>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance:

  • N/A.

M&A news:

  • THOR +168.5% (to be acquired by Sanofi (SNY) for $68/share in cash)
  • XBIT +136.1% (to divest Human antibody Bermekimab targeting IL-1a to Janssen)
  • ARQL +100.6% (to be acquired by Merck (MRK) for $20 per share in cash for an approximate total equity value of $2.7 billion)
  • RRTS +10.9% (announces the sale of its Flatbed business unit, for $30 mlnin cash)

Other news:

  • FATE +25.1% (reports clinical data from Landmark Phase 1 studies; No dose-limiting toxicities or FT500-related SAEs reported in first 12 patients; also presents new in vivo preclinical data for FT596 -- company plans to initiate enrollment of first-in-human clinical trial of FT596 in rarly 2020)
  • OBSV +22.1% (reports positive Phase 3 trial results from PRIMROSE 2 trial of linzagolix)
  • TGTX +22.1% (presents triple therapy data from Phase I/II study of ublituximab in combination with umbralisib and venetoclax)
  • PCG +21% (reaches agreement to resolve wildfires from 2017 and 2018)
  • CRTX +14% (reports new data revealing link between bacterial pathogen and genetic risk for Alzheimer's Disease)
  • AGIO +12.4% (announces that clinical proof-of-concept has been established based on preliminary analysis of Phase 2 trial of mitapivat in patients with non-transfusion-dependent thalassemia)
  • DTIL +9.4% (announces updated interim clinical data from the ongoing Phase 1 trial of its lead investigational off-the-shelf (allogeneic) chimeric antigen receptor (CAR) T cell therapy candidate, PBCAR0191)
  • RCKT +7.3% (presents 'encouraging' preliminary results from its Phase 1 trial of commercial-grade RP-L102 "Process B" for Fanconi Anemia)
  • ALEC +6.8% (presents Phase 1 data on AL002)
  • SGMO +5.5% (Sangamo Therapeutics and Pfizer (PFE) report updated Phase 1/2 results showing sustained increased Factor VIII activity through 44 weeks )
  • KPTI +5.3% (reports new and updated XPOVIO data demonstrating 56% overall response)
  • BLUE +5% (Bluebirdbio and Bristol-Myers (BMY) report "positive" top-line results from Ph 2 KarMMa study of ide-cel; met its primary endpoint and key secondary endpoint) APTO +3.9% (reports early clinical observations with CG-806 and APTO-253)
  • CGC +3.3% (names David Klein CEO effective January 14)
  • AM +2.9% (to repurchase $100 mln of shares from Antero Resources)
  • CSIQ +2.8% (authorizes $150 mln share repurchase program )
  • BMY +2.3% (presents data from multiple studies evaluating lisocabtagene maraleucel at ASH)
  • MNK +2.1% (presents data on a novel predictive model to identify infants at risk for infantile spasms)
  • SESN +1.7% (initiated the submission of its BLA for Vicinium for the treatment of BCG-unresponsive non-muscle invasive bladder cancer under Rolling Review to the FDA
  • MBIO +1.3% (highlights presentation of updated Phase 1/2 clinical data for MB-107 lentiviral gene therapy for X-linked severe combined immunodeficiency)

Analyst comments:

  • QRVO +3.4% (upgraded to Buy (from Underperform) at BofA/Merrill)
  • SWKS +2.2% (upgraded to Buy (from Underpeform) at BofA/Merrill)
  • NUE +1.4% (upgraded to Buy at Longbow)
  • STLD +1.1% (upgraded to Buy at Longbow)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • XBIT +151.8%, ARQL +101.7%, FATE +22.5%, PCG +21.2%, BLUE +6.4%, PLUG +2.9%, XNET +2.5%, RBS +1.8%, RIO +1.4%, LYG +1.3%, BBL +1.3%, SAN +1%, BHP +1%, DB +1%
  • Gapping down:
    • DPLO -31.2%, KOS -4%, NOK -2.3%, M -1.8%, JKS -1.4%, TEVA -1.2%, MMM -1%, MYL -1%, ERIC -0.7%, BIG -0.7%, VOD -0.6%, BABA -0.5%

TheGUardian :French gaming giant makes play for National Lottery

French gaming giant makes play for National Lottery

France’s newly privatised bookmaker is making a play for the National Lottery, further raising the stakes in the race to seize control of the prized contract from Camelot. Representatives for Française des Jeux (FDJ), one of Europe’s most powerful gaming firms, are understood to have held talks with Rothschild, the investment bank leading the hunt for the next National Lottery operator. Industry sources confirmed the discussions as FDJ last week celebrated Frances’s biggest stock market float for almost 15 years (Source: Telegraph, http://bit.ly/2Pn1V1r)

FT : Wirecard’s singular approach to counting cash

Wirecard’s singular approach to counting cash
German fintech boosted its cash reserves using trust accounts from its payments processing operations

Wirecard boosted its cash reserves in 2017 by including money held in “trust accounts” used in its payments processing operations, raising fresh questions about the opacity and integrity of financial statements published by the German fintech. 

Cash flow is a key metric of financial health and the fourfold rise in Wirecard’s share price since the start of 2017, which vaulted the group into Germany’s prestigious Dax 30 index, came alongside a marked improvement in its cash generation. 

Wirecard’s substantial net cash balance has also offered reassurance to some this year, in the face of a criminal investigation in Singapore into allegations that members of its finance team based there forged contracts and invoices to fabricate sales and profits.

For instance, Sandeep Deshpande said in a September report for JPMorgan Cazenove that “Wirecard has been a target of accounting-related allegations over the past several years”, but highlighted as a strength its “strong free cash flow conversion and net-cash position”.

The German fintech is also undergoing a KPMG special audit, prompted after the Financial Times reported suspicions about Al Alam Solutions, a Dubai partner which appeared to have contributed half of Wirecard’s profits in 2016 and early 2017.

Internal Wirecard documents, seen by the FT, suggest Al Alam was also important to the group’s balance sheet, which held €1.45bn of cash and equivalents at the end of March 2017. 

Correspondence indicates Al Alam was associated with €334m held in “trustee accounts” as of that date. It is not clear if that particular sum was included in Wirecard’s calculation of cash reserves; nevertheless other internal documents show an attempt to justify the general principle that money held in such accounts contributed to operating cash flow. 

A trust account is sometimes used in payment processing to hold pooled money — for example on behalf of merchant customers.

Wirecard is an acquirer, a business which collects money from credit card issuers when a consumer pays for something with a card. But the group also used some “third-party acquirers” in its payment processing, a term staff repeatedly applied to Al Alam. 

Stephan von Erffa, Wirecard’s deputy chief financial officer, received a summary accounting opinion on April 1 2017 which said “management believe that trust accounts held in third-party acquiring business is cash equivalent, part of operating cash flow and not restricted”.

The justification was sent by Edo Kurniawan, Wirecard’s former head of international reporting and a key suspect in the Singapore criminal probe. It indicates that such trust accounts held reserves, typically money due to merchants but held back for a period of time in case of refunds enforced by credit card issuers, known as “chargebacks”, and other fees. 

Collins Ntim, professor of accounting at Southampton Business School, said a key test in determining if cash could be recognised on a balance sheet would be who controlled a trust account. 

“Trusts are set up to ensure an equitable distribution to beneficiaries. The independent party is the trustee who could address any conflicts,” Professor Ntim said. It would depend on contract terms, he said, but ordinarily “to count the cash as cash and equivalents on the balance sheet, that would be aggressive accounting”. 

Asked by the FT to identify the nominated trustees for Al Alam accounts, Wirecard said: “All funds are held with reputable financial institutions.”

It said: “Trust accounts are only used to segregate our own cash from the operating cash of partner acquirers. Such trust accounts are held in the name of Wirecard and the funds can be accessed at any time.” Wirecard also said judgments about cash were subject to detailed review in its audit process. 

The group reported a €2.1bn net cash position at the end of June this year. In September it raised €1.4bn of new debt, judged investment grade by Moody’s, and intends to raise funds from consumers by paying an attractive interest rate on Wirecard Bank current accounts guaranteed by the European deposit protection scheme. 

Al Alam operates from a small office in Dubai with almost no web presence. A former employee told the FT this year that Al Alam had six or seven staff, and was run by a Wirecard executive — a claim the German company has denied. 

Wirecard said: “Al Alam is a payment technology services company providing connectivity to a number of local acquirers via switching and routing services.” Asked to identify an acquirer connected to Wirecard in such a way, the company suggested the FT contact Al Alam about “their partner relationships”. Al Alam, which did not respond to questions, has said it always acted legally. 

In October, the FT published internal Wirecard financial reports that indicate it claimed to route billions of euros in payments for 34 clients through Al Alam in 2016 and 2017. Yet out of 34 client names listed in the documents, eight had ceased trading at the time business was attributed to them. A further 15 told the FT they had never heard of Al Alam, of which only four said they were clients of Wirecard in the period concerned.

The FT has asked Wirecard repeated questions about Al Alam since April. On Thursday, Wirecard said: “No ebitda [earnings before interest, tax, depreciation and amortisation] or revenue is generated by Al Alam.” 

Wirecard has also said documents published by the FT are not authentic, that the FT’s analysis of them is flawed, and it expects to be exonerated by KPMG. It has said some Singapore staff may face criminal liability for their actions, but that the impact on group financial statements was minimal.

FT : HEC Paris takes the top place in FT European rankings

HEC Paris takes the top place in FT European rankings
The French institution has overtaken London Business School in the latest tables


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A top French institution has overtaken its leading British rival as the foremost European business school, in the Financial Times’s latest annual composite rankings assessing the range of qualifications offered.

HEC Paris came first in the FT European Business Schools ranking, which judges schools’ overall performance across their MBAs, Executive MBAs, Masters in Management and Executive Education programmes. It beat London Business School, the leader for the previous two years.

The latest assessment takes into account the ratings in each of the FT’s most recent rankings for the different qualifications, which reflect performance on factors including salary earned three years after graduating, the quality of research and faculty and student diversity.

Peter Todd, dean of HEC Paris, said: “We’re always proud when we get good results and of what we’ve achieved but we’re never satisfied. The market is highly competitive and the competition is only intensifying.”

While France is often associated with a large state and criticism of private capitalism, six of the top 20 European business schools in the FT ranking are based in the country, which has a long tradition of selective and highly competitive entry among the brightest national school leavers and a strong draw for foreign students learning about business.

Many of the leading French business schools were created independently from universities by the country’s regional Chambers of Commerce, including ESCP, based in Paris, which has just celebrated its 200th anniversary. As funding from the chambers dries up and schools seek fresh investment, they are exploring ways to diversify their ownership and sources of income.

A number of the business schools, including HEC, Insead and Essec, have hired deans and other senior faculty from outside France to offer significant teaching in English as well as French — a draw for students from other countries. Many have satellite campuses and partnerships with other institutions in and beyond Europe.

The UK also has six business schools among the top 20 in the latest FT European ranking, as well a branch of ESCP, which also has campuses in Germany, Spain, Italy and Poland. The list also includes three in Spain, two in Switzerland and one in each of Italy, Germany and the Netherlands.

At a time when applications to MBAs at US business schools are stagnating and there has been a broader rise in anti-immigrant sentiment, European institutions have received a boost in the number of international students applying to study. Several Chinese business schools have also opened campuses within Europe.

Bus. Of Fas. : Gucci Targets China's Tier Two Cities

Gucci Targets China's Tier Two Cities
Kering said its strategy is to tap on the network it’s already built in top-tier cities while opening new stores in so-called tier 2 cities.

BEIJING, China — China may have helped create the world’s biggest shopping event online, but for Gucci’s owner, physical stores are still the way to go in the most populous country.

A total of 14 new outlets are being planned for five of its brands across six Chinese cities including Dalian and Wuhan, according a note published by Kering SA, which also owns Bottega Veneta and Saint Laurent. Kering has been expanding its product offerings in the country since the Gucci opened its doors in Shanghai in 1997, the first retail location in mainland China. The brand now has about 50 stores.

“Real estate has to provide a showcase for luxury brands, wherever the shopper is,” Sergi Villar, Kering’s real estate director, said in the note. “China is still a key growth engine for the global luxury market.”

Chinese shoppers are crucial for Gucci, Kering’s biggest brand that made up more than three-quarters of its operating profit in the first half of this year. That’s because the country’s millennial shoppers eagerly shell out everything they earn on items such as $1,400 crystal-studded sunglasses and velvet clutches that cost thousands of dollars.

Kering’s note also pointed to a Bain & Co. report that showed Chinese shoppers accounting for a third of the annual global luxury spend of $260 billion.

In China, Kering said its strategy is to tap on the network it’s already built in top-tier cities such as Shanghai and Beijing, while opening new stores in so-called tier 2 cities.

Last month, Alibaba Group Holding Ltd., China’s biggest e-commerce company, logged more than 268 billion yuan ($38.1 billion) of purchases during its Singles’ Day 24-hour sales marathon, a record for the world’s biggest shopping event.

Kering’s online presence isn’t too shabby either. Gucci has more than 38.2 million Instagram followers, more than Louis Vuitton and Chanel. It also outpaced the other two luxury companies in brand value, according to marketing consulting company Interbrand.

BofFas. :Shandong Ruyi Bonds Tumble After S&P Withdraws Rating Shandong Ruyi, wh

Shandong Ruyi Bonds Tumble After S&P Withdraws Rating
Shandong Ruyi, which owns Sandro, Maje and Claudie Pierlot, saw its bonds drop to an all-time low.

BEIJING, China — Dollar bonds of Chinese luxury clothing company Shandong Ruyi Technology Group Co. plunged to record lows on Friday after S&P Global Ratings withdrew its credit rating on the firm.

Ruyi’s dollar bond due December 19 fell 15 cents on the dollar while the note due 2022 fell 10 cents at 5:07 pm in Hong Kong, according to Bloomberg-compiled prices. Both bonds dropped to all-time lows, the data show.

S&P on Friday said it had withdrawn its CCC+ credit rating on Ruyi at the company’s request. Its rating outlook on the company was negative at the time of the withdrawal, S&P said.

“Ruyi should be able to meet its bullet debt maturities in December 2019 with the recent backing of Jining City Urban Construction Investment Co. Ltd., a state-owned enterprise,” S&P said, adding that some execution risks could be expected given the short time frame.

China’s local government-owned Jining City Urban Construction Investment Co. bought a 26 percent stake in Shandong Ruyi in October for 3.5 billion yuan ($497 million). Jining City Construction is now Shandong Ruyi’s second-biggest stakeholder, according to an October filing on the Shanghai Clearing House.

While Ruyi juggles its own debt burden, it’s also facing a negative impact from defaults in other Shandong-based companies, according to Li Yunfei, an analyst at Pacific Securities Co.

Ruyi made $4 billion worth of overseas acquisitions in three years starting from 2015, including UK trench coat maker Aquascutum and SMCP SA, the French fashion retailer whose labels include Sandro, Maje and Claudie Pierlot. It also owns Hong Kong-listed Trinity Ltd., which controls British bespoke tailor Gieves & Hawkes.

Its stated ambition was to become the LVMH of China and the company planned to inject new, trendy elements into underperforming brands and boost their e-commerce sales, Chairman Qiu Yafu said in an interview last year.

WWD : Bernard Arnault Pays First Official Visit to Tiffany, Tours Fifth Ave. Fla

Bernard Arnault Pays First Official Visit to Tiffany, Tours Fifth Ave. Flagship
WWD unofficially tagged along as Arnault was guided through Tiffany's historic store.
VIEW GALLERY — 12 PHOTOS

It was lunchtime at Tiffany for Bernard Arnault on Thursday afternoon, as the LVMH Moët Hennessy Louis Vuitton chairman and chief executive officer paid his first official visit to the flagship of his new $16.2 billion trophy.
Arnault perused the store for approximately 75 minutes amid throngs of holiday shoppers and tourists, accompanied by his sons Alexandre (ceo of Rimowa) and Frédéric (strategy and digital director of Tag Heuer), as well as LVMH group managing director Antonio Belloni; Anish Melwani, chairman and ceo of LVMH Inc., and Alessandro Bogliolo, ceo of Tiffany. WWD unofficially tagged along.
Tiffany’s Fifth Avenue flagship is due to close for a two-year renovation in early January. The Art Deco jewel opened in 1940 and represents Tiffany’s heritage as the only enduring American luxury brand, with a $4 billion-strong global reach in annual sales. Last week, Arnault succeeded in his $16.2 billion bid for the brand, representing the largest luxury deal in history.


Bernard Arnault, Alexandre Arnault and Tiffany ceo Alessandro Bogliolo.
Bogliolo led Arnault through each floor of the iconic store, trailed by a heavy security detail and palpably anxious store directors. The visit marked a busy day for Bogliolo, as Tiffany reported its quarterly earnings that morning. The New York-based jeweler’s net earnings fell 17.4 percent to $78.4 million, or 65 cents a diluted share, in the third quarter from $94.9 million, or 77 cents, a year earlier. That was 20 cents below the 85 cents analysts projected.
Sales for the three months ended Oct. 31 inched up to $1.014 billion from $1.012 billion with a 4 percent drop in comp sales. Revenues in the company’s home market, the Americas, fell 4 percent to $423 million.
Speaking to WWD the day after the deal was revealed, Arnault made no secret that he believes Tiffany needs a lot of work. “There is a lot of improvement to do — as there is in general for a number of brands — for the stores, the design of certain stores could certainly be improved,” he said.
After shaking hands, Bogliolo showed Arnault around the flagship’s ground floor and offered a primer on Tiffany’s heritage design collections — including midcentury designs by Jean Schlumberger and high jewelry pieces featuring exceptional stones. The group also touched upon artistic director Reed Krakoff’s most extensive women’s collection for Tiffany, the Paper Flowers range introduced in May 2018.
It was then up to the mezzanine floor, where a stone-faced Arnault spent a particular amount of time in the Patek Philippe salon, the Tiffany flagship’s only third-party vendor which Arnault is said to also have his eye on. The executive was overheard inquiring about the stories behind some of the half-dozen or so watches that he viewed, but additional details of the conversation could not be heard over the roar of holiday season shopping.
After stopping on two administrative levels closed to the public, the clan made its way to Tiffany’s fourth floor, home to the jeweler’s housewares, handbags and Blue Box Café. While Arnault’s presence was lost on the store’s American tourists, some European travelers caught on — with two twentysomething Germans observed giggling in disbelief at the sighting. Sales associates awkwardly grinned and paced about, telling shoppers that the man with the big entourage was the store’s new owner. “We are not so much excited as we are nervous,” said one associate.


Bernard Arnault flanked by LVMH and Tiffany executives. Misty White Sidell/WWD
Down the spiral staircase and after a quick perusal through Tiffany’s sterling-silver salon, Arnault made his way to the store’s Love and Engagement department on the second floor, where Bogliolo highlighted a portrait of Audrey Hepburn in costume as Holly Golightly in “Breakfast at Tiffany’s.”
Flagship review complete, the group made its way outside to view the brand’s new men’s pop-up next door on 57th Street. The location, which opens Friday, will transition in mid-January to become a temporary flagship once Tiffany’s Fifth Avenue location closes for renovation.
There, Arnault was greeted by Krakoff — who was observed sitting out the flagship tour to help tidy up the men’s store and make adjustments to its merchandising.
Frédéric Arnault and Alexandre Arnault.
It remains to be seen if Arnault will overhaul the jeweler’s current plans for its flagship renovation — which until now had been laid out by Krakoff. Arnault is renowned for his grand approach to flagship build-outs devised in close collaboration with architect Peter Marino.
The luxury kingpin’s decision to bring his two youngest sons along on the visit was interesting. Both in their 20s, Alexandre and Frédéric already have high-profile roles within the company: Alexandre has seen recent success in bringing new life to the German heritage luggage company Rimowa by signing collaborations and sponsorship deals with household names like Supreme and Roger Federer. Belloni, also present Thursday, helped orchestrate the Tiffany deal on Arnault’s behalf.
And Arnault’s holiday season shopping spree may not be over yet: It was reported this week that he may be in talks to purchase the Italian soccer team A.C. Milan.