> Call
* TeamViewer Rated New Buy at Deutsche Bank; PT 65 euros
>>> Call
* CaixaBank Capital Strong, Expect Shares to Rise: Jefferies (+)
* CVS Group Benefiting From Lockdown Pet Popularity: Peel Hunt (+)
* Daimler 4Q Strong as Bernstein Cites ‘Outstanding’ Performance (+)
* Deutsche Bank Turns Bearish on Rational Following All-Time High (+)
* Flow Traders to Benefit From Spikes in Volatility: Jefferies
* Ferragamo Still Lagging in 4Q as Polarization Continues: Citi
* JCDecaux Has ‘Tough’ 4Q As Lockdowns Continue, Says Berenberg (+)
* Shop Apotheke Preferred to Zur Rose After Rally, Citi Says
* Shop Apotheke Preferred to Zur Rose After Rally, Citi Says
* TeamViewer Initiated at Deutsche Bank With Buy, Street-High PT (+)
* U.K. Housebuilder Fundamentals Still Attractive, Berenberg Says