After Hours Summary: AMZN jumps to all-time highs on earnings; NAV +51% on takeover bid; WWE -23% down sharply on mgmt departures
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: FLEX +12.1%, AMZN +10.8%, NATI +7.5%, VRTX +5.9%, WDC +5.9%, X +5.6%, DECK +3.7%, EW +3.3%, SIGI +2.9%, MITK +2.6%, BZH +1.2%, AJG +0.8%, SKYW +0.8%, LEVI +0.5%, LPLA +0.4%, OTEX +0.4%, RMD +0.3%, MTX +0.1%, PFPT +0.1%
Companies trading higher in after hours in reaction to news: NAV +51.6% (receives $35/sh takeover bid from Volkswagen subsidiary), IBM +5.1% (IBM names Arvind Krishna as CEO), TELL +5% (announces that LNG has dismissed all claims against TELL), DBX +1.1% (names new COO), CCL +0.8% (issues statement on Costa Cruises ship in Italy)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings/guidance: RHI -5%, CE -3.7%, CACC -3.6%, V -3.1%, AVD -2.6% (lowers FY19 rev guidance), AMGN -2.2%, EA -2.1%, FICO -2%, HAYN -1.3%, NVST -0.6%, EMN -0.5%, EPAY -0.4%, NFG -0.3%, HA -0.2%, CPT -0.1%, CVCO -0.1%
Companies trading lower in after hours in reaction to news: WWE -22.9% (George Barrios, Michelle Wilson departing, searching for premanent CFO, CRO, lowers OIBDA guidance)
Aston Martin calls emergency fundraising board meeting
Chinese carmaker Geely and billionaire Lawrence Stroll both propose £200m investment
Aston Martin has called a board meeting for Thursday evening that may lead to it deciding between two potential investors in an emergency fundraising to help prop up the struggling luxury carmaker.
Chinese carmaker Geely and Canadian billionaire Lawrence Stroll are both proposing to invest about £200m for a fresh 20 per cent stake in the business and a place on Aston’s board.
The decision over which one will end up investing in Aston is likely to come down to what the new parties bring to the carmaker beyond their funding, which in itself will be a lifeline for the business.
Geely wants a technical partnership with its other brands such as Lotus, while Mr Stroll is interested in the Formula 1 possibilities of an Aston relationship, two people said.
An announcement may come as soon as Friday morning, although it is possible the board discussions will run over into the weekend, delaying a result until next week, one person cautioned.
If Mr Stroll is successful, he will instigate a boardroom shake-up that will lead to the departure of Aston’s chairman Penny Hughes, who was appointed in the run-up to its ill-fated initial public offering two years ago.
Mrs Hughes, a former Coca-Cola executive, has been in the company since September 2018, a month before the company’s IPO.
Shares have fallen by three quarters since the listing amid falling profits and a sales slowdown, forcing the company to raise fresh debt several times and seek a new outside investor.
Both potential investors are planning to structure any deal so that Aston receives a small amount of cash straight away — not the full investment amount — while the equity issue is completed, a process that may take several weeks, according to three people.
A spokesman for Aston Martin declined to comment. Representatives for Geely and Mr Stroll did not respond to request for comment.
In a trading update earlier this month, Aston said it “remains in discussions with potential strategic investors, which may or may not involve an equity investment into the company”.
An injection will be a lifeline for Aston, which has been forced to tap the debt markets at increasingly expensive borrowing levels in order to refinance the business amid a sharp fall in profits and higher investment levels.
Earlier this month Aston issued its second profits warning within a year, saying that earnings for 2019 will be £130m to £140m, a third lower than the £200m expected by analysts, while margins will be 12.5 per cent to 13.5 per cent, compared with already lowered expectations of 20 per cent.
The group has been seeking fresh investment for several months in an attempt to bring fresh capital into the business. It raised $150m in debt last year, and plans to draw down an additional $100m, it announced earlier this month.
The company has pinned its hopes on the DBX, its first sport utility vehicle, which will take the brand into one of the fastest growing and most profitable segments in the global automotive industry.
Uber and DoorDash held failed merger talks
SoftBank, an investor in both, pushed for consolidation between the food-delivery businesses
Uber and DoorDash held talks to combine last year in a deal that would have accelerated the long-awaited consolidation of the lossmaking food delivery industry, according to people close to the discussions.
The talks, held roughly six months ago, took place at the behest of Japan’s SoftBank, a shareholder in both companies through its $100bn Vision Fund, these people added. While the merger discussions did not result in a deal, the two sides have not ruled out returning to negotiations or attempting to merge with a rival.
DoorDash executives were cool towards the idea of a merger at the time, believing that their own food delivery service had stronger growth prospects then Uber’s service, Uber Eats.
SoftBank and DoorDash declined to comment. An Uber spokesman said: “We’re in constant dialogue with all our shareholders, but to be clear: our M&A strategy is ours and ours alone.”
DoorDash, which was valued at $12.6bn in its last funding round in May, last year emerged as the market leader in US food delivery, taking 37 per cent of sales in December compared with 21 per cent for Uber, according to the data provider Second Measure.
SoftBank had pushed for the discussions between the two companies, some of these people said, adding that the Japanese investor has been particularly concerned about Uber’s difficulties operating in the food-delivery market.
DoorDash was reluctant to entertain merger talks with Uber but ultimately agreed to sit across the table from its rival at SoftBank’s urging, these people said.
The talks came in the wake of Uber’s $8.1bn initial public offering in May and around the time WeWork, another SoftBank investment, was planning a public listing it ultimately withdrew. SoftBank’s Vision Fund was Uber’s largest investor at the time of its listing, owning 15 per cent of the company.
The growing food delivery industry has been marked by intense competition, as rivals such as Grubhub, Postmates and DoorDash attempt to win over customers with discounts subsidised by deep-pocketed private investors.
The groups have so far struggled to become profitable, fuelling talks of consolidation. Uber reported losses of $316m in its Eats business through the third quarter last year, representing a 67 per cent increase from the same point in 2018.
Takeaway.com and Just Eat are currently attempting to seal a £6bn merger, which has come under scrutiny from UK competition regulators.
Since Uber’s IPO, chief executive Dara Khosrowshahi has been fighting a falling stock price and committing to investors that he will turn the company profitable on an adjusted basis by 2021.
Part of that strategy relies on cutting back Uber’s business lines, including Eats, in markets where its pursuit of scale against rival start-ups has seen it burn through cash. In certain areas, Uber has looked to consolidate its position, merge with rivals or shut down its Eats businesses entirely.
Last week Uber agreed to sell its Indian food delivery unit to local rival Zomato for a near 10 per cent stake in the combined business. In October, the company shut its food delivery operations in Korea.
DoorDash has increased its market share by targeting suburban US areas that competitors had avoided, aided by almost $1.9bn in private funding since 2018. Activists had targeted the company over its pay model, which in effect counted tips against wages earned by its contract workers. DoorDash eliminated that policy last year.
A merger of DoorDash and Uber’s Eats business would have concentrated the food delivery market around two of SoftBank’s largest investments. Several of the Japanese group’s other investments offer food delivery services, including the Colombian start-up Rappi and Singaporean ride-hailing company Grab
Southwest Flew Millions on Jets With Unconfirmed Maintenance Records, Government Report Says
Transportation Department report to fault FAA for what it calls ineffective oversight of carrier
A government report to be released in coming days says Southwest Airlines Co. LUV -1.23% failed to prioritize safety and the airline’s regulator, the Federal Aviation Administration, hasn’t done enough about it.
Southwest pilots flew more than 17 million passengers on planes with unconfirmed maintenance records over roughly two years, and in 2019 smashed both wingtips of a jet on a runway while repeatedly trying to land amid gale-force winds, according to the Transportation Department report, reviewed by The Wall Street Journal.
The lapses are highlighted in a draft audit by the agency’s inspector general that also criticizes the FAA’s oversight of the carrier as lax, ineffective and inconsistent. The document indicates no agency enforcement action resulted from those safety slip-ups or certain other alleged hazards. In some cases, the report alleges, the FAA’s overall approach served to “justify continued noncompliance with safety regulations.”
Following a roughly 18-month inquiry, the inspector general found FAA managers in the Dallas-area office that supervises Southwest routinely allowed the carrier “to fly aircraft with unresolved safety concerns.” And it said they failed to adequately confront shortcomings in the airline’s approach to safety, which were recognized by agency officials ranging from senior headquarters personnel to local inspectors. The audit indicates nearly two-thirds of the 46 FAA employees interviewed “raised concerns about the culture at Southwest.”
“It is clear that the Agency is not yet effectively navigating the balance between industry collaboration and managing safety risks at the carrier,” according to the report.
A spokesman for the inspector general declined to comment. An FAA spokesman said, “We will respond directly to the Office of Inspector General.”
A Southwest spokeswoman said the company reviewed the draft on Tuesday and strongly disagrees with “unsubstantiated references to Southwest’s Safety Culture.”
“We have communicated our disappointment in the draft audit report to the OIG and will continue to communicate any concerns directly with its office,” she said in an email, adding that Southwest’s safety systems meet or exceed all regulatory requirements. “Our friends, our families board our aircraft and not a single one of us would put anything above their safety.”
Previously, Southwest executives characterized many of these same issues, which concern both maintenance documentation and the weight of planes at takeoff, as differences of opinion between the airline and its regulators—and sometimes between various groups of regulators—that didn’t affect safety.
As the DOT report was being prepared, the FAA also confronted concerns from lawmakers, airlines and safety experts that it was too deferential to Boeing Co. in approving the plane maker’s 737 MAX jet, which is now grounded following two fatal crashes in 2018 and 2019.
FAA officials have said they plan to respond to various outside reports and recommendations about the agency’s oversight of industry.
The Journal previously reported issues at Southwest regarding maintenance compliance and computing correct takeoff weights. The new DOT report offers additional details and provides official findings and recommendations. Operational problems such as the wingtip strikes haven’t been revealed before.
The carrier transports more domestic passengers than any rival and has a controversial, decadelong history of dealings with a series of local FAA managers who have been investigated by lawmakers and scrutinized by the agency’s top brass for allegedly being too accommodating to Southwest.
The most recent shake-up occurred seven months ago, when three senior managers in the local office that oversees Southwest were reassigned. The final version of the report, expected to incorporate only minor changes from the draft reviewed by the Journal, according to people familiar with the matter, could be released as soon as the end of the week or as late as mid-February.
Beyond Southwest, the findings raise questions about a core FAA philosophy that depends heavily on data generated by airlines themselves.
The audit indicates that in relying on information from such company safety management systems, the FAA also must evaluate the safety culture of individual airlines. The audit is recommending the agency provide its inspectors with guidance materials to make such assessments. Numerous FAA officials, according to excerpts of interviews included in the document, complained Southwest often was slow or resistant to providing the agency with safety information.
The newest and most gripping details are in a section that faults both the carrier and the FAA as failing to adequately investigate the root causes of three successive botched landings during a flight last February at Bradley International Airport near Hartford, Conn.
No one was hurt, but the plane was damaged and, according to the audit, the cockpit crew continued descents through major turbulence, low-level wind shear and gusts stronger than those the pilots were trained to handle.
One of the approaches ended with the pilots pulling up a foot above the runway and later, about a dozen feet before touchdown, according to a separate safety report prepared by Southwest after its internal investigation and reviewed by the Journal. Once the jet diverted and landed safely outside Providence, R.I., flight attendants alerted a Southwest employee who met them at the gate that a crew would need to clean the cabin splattered with vomit from “the number of passengers who had gotten sick,” the internal report dated May 31 says.
Southwest management didn’t identify problems with the pilots’ decision making and determined a random gust caused the wings to hit the tarmac, according to the internal safety analysis. The pilots told company investigators they “had never seen winds like this before in their flying careers,” the internal May report said. Rather than questioning the pilots’ judgment, the airline took steps to adjust crosswind landing calculations and enhance flight attendant training to alert cockpit crews of wing strikes or other in-flight emergencies, according to the report.
The DOT audit said the FAA’s review of the Bradley incident failed to determine whether Southwest’s safety system “was effective in achieving the highest possible degree of safety.” On Wednesday, Southwest said it thoroughly investigated the incident and shared all airline safety data with the FAA during that process.
The DOT audit also provides new details about problems that led to Southwest’s incomplete documentation of certain aircraft inspections and repairs over the years that prevented the FAA from determining if all mandatory work had been completed on dozens of Boeing Co. 737 jets.
The audit reveals that initial FAA approval of mandatory maintenance certificates for 71 of 88 used aircraft—a process the agency told investigators typically takes three or four weeks—occurred in one day. After problems with that process were identified, the FAA gave Southwest two years to fully inspect and verify that the planes—already phased into the fleet—met all safety requirements.
In a December interview, Southwest Chief Executive Gary Kelly said the carrier has always complied with FAA directives and reiterated that late last year Southwest agreed to accelerate the checks at the agency’s request. Southwest’s statement on Wednesday said it has completed reviews of 75 aircraft and found “very low risk, well within acceptable parameters.” The airline said it is in the process of inspecting the remaining 13 aircraft, months ahead of the original schedule.
Another section of the audit blames local FAA managers as having allowed Southwest, rather than federal inspectors, to determine potential hazards stemming from the airline’s chronic failures to accurately monitor the weight of checked baggage loaded into aircraft. Such noncompliance has persisted for roughly two years, according to the audit.
The FAA closed that enforcement case without taking action against the carrier, though people familiar with the details said agency inspectors continue to find weight discrepancies.
The carrier has long held that heavier-than-expected baggage loads fall well within its planes’ operating safety margins and that its system for calculating weight and balance data didn’t present a systemic safety risk.
Amid an FAA investigation, the airline last year phased in a new system to scan checked bags loaded in the bellies of jets and has said it resulted in much more accurate weight calculations. Southwest on Wednesday said it added new planeside scanning equipment for bags after the inspector general stopped collecting data.
“We agree with the FAA we have opportunities to improve there,” Mr. Kelly said during the same interview. “We’ve been working hard at that and I think that the results attest to that.”
Southwest was concerned enough about the audit to request a September meeting between Mr. Kelly and Calvin Scovel, then the inspector general. At the time, a spokesman for Mr. Scovel said the sit-down was “at the airline’s request” and didn’t influence the results of the audit. Mr. Kelly said in December that his meeting with Mr. Scovel didn’t include a discussion about the substance of the report. Investigators for the House Transportation Committee and the Senate Commerce Committee have been looking into that meeting, according to people familiar with those inquiries.