After Hours Summary: TSCO +7.7% jumps on strong guidance; UEPS -13.8%, VSAT -7.8% down in earnings; DPZ +0.5% ticks higher as comps start to accelerate in Q2After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: STNE +26%, OOMA +8.6%, TSCO +7.7% (guides Q2 well above consensus), HEI +7.4%
Companies trading higher in after hours in reaction to news: CHRS +8.5% (to join S&P SmallCap 600), TSCO +7.7% (issues upside revenue and EPS guidance for Q2), ATRA +7.3% (commences public offering of common shares and pre-funded warrants to purchase common shares), ESNT +6.1% (to join S&P MidCap 400), PTEN +3.7% (to join S&P SmallCap 600), IDXX +1.4% (provides update on US Companion Animal Market Trends through May 22), TLRY +1.3% (announces optimization plan for adult-use facilities in Canada), DIS +0.6% (to submit proposal on Wed concerning phased reopening of Florida parks), DPZ +0.5% (provides mid-quarter update; co is seeing a material increase in US comps in weeks 5-8 of Q2 relative to weeks 1-4), BMY +0.3% (FDA approves Opdivo + Yervoy as first-line treatment of metastatic or recurrent non-small cell lung cancer)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: UEPS -13.8%, VSAT -7.8%, KEYS -7.1%
Companies trading lower in after hours in reaction to news: IIPR -4.6% (announces public offering of 1.0 mln shares), BEP -3.4% (BEP and BAM announce offering of 10,236,000 limited partnership units of BEP by certain affiliates of BAM), FVRR -3% (commences follow-on offering of $100 mln of its ordinary shares), NUVA -2.8% (to offer $400 mln in convertible notes in private placement), QLYS -0.4% (names new CFO)
Closing Stock Market SummaryThe S&P 500 rallied as much as 2.2% on Tuesday on a familiar reopening trade, but some weakness into the close left the benchmark index up 1.2% for the session. The Dow Jones Industrial Average (+2.2%), Russell 2000 (+2.8%), and S&P MidCap 400 (+3.4%) outperformed, while the Nasdaq Composite increased just 0.2%.
Some attributed today's late selling to a Bloomberg report that indicated the Trump administration was considering sanctions on Chinese officials, businesses, and financial institutions in response to Beijing's plans to tighten control over Hong Kong. The news wasn't exactly "new," but the negative-sounding headline helped take the S&P 500 below its 200-day moving average (3000) on a closing basis.
Nevertheless, stocks remained supported by a multitude of factors, namely favorable monetary and fiscal policy; reopening efforts; vaccine progress; and a bullish trend that has pulled in reluctant investors fearful of missing out on further gains. Over the extended weekend, many more businesses continued to reopen as the rate of new coronavirus cases and deaths continued to flatten or decline.
The reopening trade was still manifested in the leadership from the financials (+5.0%) and industrials (+4.2%) sectors, and in the higher oil prices ($34.36/bbl, +$1.11, +3.3%). The heavily-weighted information technology (-0.1%) and health care (-0.2%) sectors, however, slipped into negative territory.
Deemed as an early catalyst today, Merck (MRK 77.26, +0.89, +1.2%) and Novavax (NVAX 48.17, +2.06, +4.5%) joined the race for a COVID-19 vaccine. Separately, JPMorgan Chase (JPM 95.82, +6.35, +7.1%) CEO Jamie Dimon expressed confidence in his company as well as hope in an economic recovery.
Elsewhere, airline stocks were among today's biggest gainers, evident by the 11.8% gain in the U.S. Global Jets ETF (JETS 15.31, +1.61, +11.8%).
The U.S. Treasury curve continued to experience curve-steepening activity amid the market's upbeat economic outlook. The 2-yr yield was unchanged at 0.17%, while the 10-yr yield increased four basis points to 0.70%. The U.S. Dollar Index declined 0.9% to 98.97.
Reviewing Tuesday's economic data, which was mostly better-than expected:
- New home sales increased 0.6% m/m to a seasonally adjusted annual rate of 623,000 (consensus 485,000) from a downwardly revised 619,000 (from 627,000). On a yr/yr basis, new home sales were down 6.2%.
- The key takeaway from the report is that the strength in sales was fortified by lower selling prices.
- The Conference Board's Consumer Confidence Index checked in at 86.6 for May (consensus 88.5) versus a downwardly revised 85.7 (from 86.9) for April.
- The key takeaway from the report is that attitudes about the short-term outlook increased some, reflecting some budding optimism about reopening efforts.
- The FHFA Housing Price Index for May increased 0.1% following an upwardly revised 0.8% in April (from +0.7%).
- The S&P Case-Shiller Home Price Index increased 3.9% yr/yr in March (consensus 3.8%) following a 3.5% increase in February.
Looking ahead, investors will receive the Fed's Beige Book and the weekly MBA Mortgage Applications Index on Wednesday.
- Nasdaq Composite +4.1% YTD
- S&P 500 -7.4% YTD
- Dow Jones Industrial Average -12.4% YTD
- Russell 2000 -16.5% YTD
Wuhan virus lab was signed off by EU Brexit chief Michel Barnier in 2004 - despite French intelligence warnings that China's poor bio-security reputation could lead to a catastrophic leak
- The EU's chief Brexit negotiator signed off on construction of the P4 laboratory
- French intelligence services warned poor Chinese security could lead to a leak
- Jacques Chirac, French president at the time, pushed the Wuhan lab project
- 50 French scientists were meant to go to Wuhan but were never sent to the lab
The construction of the Chinese laboratory at the centre of mounting suspicion over the source of the Covid-19 pandemic was signed off by the EU’s chief Brexit negotiator Michel Barnier – despite warnings by French intelligence services.
Mr Barnier – currently embroiled in acrimonious negotiations with the UK over a post-Brexit trade deal – was the French foreign minister when he gave the go-ahead for work to start on the Wuhan Institute of Virology in 2004, under a joint deal with the Chinese.
The move came despite strong opposition from French diplomatic and security advisers, who argued that the Chinese reputation for poor bio-security could lead to a catastrophic leak.
They also warned that Paris could lose control of the project, and even suggested that Beijing could harness the technology to make biowarfare weapons.
Eleven years later, as the laboratory prepared to open, the French architects of the project complained that they had, as feared, been ousted by the Chinese communist government.
Mr Barnier (pictured) – currently embroiled in acrimonious negotiations with the UK over a post-Brexit trade deal – was the French foreign minister when he gave the go-ahead for work to start on the Wuhan Institute of Virology in 2004
Mr Barnier’s role in helping to establish the Wuhan institute can be revealed as part of a Mail on Sunday investigation into French connections to the laboratory.
The site was carrying out research on coronaviruses when the outbreak started in the city last November.
A growing number of scientific and security experts are now questioning the Chinese government’s insistence that the virus originated in a wildlife market in Wuhan, with Beijing’s refusal to allow an international investigation only adding to the growing suspicions.
Last week, The Mail on Sunday revealed that experts now believe the coronavirus was taken into the market by someone already carrying the disease.
Biologists who carried out a landmark study say they were ‘surprised’ to find the virus was ‘already pre-adapted to human transmission’.
Jacques Chirac, the French president at the time of the deal, pushed for the Wuhan institute to be set up after the 2003 SARS outbreak, which affected 26 countries and resulted in more than 8,000 cases and 774 deaths. Mr Chirac, along with his pro-Beijing prime minister Jean-Pierre Raffarin, promised French funding and expertise in return for a share of the intellectual copyright on the lab’s discoveries.
Jacques Chirac, the French president at the time of the deal, pushed for the Wuhan institute (pictured) to be set up after the 2003 SARS outbreak, which affected 26 countries and resulted in more than 8,000 cases and 774 deaths
They argued that a French-Chinese collaboration could develop effective – and lucrative – vaccines to prevent a repeat of a deadly virus pandemic.
France is a global leader in virus research, but the Chirac government also saw the deal as a way to forge stronger trade links with China than its Western rivals.
According to a report in France’s Le Figaro newspaper, institutions such as the General Directorate for External Security, the French equivalent of MI6, expressed repeated concern at the lack of international control over Chinese laboratories and issues with ‘transparency’.
A source told the newspaper: ‘What you have to understand is that a P4 [high-level bio-security] laboratory is like a nuclear reprocessing plant. It’s a bacteriological atomic bomb.
‘The viruses that are tested are extremely dangerous – diving suits, decontamination airlocks etc must be followed to the letter.’
As part of the deal, up to 50 French scientists were expected to travel to Wuhan to help the Chinese run the laboratory properly – but they never went.
The Wuhan institute became operational in January 2018, and coincided with a visit to Beijing by current French president Emmanuel Macron and Mr Raffarin, who was made a ‘special envoy to China’
Alain Merieux, the French billionaire who was instrumental in setting up the Wuhan laboratory in partnership with his Institut Merieux in Lyons, abandoned the project in 2015, saying: ‘I am giving up the co-chairmanship of [the] P4 [laboratory], a Chinese tool. It belongs to them, even if it was developed with technical assistance from France.’
According to Le Figaro, a diplomat with a close knowledge of the deal added: ‘We knew the risks involved and thought that the Chinese would control everything and quickly eject us from the project.
‘We believed that providing this cutting-edge technology to a country with an endless power agenda would risk exposing France in return.’
Their fears were compounded in 2015 when China implemented a new policy of ‘dual use’ technologies, which allows their armed forces to use any civilian technology for military purposes.
The Wuhan institute became operational in January 2018, and coincided with a visit to Beijing by current French president Emmanuel Macron and Mr Raffarin, who was made a ‘special envoy to China’.
Last night, a Foreign Ministry source in Paris confirmed that Mr Barnier had helped set up the Wuhan institute when he was foreign minister as ‘the hand that signed the paper’.
A Foreign Ministry source in Paris confirmed that Mr Barnier had helped set up the Wuhan institute when he was foreign minister as ‘the hand that signed the paper’
Mr Barnier, a Gaullist conservative, served as foreign minister for just over a year, from April 2004 to June 2005.
The source said: ‘The aim was to develop vaccines following the SARS crisis between 2002 and 2004.
‘There was much co-operation on a range of issues between France and China at the time, and Michel Barnier was implementing government policy.’
The source added that opposition to the move had come from a number of people, including senior figures within the French security services.
‘The issue of bio-security was certainly a cause for concern within agencies including the DGSE,’ said the source.
A security services source involved in the case at the time said: ‘The Chinese laboratories were not inspiring a great deal of trust, but the government had its own reasons for progressing with this.’
Coronavirus is 'uniquely adapted to infect humans': Top vaccine scientist says it could only have come from an animal through a 'freak of nature' - and the possibility it leaked from Wuhan lab MUST be investigated
By Ian Birrell for the Mail on Sunday
A team of scientists has produced evidence that the pandemic virus is ‘uniquely adapted to infect humans’, raising fresh questions over whether its origins were natural or could have occurred in a laboratory.
Professor Nikolai Petrovsky, a top vaccine researcher who headed the Australian team, said the virus was ‘not typical of a normal zoonotic [animal to human] infection’ since it appeared with the ‘exceptional’ ability to enter human bodies from day one.
He said the virus should have emerged from an animal through ‘a freak event of nature’ but the possibility that it had leaked from a laboratory could not be ruled out.
Petrovsky, professor of medicine at Flinders University in Adelaide, runs a biotech research unit that will start human trials for a Covid-19 vaccine next month.
‘I haven’t seen a zoonotic virus that has behaved in this way before,’ he said.
A team of scientists has produced evidence that the pandemic virus is ‘uniquely adapted to infect humans’
He told The Mail on Sunday that new viruses crossing over from animals normally strengthen as they adapt to human hosts, but for unexplained reasons, this new coronavirus seems perfectly adapted to infect humans without the need to evolve.
He pointed to the ‘coincidence’ that the most closely related known viruses were being studied in a laboratory in Wuhan, the Chinese city where the pandemic erupted, and insisted that the possibility of a leak, however remote, should not be ignored in the search for its origin.
‘The implications may not be good for scientists or global politics, but just because the answers might cause problems, we can’t run away from them,’ he added. ‘There is currently no evidence of a leak but enough circumstantial data to concern us. It remains a possibility until it is ruled out.’
Prof Petrovsky has gone further than any other expert in raising the idea that the virus escaped from one of two laboratories researching bat viruses in Wuhan.
Richard Ebright, one of the world’s top biosecurity experts, also told this newspaper that the odds of this new virus containing such unusual features and occurring naturally were ‘possible – but improbable’.
Simon Wain-Hobson, a virologist at the Pasteur Institute in Paris, said the ‘body of evidence’ suggested this was a natural virus. Pictured: A worker inside the P4 laboratory in Wuhan in 2017
Chinese media 'shows Wuhan labs studying coronavirus' in 2018
Ebright, professor of chemical biology at Rutgers University, in New Jersey, said scientists at the Wuhan Institute of Virology were creating chimeric coronaviruses (new hybrid micro-organisms) and seeking funding to test their ability to infect human cells while using procedures that leave no sign of human manipulation.
Asked about the chance of a leak, he replied: ‘There definitely is a possibility. But there is no basis to say a high probability.’
Last week, the MoS revealed details of a key study challenging China’s claims that the pandemic emerged from a Wuhan animal market in December. The researchers were ‘surprised’ to find the virus ‘already pre-adapted to human transmission’, contrasting its stability with another coronavirus that evolved rapidly as it spread around the planet during the 2002-04 SARS epidemic. Their findings are backed by the Australian team’s study into the ‘spike protein’ that binds Sars-CoV-2 – the new strain of coronavirus that causes disease – to cells in human bodies. The research, posted on Cornell University’s website but not yet peer-reviewed, used computer modelling to test the spike protein’s ability to bind to humans and 12 possible animal hosts.
It found the ability to bind to human cells far exceeded its ability in other species. ‘This indicates Sars-CoV-2 is a highly adapted human pathogen,’ it said, ‘raising questions as to whether it arose in nature by a rare chance event or whether its origins lie elsewhere.’
Richard Ebright, professor of chemical biology at Rutgers University, in New Jersey, said scientists at the Wuhan Institute of Virology (pictured) were creating chimeric coronaviruses (new hybrid micro-organisms)
Scientists conduct research at the controversial Wuhan virus lab
Prof Petrovsky said it seemed ‘very unusual’ for an ‘exquisitely human adaptive virus’ to have suddenly crossed from an animal host to humans last year.
‘This is either a remarkable coincidence or a sign of human intervention,’ he said. ‘It is possible the virus was a fluke event and it turns out humans were the perfect host.
‘But we don’t have evidence for this because no one has found this virus in an intermediate host animal [for example pangolin] yet.
‘No one can say a laboratory leak is not a possibility.’
He claimed that scientists were reluctant to discuss the possibility of botched lab experiments or leaks since any backlash could lead to research restrictions and threaten crucial research. However, he added, it was vital to discover the source of the virus.
Prof Petrovsky said that if Sars-CoV-2 was a natural event, another related virus could erupt again from the same source with even more devastating consequences. ‘Next time, it could have far worse mortality rates,’ he warned.
He also highlighted the ‘furin cleavage site’, which allows the spike protein to bind to cells in human tissues including the lungs, liver and small intestines.
One US expert in biomedical sciences, who did not wish to be named, said there was no direct evidence to support the idea that the virus was engineered or leaked from a lab
Previous studies have noted the efficiency of this cleavage method, which does not exist in the most similar coronaviruses – although researchers in 2009 modified the SARS virus to introduce a furin cleavage site in a similar position to Sars-CoV-2 and found this increased the infectivity of the virus.
In the latest study published on Friday, three German scientists highlighted how this cleavage site was essential for the infection of human lung cells. One US expert in biomedical sciences, who did not wish to be named, said there was no direct evidence to support the idea that the virus was engineered or leaked from a lab, although ‘the location of the acquired furin mutation is quite surprising’.
Another leading research scientist said a member of his team ‘went a bit pale when he looked at this’.
A paper earlier this year by Yong-Zhen Zhang, the Chinese diseases expert who published the first genome sequence for Sars-CoV-2, said this was ‘arguably the most important’ difference between the new virus and its closest known relative, which was derived from a bat by Wuhan researchers.
Simon Wain-Hobson, a virologist at the Pasteur Institute in Paris, said the ‘body of evidence’ suggested this was a natural virus. ‘You would see signatures if this was an engineered virus and I don’t see any evidence that it is engineered,’ he said.
Last week Chinese health officials confirmed they had ordered some labs to destroy samples of the coronavirus to ensure work was not being carried out in units that did not meet global biosafety rules.
Automakers should emerge greener from the crisis
Governments need to tie financial aid to commitments on climate
No industry has been left unscathed by the pandemic but the automotive sector, along with aviation, has been among the worst hit. Across western Europe, sales collapsed 80 per cent year on year in April, with barely a car being bought in the UK, Spain and Italy. Global sales of new cars are forecast to fall more than 20 per cent this year. Factories have been shut down and consumers have stayed away from showrooms.
Even before the pandemic struck, carmakers faced plenty of challenges. Sales in key markets were already in decline, and new emissions regulations were forcing an expensive shift to electric vehicles, putting margins under pressure. Job cuts were already on the agenda and many big players were looking at mergers or alliances to cut costs. The pandemic will put these trends into overdrive.
For policymakers, the immediate concern is the survival of an industry that is not only a big contributor to gross domestic product and a big employer, but also for many nations strategically important. In France, President Emmanuel Macron on Tuesday unveiled an €8bn support package including increased subsidies for buyers of electric or hybrid cars and support for research into hydrogen power. He set a target of producing 1m electric cars annually by 2025. His efforts to encourage “reshoring” of production are partly about industrial policy, but also reflect weaknesses that the pandemic has highlighted in global supply chains. Unfortunately for Mr Macron, his package is unlikely to prevent expected big job losses at Renault, one of France’s automotive champions.
Politicians do at least have recent history to instruct them. After the banking crisis in 2008, governments around the world gave their car industries help of differing kinds — from direct injections of money to customer incentives to increase demand, commonly known as scrappage schemes. One lesson from a decade ago is that weaning companies off incentives is never easy; while scrappage schemes helped to shore up demand their eventual termination led to a sharp drop in sales in some countries. An incentive scheme to help the sales of electric vehicles might not be of much practical use in Europe, where carmakers make few electric cars and are quite able to sell the ones they do produce thanks to generous existing subsidies. The green benefits of encouraging consumers to scrap perfectly good cars for newer, lower-emissions models, are also debatable.
In the medium-term, the threat of weak demand is a far bigger challenge than restarting production. Demand in Europe is about 30 per cent lower than normal. While there are some promising signs in China, where demand has come back as lockdowns have eased, it is hard to see demand in the west returning that quickly. Most economists predict coronavirus will bring about one of the largest-ever reductions in economic activity.
Carmakers could well join the queue behind airlines for bespoke government assistance. Leaders should remember the lessons of the bailouts a decade ago, and use their influence to change the industry — and transport — for the better. They should put their money not into sales incentives, but plans to bring about the electric charging infrastructure necessary for a decisive shift away from hydrocarbons. A pan-European initiative to build electric car batteries is a positive step.
Any financial assistance to automotive companies should be conditional on them working in the same direction. Governments are focused on hitting their climate change goals. Today’s crisis offers an opportunity they should not miss.
Warner Music IPO: magnifying Len
Listing will be music to billionaire’s ears who will maintain control via supervoting shares
Home entertainment stocks have been hitting all the right notes for investors. With millions stuck indoors and in need of diversion, streaming services such as Netflix and Spotify and video game maker Nintendo have all seen a surge.
Warner Music Group is looking to ride the wave. The music company behind Cardi B, Ed Sheeran and Bruno Mars, is pressing ahead with plans to raise as much as $1.82bn in an initial public offering. Potential investors should not get so jazzed though. For one thing, they will have no say in determining the company’s course. Billionaire Len Blavatnik will retain firm control of the group through supervoting shares.
Once dismissed as in terminal decline, the music business has enjoyed a renaissance in recent years. Streaming services convinced people to pay for music again. At Warner, revenue grew 12 per cent for two years to hit $4.5bn in fiscal 2019, when profit topped $250m. Goldman Sachs expects worldwide recorded music revenue to more than double to $45bn by 2030, with the bulk of the growth driven by streaming.
The pandemic, which initially prompted Warner to put its IPO plans on hold, has done little to dull the shine. Streaming revenue actually grew 9 per cent year-on-year in April.
At the top end of the announced price range, Warner’s IPO will give the company an enterprise value of about $15.7bn, or about 21 times last year’s adjusted ebitda. By contrast, Vivendi sold a 10 per cent stake in Universal Music Group to China’s Tencent for an implied total enterprise value of €30bn. That works out to about 27 times UMG’s 2019 ebitda. The premium reflects UMG’s market-leading status. It made 60 per cent more in revenue than Warner last year.
Still, the IPO will be music to Mr Blavatnik’s ears. He paid only $3.3bn, including debt, for Warner in 2011. After the IPO, he would retain 99 per cent of voting power through Class B shares held by his company Access Industries. Warner’s shares are only decent value for investors willing — like so many aspirant musicians — to cede control to a managerial Svengali.
JAB seeks valuation of up to €16bn for coffee business
Forthcoming IPO of JDE Peet’s likely to be Europe’s biggest listing since 2018
JAB Holdings is seeking a valuation of up to €16bn for its JDE Peet’s coffee business and has secured investments from funds managed by billionaire George Soros and Fidelity for Europe’s biggest listing since 2018.
JDE aims to raise as much as €2.25bn which, if achieved, would surpass any initial public offering since German train brake maker Knorr-Bremse raised €3.8bn in 2018, according to data provider Refinitiv.
The company, which owns coffee brands including Douwe Egberts, Kenco and Jacobs, is one of a handful of groups that have braved Europe’s IPO market since the onset of the coronavirus crisis and is counting on the resilience of coffee consumption during the downturn to fuel demand for the deal.
JDE is seeking a valuation of between €14.9bn and €16bn by selling more than 23m shares priced at €30-€32.25 each, according to the prospectus published on Tuesday. Its shares are due to begin trading on Amsterdam's Euronext exchange next week.
The company has secured cornerstone investment worth €100m from Quantum Partners and Palindrome Master Fund, both managed by Soros Fund Management, and €361m from Fidelity. In addition to the outside investment JAB, which manages the wealth of Germany’s billionaire Reimann family and owns a majority stake in JDE via a holding company, plans to increase its ownership by buying €300m in new shares.
Widespread lockdowns have sent a chill through Europe's IPO market, with an 80 per cent drop in flotation proceeds and over-allotments so far in 2020 compared to the same period in 2019, according to Refinitiv.
“We believe that JDE Peet’s is well positioned to be at the forefront of reopening the IPO market,” said Olivier Goudet, JAB’s managing partner.
The listing will be a test of the strategy JAB has pursued over nearly a decade of consolidating the global coffee industry. Last year the group merged Jacobs Douwe Egberts Group, the second-largest coffee roaster globally after Nestlé, with the US retail coffee brand Peet’s and overhauled its management as it prepared for the IPO.
JDE Peet’s mainly sells coffee beans and capsules through retail stores, under brands such as L’Or, Senseo, Tassimo and Kenco and the company plans to use €700m to pay down existing debt.
Almost 80 per cent of sales are derived from coffee drunk at home. JAB thinks that the social and economic effects of coronavirus will endure for years, bolstering long-term demand for at-home coffee.
JAB is also involved in a turnround at Coty, another well-known consumer business in its portfolio. Earlier this month, US private equity group KKR injected $750m into the debt-laden cosmetics maker as part of its plan to become the majority shareholder in the company’s professional beauty and haircare division.
Gapping down
In reaction to disappointing earnings/guidance:
- PLAN -4.8%
Other news:
- LTM -39.9% (initiates voluntary reorganization and restructuring of their debt under Chapter 11 protection
- HTZ -35.9% (reorganization under Chapter 11)
- VXX -4.5% (trading lower with US futures up nearly 2%)
- REGN -3.5% (Regeneron Pharma announces secondary offering of its common stock held by Sanofi (SNY))
- ONEM -0.9% (proposes private offering of $250 million of convertible senior notes due 2025)
- GLD -0.6% (Gold futures down 1% in pre-mkt)
- GDX -0.5% (Gold futures down 1% in pre-mkt)
Analyst comments:
- CPTA -1.1% (downgraded to Mkt Underperform from Mkt Perform at JMP Securities)