Gapping down
In reaction to disappointing earnings/guidance:
- DBD -26%, DIN -12%, EMES -11.2%, ENPH -10.9%, CAKE -9.2%, FTR -9%, HBI -8.8%, BGFV -8.5%, ZAGG -7.7%, BIDU -7.6%, MB -7.2%, NVMI -6.8%, CRTO -6.2% (light volume), AKAM -6.1%, CHK -6.1%, NLNK -5.6% (also downgraded to Hold at Stifel), FUN -4.7%, DVN -3.6%, WLL -3.5%, RIO -3.4%, BG -3.2%, WGP -2.8% (light volume), QSR -2.6%, QLYS -2.4%, LFUS -1.8%, QUOT -1.7%, NBR -1.3%
M&A news:
- SYNA -10.6% (confirms terminated acquisition discussions with Dialog Semiconductor [DLGNF], sees Q4 EPS at high-end of guidance)
- DOCU -0.7% (DocuSign to acquire SpringCM for approx. $220 mln in cash)
A few China ADRs are indicated lower amid additional tariff threats (etf FXI -2%):
- CEA -1.6%, VIPS -1.6%
Other news:
- AGNC -2.6% (prices public offering of 38 mln shares of common stock for total expected gross proceeds of $718.2 mln)
- VNOM -2.5% (Viper Energy Partners prices public offering of 9 mln common units representing limited partner interests at a public offering price of $31.25 per unit, increases quarterly dividend and reports Q2 update)
- BHP -2.5% / FCX -2% (following RIO results)
- UHS -1.7% (acquires The Danshell Group through its subsidiary, Cygnet Health Care; downgraded to Market Perform from Outperform at BMO Capital Markets)
- BXMT -1.6% (prices underwritten public offering of 6 mln shares of its class A common stock for gross proceeds of approximately $195.6 mln)
Analyst comments:
- TORC -5.8% (downgraded to In-line at Evercore ISI)
- GOOS -3.2% (downgraded to Neutral from Outperform at Robert W. Baird)
- INWK -2.9% (downgraded to Hold from Buy at Craig Hallum)
- INCY -1.6% (downgraded to Mkt Perform from Mkt Outperform at JMP Securities)
- SHOP -0.9% (downgraded to Neutral from Overweight at Piper Jaffray following earnings)
Gapping up
In reaction to strong earnings/guidance:
- MOH +18.6%, TCS +14.6%, P +14.5% (also upgraded to Outperform from Sector Perform at RBC Capital Mkts), SODA +14.5%, GLUU +10.5%, CAI +10%, SEND +9.7%, QGEN +8.8% (also announced that its careHPV Test, one of the only molecular diagnostics for high-risk human papillomavirus designed to screen women in low-resource settings, has been added to the World Health Organization list of prequalified in vitro diagnostics), PAYC +8.2%, ZEN +7.6%, HURN +6.6%, NBIX +6.5%, WIRE +6.3%, MTSI +5.6%, NANO +4.2%, AAPL +4.1%, ICL +4%, OLN +3.4%, GNRC +3.3%, BAND +3.1%, SSYS +3% (light volume), GRMN +2.9% (light volume), COHR +2.4%, MT +2.4%, CACC +2.2% (light volume), VRSK +2.2%, ENLK +2.1% (light volume), SKT +2.1% (light volume), AMC +2.1%, AMRN +2%, STAG +1.9% (light volume), GNW +1.7%, HUM +1.5%, PBI +1.4%, LADR +1.3%, ZIXI +1.1% (also plans to sell France based IT value added reseller business to Bechtle AG for an enterprise value of $246 million), NFX +1% (light volume), MTOR +1%
Apple suppliers are trading higher:
- CRUS +2.4%, FNSR +2.4%, IIVI +2%, LITE +1.6%, SWKS +1.5%, QRVO +0.7%, AVGO +0.7%
Other news:
- SRG +8.4% (has entered into a $2.0 billion term loan facility with Berkshire Hathaway Life Insurance)
- TTM +4.9% (rebounding from earnings)
- CPB +4.8% (WSJ reporting that activist Third Point has built stake)
- PII +0.7% (CEO disclosed the purchase of ~3K shares worth ~$312K and 3 Directors disclosed the purchase of ~9K shares worth ~$966K)
- TSLA +0.3% (said to be planning to invest $5 bln for Chinese factory, according to Bloomberg)
Analyst comments:
- GDS +6.2% (upgraded to Outperform from Neutral at Credit Suisse)
- FATE +4.6% (ticking higher; initiated with a Buy at Citigroup; tgt $20)
- DBX +2.7% (upgraded to Buy from Hold at Jefferies)
- PZZA +2.5% (upgraded to Buy from Hold at Jefferies)
- EA +1% (upgraded to Buy from Hold at Argus)
- FSLR +0.7% (added to Analyst Focus List at JP Morgan)
- AFL +0.5% (upgraded to Buy from Hold at Sandler O'Neill)
Sprint beats by $0.03, reports revs in-line; updates EBITDA guidance (5.43)
- Reports Q1 (Jun) earnings of $0.04 per share, $0.03 better than the Capital IQ Consensus of $0.01; revenues fell 0.4% year/year to $8.13 bln vs the $8.05 bln Capital IQ Consensus. Wireless service revenue grew sequentially for the first time in more than four years, excluding the impact of the new revenue recognition standard Postpaid ARPU grew sequentially for the first time in nearly five years. Retail phone net additions for the sixth consecutive quarter. Postpaid phone net additions of 87,000 were the 12th consecutive quarter of postpaid phone net additions.
- The company is increasing adjusted EBITDA expectations on a reported basis to a range of $12.0 billion to $12.5 billion, as impacts of the new revenue recognition standard were higher than preliminary estimates. The previous expectation was $11.6 billion to $12.1 billion. Excluding the impact of the new revenue recognition standard, the company continues to expect adjusted EBITDA to be $11.3 billion to $11.8 billion. The company continues to expect cash capital expenditures excluding leased devices to be $5 billion to $6 billion.
- Merging with T-Mobile (TMUS)
Activist investor Third Point LLC has built a stake of more than $300 million in Campbell Soup Co. CPB -0.10% , according to a person familiar with the matter, adding to pressure on the soup maker as it seeks to turn around its business and reverse a sharp stock-price decline.
While it isn’t clear exactly how big the stake is, it amounts to more than 2.5% of Campbell’s stock. Third Point had filed for antitrust clearance, people familiar with the matter said, which is necessary if the firm wants to increase its stake and get involved with business decisions at Campbell. A 30-day waiting period ended earlier this week without the government objecting.
Third Point founder Daniel Loeb, who like other activists frequently pushes companies he invests in to sell all or part of themselves, has spoken with Campbell’s interim Chief Executive Keith McLoughlin about possible courses of action, the people said. It isn’t clear what Third Point’s plans for the stake are or whether it plans to go public with them.
Campbell said in a statement that it maintains an open dialogue with its shareholders.
The company expects to discuss the results of a strategic review of its businesses it is conducting in late August, around the time it is slated to report quarterly earnings.
The strategic review is being led by consultants at Deloitte LLP with help from deal-advisory firm Centerview Partners, one of the people said.
Campbell is at a pivotal moment in its 150-year history as its namesake canned soups and other heavily processed foods have fallen out of favor with consumers, and attempts to pivot to fresher offerings such as Bolthouse Farms juices have stumbled. Former Chief Executive Denise Morrison stepped down abruptly in May after a seven-year run and the company said it would review its product portfolio, which could involve selling or spinning off brands or divisions or distributing resources differently. Company officials have said all options are on the table, stoking speculation of a full sale to a rival or private-equity group.
Should it decide to sell itself, analysts and bankers have pointed to Kraft Heinz Co. as one potential suitor.
Crucial to the outcome of the strategic review is a group of insider shareholders, including the Campbell Trust and three descendants of the company’s founder who are also board members. Together this group owns about 42% of Campbell’s shares, according to FactSet. The three family members— Mary Alice Dorrance Malone, Bennett Dorrance and Archbold D. van Beuren —support the board-led strategic review and haven’t ruled out any option, including an outright sale, one of the people said. While Mr. Loeb reached out to family members, he has been speaking to management, this person said.
Shares of Campbell, which has a market value of around $12.3 billion, have slumped 23% over the past year. Growth in its core soup business fell in all but one of the past seven years and in the most recent quarter the company booked a sizable markdown of its fresh-foods business.
Third Point, which has about $18 billion of assets under management, often invests in what it considers undervalued companies on the verge of change. Campbell isn’t the first consumer company it has targeted. The hedge fund has criticized what it calls a “muddled strategic approach” at Nestlé SA and has been pressuring the food company to sell underperforming and unrelated businesses including a stake in L’Oréal SA . It is also known for waging successful campaigns at Yahoo Inc. and Sotheby’s.
Early premarket gappers
- Gapping up: MOH +18.6%, P +17.1%, TCS +11.6%, GLUU +10.5%, CAI +10%, SEND +9.7%, QGEN +9.5%, PAYC +8.8%, SRG +8.4%, ZEN +7.6%, NBIX +6.5%, WIRE +6.3%, MTSI +5.6%, NANO +4.2%, MDR +3.8%, CPB +3.5%, AAPL +3.4%, BAND +3.1%, IQ +3.1%, LITE +3%, COHR +2.5%, CRUS +2.4%, FNSR +2.4%, HBI +2.4%, GNRC +2.3%, VRSK +2.2%, IIVI +2%, MT +2%, AMRN +2%, GNW +1.7%, SWKS +1.3%
- Gapping down: BGFV -14.7%, SYNA -13.4%, ENPH -10.9%, FTR -9%, CAKE -8.5%, ZAGG -7.7%, MB -7.2%, TORC -5.8%, AKAM -5.7%, RIO -3.7%, WLL -3.5%, DVN -3.1%, AGNC -2.9%, QLYS -2.4%, VNOM -2.3% BXMT -1.9%, UHS -1.7%, QUOT -1.7%, RACE -1.6%, NBR -1.3%, ACER -1.1%
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Family May Be Warming Up to Campbell Sale
As an activist investor takes a stake in Campbell Soup Co., a sale to someone like Kraft Heinz is looking increasingly likely
The pressure is building on Campbell Soup Co. An outright sale of the company may be difficult to resist.
Activist investor Daniel Loeb’s Third Point has taken a stake of more than $300 million, around 2.5% of the company, The Wall Street Journal reported Tuesday. The fund hasn’t commented on its motivation but it will likely push for a sale, perhaps to a well-known industry consolidator like Kraft Heinz. For all shareholders, this looks like the best way out of a tough situation.
Campbell’s chief executive stepped down in May following a troubled tenure. The company’s forays into fresh foods through pricey acquisitions fared poorly, as have its famous soups. The acquisition of Snyder’s-Lance at the end of last year left Campbell heavily indebted and needing to cut costs. Shares were down by nearly a third in 2018 before rebounding sharply in recent weeks on rumors of a possible sale.
Campbell’s interim chief executive and its board are conducting a comprehensive strategic review and have promised to report back on their findings by the end of August. The company also will report earnings during the month.
It is difficult to see what strategic alternatives would appeal to shareholders more than selling the company. Campbell could sell off the fresh food brands it has acquired, including smoothie and carrot maker Bolthouse Farms, but they are unlikely to fetch a great price. The company has already written down the value of these business by over $1 billion since acquiring them.
Fresh investment also is needed to revitalize Campbell’s core soup line, but resources to achieve this are scarce. With the company’s net debt standing at 4.8 times earnings before interest, taxes, depreciation and amortization, cost cutting is the current priority. The easiest way to do that is through a merger that eliminates overhead and finds synergies. An outside party could also bring money and fresh thinking.
The Dorrance family, who own 41% of the company and are descended from the inventor of Campbell’s condensed soup formula, historically hasn’t been supportive of deals for the entire company. But at the end of the day Campbell’s board has a fiduciary duty to all shareholders, not just those with an emotional attachment to the brand. An outright sale grows ever more likely.
Former High-Speed Trading Executives Allege ‘Tyrannical Coup’ at Quantlab
A leadership fight has broken out over one of the world’s most secretive and profitable high-frequency trading firms, pitting a beret-wearing mathematician against a former business partner and a Ukrainian physicist
A leadership fight has broken out over one of the world’s most secretive and profitable high-frequency trading firms, pitting a beret-wearing mathematician against a former business partner and a Ukrainian physicist.
The dispute in recent weeks has spilled into lawsuits that, for the first time, shed light on the inner workings of Quantlab Financial LLC, a Houston-based high-frequency-trading firm. A website for co-founder Wilbur “Ed” Bosarge Jr. says the firm accounts for between 3% and 10% of total daily volume on the venues where it trades.
The colorful personalities that have run Quantlab for two decades are now sparring over control of it. Quantlab trades on dozens of exchanges and has earned more than a billion dollars of profits over the last two decades. The founders of the firm began to clash in early 2016, according to the court records, and a person familiar with the company.
Co-founder Bruce Eames, 63, and Ukrainian physicist-turned-quant Andrey Omeltchenko say in filings they began to disagree with Mr. Bosarge after discussions to sell a controlling interest in Quantlab’s parent company, Quantlab Group LP, to an undisclosed buyer valued it at between $1.6 billion and $1.8 billion. The deal later fell apart.
Mr. Bosarge, 78, believed the firm could fetch a valuation of more than $3 billion, according to their complaint, which says he took control of the company in a “tyrannical coup.” The men are asking a Texas district court judge to give them control of the company’s operations.
Mr. Bosarge said in a statement that he returned to the company in mid-2016 as CEO following an absence after Mr. Eames asked him to because Mr. Eames “felt unable to continue in that role.”
“It is unfortunate that Bruce and Andrey—who collectively control less than 28% of the ownership—are attempting to interfere with the successful current management of the company,” Mr. Borsarge said. “On a personal level, after our many years of friendship, I am saddened and disappointed that Bruce and Andrey have resorted to false, misleading and defamatory statements.”
Messrs. Eames and Omeltchenko and their lawyers declined to comment.
Companies connected to Mr. Bosarge and his family control own more than 70% of Quantlab Group. For years, he has taken a back seat there to focus on his other businesses, including medical-research company Black Beret Life Sciences LLC, a sugar substitute called Sola and a 72-acre private island resort in the Caribbean. During the sale discussions, he began to play a day-to-day role in the firm.
“Instead of recognizing that a $3 billion valuation for Quantlab Group was not a realistic possibility, Dr. Bosarge blamed Mr. Eames,” according to the complaint from Messrs. Eames and Omeltchenko.
Under Mr. Bosarge’s control, Quantlab “barely broke even,” making 2017 the “worst year in Quantlab Group’s history,” according to the complaint from Messrs. Eames and Omeltchenko. This year is on track for similar results, it says.
The person familiar with the company said that many high-frequency trading firms struggled in 2017, but noted Quantlab was in good enough shape to acquire assets from rival firm Teza Technologics LLC in Chicago that year.
“As a result of a series of changes the current management team has made over the past two years, the company is stronger today,” Mr. Bosarge said in a statement.
In recent years, Quantlab has earned more than $200 million annually in net profits and averaged since founding “in excess of hundreds of millions per year,” the complaint from Messrs. Eames and Omeltchenko says.
In November 2017, Messrs. Eames and Omeltchenko sought to replace Mr. Bosarge as the general partner of the company through an action in the Court of Chancery in Delaware. A judge in early May ruled against the move, saying they misread internal agreements before moving “under the cover of night to try and overthrow a majority owner.”
In a separate federal suit filed by Quantlab against a lawyer allegedly consulting with Messrs. Eames and Omeltchenko, the firm described the effort as an attempt to “steal control” of the company through a “surprise coup d’état.” The lawyer, Allen Dempster of Walnut Creek, Calif.-based Dempster & Dietler LP, declined to comment.
In June, after the judge in Delaware ruled against their move, Messrs. Eames and Omeltchenko filed a suit in the district court of Harris County, Texas, against Quantlab Group and the companies through which Mr. Bosarge and his family own most of it, asking a judge to give them control of the firm.
“Now without the key management and research scientist who made Quantlab Group into a billion dollar company, Quantlab Group’s future is at risk,” the complaint from the men says. “What remains is valuable, but increasingly ineffective, intellectual property”.
The most successful high-frequency trading firms were founded by an eclectic lot. Virtu Financial Inc.’s founder, Vincent Viola, is a former infantry officer turned gasoline pit trader who became chairman of the New York Mercantile Exchange. Mark Gorton, of Tower Research Capital, was founder of the company that distributed the peer-to-peer file-sharing program LimeWire that was shut down over copyright infringement.
Mr. Bosarge, who previously worked as a mathematician at IBM, first tried to break into the fledgling field of quantitative investing with the formation of The Frontier Cos. in 1986. Quantlab’s lawsuit against the lawyer allegedly working with Messrs. Eames and Omeltchenko says Mr. Bosarge in the 1980s and 1990s “developed mathematical models that could predict the behavior of financial markets”.
In 1997, Mr. Bosarge began working with Mr. Eames, a former Boston Consulting Group associate and entrepreneur at the first iteration of Quantlab. One of their first hires was Mr. Omeltchenko, who held master’s degrees in physics and computer science from Moscow Institute of Physics and Technology. His hiring “changed everything for the company,” according to the lawsuit by Messrs. Eames and Omeltchenko.