After Hours Summary: SCS +7% following earnings, SINA +1% on shareholder Board nominations / evaluation of optionsAfter Hours Gainers:
Companies trading higher in after hours in reaction to earnings/guidance: SCS +6.6%
Companies trading higher in after hours in reaction to news: NBRV +6.8% (continued strength; also commences $80 mln offering of ordinary shares), REXX +5.5% (provides update for its Moraine East Area operations, remains on target to meet its Q3 production guidance and its FY17 exit rate production growth rate guidance of 15-20%), DRNA +5% (Bain Capital Life Sciences Fund discloses increased active stake), NOMD +2.8% (Elliott Associates discloses 5.7% passive stake), JONE +2.1% (Fir Tree Partners calls on Jones Energy to pursue 'value-maximizing strategic alternatives'), KTOS +1.5% (Kratos Defense and Security deploys the World's First autonomous vehicle approved and supporting live roadway operation in Colorado), ACIA +1.3% (initiated after the close with a Buy and $64 tgt at MKM Partners), SINA +1.2% (shareholder Aristeia Capital confirms has nominated two independent candidates for election to Sina's Board to immediately evaluate and help execute opportunities), HLF +0.8% (amends/extends tender offer for common shares), MGM +0.5% (Senator Investment Group increases passive stake)
After Hours Losers:
Companies trading lower in after hours in reaction to news: FOMX -11.6% (light volume -- director and advisor entered into an individual share trading plan in accordance with Rule 10b5-1), MUX -7.4% (announces bought deal of $40.5 mln -- includes 18 mln shares and warrants to buy up to 9 mln shares at $2.25 per share and associated one-half common stock warrant), SUPN -5.5% (announced outcome of the planned interim analysis from the first Phase III clinical trial on SPN-810; says lower dose of SPN-810 trial will be eliminated), BECN -4.7% (commences $300 mln common stock offering; also files for common stock shelf offering), AMC -2.7% (continued weakness following NCMI news), BEAT -1.5% (continued weakness; also Board determined that the Company hold an advisory vote to approve executive compensation annually), EFX -0.9% (pulling back in after hours trade on reports that the company had security breach earlier than disclosed), WB -0.8% (WSJ reporting that Aristeia pushing for Sina sale / WB merger), HAS -0.8% (light volume; continued weakness on potential Toys R Us bankruptcy)
Closing Market Summary: Another Day, Another Record HighThe U.S. equity market opened the week on a positive note, sending both the S&P 500 (+0.2%) and the Dow (+0.3%) to new all-time highs. The tech-heavy Nasdaq (+0.1%) touched a new intraday high on Monday, but failed to carve out a new record close following a technology sell off in the late afternoon. Small caps outperformed, pushing the Russell 2000 higher by 0.7%.
After climbing to a new record high at the start of Monday's session, the stock market began trending sideways, protecting its modest opening gain. The heavily-weighted financial sector (+1.0%) underpinned the broader market during this time and continued to exert a positive influence through the closing bell.
However, the top-weighted technology sector (unch) took control of the broader market in the afternoon following the sector's sharp drop into negative territory.
Without a catalyst, the tech sector exchanged a gain of 0.3% for a loss of 0.3% in less than an hour with mega-cap names like Apple (AAPL 158.67, -1.21), Facebook (FB 170.01, -1.63), Alphabet (GOOGL 929.75, -5.54), and Microsoft (MSFT 75.16, -0.15) leading the retreat. Likewise, the S&P 500 slipped to its lowest mark of the day, fully retracing its gain of 0.3%.
However, the tech group managed to bounce back a bit in the late afternoon to finish just a tick below its unchanged mark. Chipmakers helped keep the sector's loss in check, putting together yet another positive performance. The PHLX Semiconductor Index climbed 1.2% to settle in the green for the sixth-consecutive session.
NVIDIA (NVDA 187.55, +7.44) led the semiconductor rally--climbing 4.1% to a new all-time high--after Bank of America/Merrill Lynch raised its target price to $210 from $185 on Monday morning.
In total, six sectors finished Monday's session in the green--financials (+1.0%), industrials (+0.6%), materials (+0.6%), telecom services (+0.5%), Energy (+0.4%), and consumer staples (unch)--while five settled in the red--technology (unch), health care (-0.1%), consumer discretionary (-0.4%), real estate (-0.5%), and utilities (-1.0%).
The industrial sector benefited from the positive performances of several influential Dow components, including Boeing (BA 253.08, +4.08) and Caterpillar (CAT 123.83, +2.46), which climbed 1.6% and 2.0%, respectively. UBS upgraded CAT shares to 'Buy' from 'Neutral' on Monday morning.
As for Boeing, it rallied alongside aerospace and defense peer Northrop Grumman (NOC 275.97, +8.94), which climbed 3.4% after announcing its intent to acquire Orbital ATK (OA 132.25, +22.21) for $7.8 billion, or $134.50 per share, in cash. Including the assumption of debt, the total cost will be $9.2 billion.
In the bond market, Treasuries sold off in a curve-steepening trade. The yield on the benchmark 10-yr Treasury note climbed three basis points to 2.23% while the 2-yr yield advanced just one basis point to 1.39%. Meanwhile, the U.S. Dollar Index (91.81, +0.16) climbed 0.2%.
Reviewing Monday's economic data, which was limited to the September NAHB Housing Market Index:
- The NAHB Housing Market Index for September declined to 64 (consensus 67) from a revised reading of 67 (from 68) in August.
On Tuesday, investors will receive three economic reports--August Housing Starts (consensus 1.17 million), August Import/Export Prices, and the Current Account Balance for the second quarter (consensus -$115.1 billion). All three pieces of economic data will be released at 8:30 ET.
Also of note, the Federal Open Market Committee (FOMC) will kick off a two-day meeting on Tuesday morning. It's latest policy directive will cross the wires on Wednesday afternoon.
Versace Said Eyeing Kim Jones
Sources caution that Louis Vuitton’s men’s designer has a long-term contract.
MILAN — The intrigue deepens at the House of Versace.
According to sources here, the Italian fashion company has held discussions to bring on designer Kim Jones, currently men’s artistic director at Louis Vuitton.
No contract has been signed and the likelihood of a deal could not immediately be learned. It is understood that the biggest barrier is a contractual one: Last year, the Englishman renewed his employment agreement at Vuitton, which he joined in 2011.
Interviewed on the sidelines of the Versus show in London on Sunday, Versace chief executive officer Jonathan Akeroyd declined all comment. A Vuitton spokeswoman also declined comment, while Jones could not be reached for comment.
Versace’s overtures to Jones follow a failed effort to bring on Riccardo Tisci, who exited Givenchy earlier this year after 12 years at the French house.
Donatella Versace — who has led the design effort since the murder 20 years ago of her brother, founder Gianni Versace — is said to be on board with a plan to bring on new creative talent to assist her in the revitalization of the company.
Her minority partner The Blackstone Group, which took a 20 percent stake in the Italian house in 2014, maintains it has never set out to replace her at the company’s creative helm.
“Blackstone has always supported and will continue to support Donatella Versace as artistic director of Versace. Any other speculation is entirely false,” Andrew Dowler, managing director of Blackstone in London, told WWD in June.
Yet WWD broke the news on Jan. 19 that Versace was eyeing Tisci, who has long expressed his admiration for the work of the late Gianni Versace and cultivated a close friendship with Donatella, whom he invited to pose in a Givenchy ad campaign in 2015. Tisci’s subsequent exit from Givenchy after his men’s show in January further fueled the speculation.
Now the spotlight is trained on Jones.
A globetrotter extraordinaire with a passion for wildlife, Jones has no design experience in women’s wear or couture, but has had a storied fashion career, with John Galliano snapping up his graduate collection from Central Saint Martins.
His own men’s wear label, known for its sporty, streetwear edge, lasted for eight seasons and attracted the attention of Dunhill, where he was creative director from 2008 to 2011, when Vuitton came knocking.
Jones, who tapped Supreme for a collaboration with Vuitton earlier this year, is among leading designers — like Tisci — who can straddle the luxury and streetwear worlds, much like Gianni Versace did in his time.
Whether or not Versace shakes up its creative leadership, the Milan-based company is confident in its strategy and growth potential.
In July, the company said investments in 2016 dented profitability, while sales last year rose 3.7 percent to 668.7 million euros.
“In 2017, sales are expected to grow with a progressive increase in margins in the wake of focused actions on the industrial, commercial and logistics fronts and a rational management of operative costs,” the company said at the time, noting all product categories and channels performed well.
Last year, sales in directly operated stores totaled 418.1 million euros, up 4.4 percent compared with 2015. Wholesale sales represent almost 30 percent of revenues.
In May 2016, Versace went through a management shake-up, bringing in Akeroyd, formerly Alexander McQueen’s ceo, to lead the company.
Versace is also said to be edging toward an initial public offering, with its previous ceo saying in 2015 that the process had started, although there was no time frame set, except for the three- to five-year range first cited in 2014.
One of Goldman Sachs’ biggest critics isn’t banking on things getting better anytime soon.
Wall Street analyst Dick Bove unleashed a blistering report on Lloyd Blankfein’s bank on Monday, doubting that execs can pull off its three-year turnaround plan to fix its trading slump, raising questions about the extent of its involvement in Venezuela, and calling for “transformational change.”
Last week, Goldman’s co-Chief Operating Officer outlined a plan to raise $5 billion in revenue by increasing investment in trading and other areas where it hasn’t traditionally focused, like lending.
But Bove isn’t buying it.
“Bottom line, Goldman is attempting to use its capital to ‘muscle-in’ to highly competitive businesses dominated by companies bigger than Goldman. Usually, this does not work,” he said in the Monday report.
During the first half of the year, Goldman, normally a powerhouse of bond trading, has been playing catch-up to its rivals. Last quarter, its trading revenue fell 40 percent while competitors gained.
Bove, who’s previously blamed Blankfein for a “lost decade” of management, says that the bank’s top employees are a little too chuffed with themselves to make any real change.
“Goldman perceives itself to be a partnership composed of extremely capable individuals,” he said. “It has yet to admit that since 2006 it has one of the worst records of any of the nation’s big six banks. It appears to be blind to its clear weaknesses.”
The early days of ICOs are even more speculative than the dot-com bubble
So… let’s talk about initial coin offerings.
The buzziest buzz in certain corners of the entrepreneurial ecosystem these days, ICOs were the talk of the town at TechCrunch Disrupt SF 2017.
Comparing the ICO market to the recent dot-com bubble, Dan Morehead of Pantera Capital compared the froth in the market these days to the days of the dot-com bubble in the late 90s.
“Everyone always uses the dot-com analogue. I think it’s a good one, but in this case, back then you actually had the sock puppet and you could tell if the sock puppet could do pet food delivery online,” Morehead told moderator and TechCrunch reporter Jon Russell.
“Here it’s just a whitepaper and a few developers. It’s so far from what the IPO boom was in the 90s. It does take a lot of in-depth thinking and reading. Back then they talked about valuations based on eyeballs.”
Morehead said that it takes more thinking and reading, but in a sense, there’s even less of a methodology to determining success.
“The first project to go live would be Augur, and it’s not live yet,” Morehead said. “All the rest are just evaluating the likelihood of success.”
For Morehead, that’s a sign of the value a venture (or investment) firm like his can bring to the market.
“There’s a Cambrian explosion happening. There were 65 ICOs in one week. There is an argument that a fund like ours could do some diligence and read all the white papers and add some value,” he said.
“In 20 years that’s probably not true, it’ll be really transparent, and a fund like ours probably won’t need to exist.”
That transparency may come from a shakeout in the market. Morehead said that there are probably a single-digit number of cryptocurrencies that will be successful. On top of those currencies, however, will be any number of companies that use the tokens to build their own products and services.
In the interim, funds like Morehead’s sound more like a monastery or a library than a venture capital firm. “Five of us are reading white-papers all day and meeting developers,” he said. “There’s just so much happening right now.”
For his part, one of the chief architects of the current blockchain boom — Ethereum creator Vitalik Buterin — is much less interested in the cryptocurrencies his token has wrought.
For Buterin, the value is less in the coin offering and the value they create than in the improving the value and decreasing the transaction fees on Ethereum itself.
Morehead agrees that not all tokens are ultimately necessary. “I think there are a lot of projects where they are saying ‘Hey. It’s kind of hard to raise money in the venture world, why don’t I just do an ICO?'” he said.
“Maybe there the token isn’t ultimately necessary, and someone will just fork it and replace it with a cheaper product,” Morehead added.
Northrop Grumman: fight club
Threats are expanding. Defence spending has not
“The technological capacity of our potential adversaries continues to advance,” according to Wesley Bush, the chief executive of Northrop Grumman. The threat posed by Kim Jong Un is alarming, but it is a boon to the US military industrial complex.
On Monday, Northrop, one of America’s big defence contractors, bought specialised aviation and space contractor Orbital ATK at an enterprise value of $9.2bn, all in cash. The one-day premium to Orbital ATK’s stock price was a mediocre 22 per cent. Yet the purchase price is more than double where Orbital traded when it was formed less than three years ago.
A united Republican government in the US along with an increasingly hostile world have sent defence stocks soaring. A consequence of those turbo-charged valuations is firepower for big, pricey takeovers. There is little overlap between Northrop and Orbital.
Northrop’s strength is in fighter jets and electronics. Orbital is known for rocket launch vehicles, missile technology and satellites. Northrop says it can cut $150m out of $4bn in annual costs at Orbital. But Mr Bush conceded the deal premium has little to do with efficiencies, but rather the opportunities from upcoming contracts to upgrade the US nuclear arsenal.
Northrop shares rose about 2 per cent to hover near their all-time high. The stock is up a fifth since the US presidential election. The Trump bump has created expectations that defence spending will rise in future without pushing up near-term profits.
Earnings and free cash flow multiples are around 20 times, steep levels usually reserved for consumer staples. US bank stocks have pulled back from post-election highs as tax cuts and regulatory reform have stalled. Increased defence spending is equally log-jammed. A bet on defence stocks — or the success of a defence takeover — depends as much on heightened belligerence among Washington Republicans as it does on sabre-rattling by North Korea.
‘Boris is Boris’ says Theresa May over Brexit challenge
Prime minister rejects foreign secretary’s vision for quitting
Theresa May has rejected Boris Johnson’s vision of a hard Brexit but declined to be drawn on whether she would sack the foreign secretary, saying only: “Boris is Boris”.
Speaking to reporters on her way to Canada, Mrs May reasserted her control over Brexit and left open the possibility that payments to the EU would continue in the short term.
“This government is being run from the front,” she said.
Mrs May brushed aside Mr Johnson’s renewed assertion that Britain would reap a £350m-a-week Brexit dividend, some of which could be used to fund the NHS.
“Decisions on how money will be spent will be taken at the time,” she said.
Over the weekend Amber Rudd, home secretary, suggested Mr Johnson was acting like “a back seat driver”, after he wrote a 4,000-word article for the Daily Telegraph urging Mrs May not to pay a big Brexit bill.
Mrs May’s assertion that she was driving the government “from the front” was an attempt to regain a grip after a weekend which saw Mr Johnson sparring with Britain’s official statistician over the £350m claim.
Asked whether she would discipline or sack her foreign secretary, she said with a resigned air: “Boris is Boris”.
The prime minister claimed the cabinet was united behind the broad Brexit strategy she set out in her Lancaster House speech in January. “We are all going to the same destination,” she said.
The prime minister will on Friday use a speech in Florence to map out her plans for a no-change transition period, possibly lasting two years, during which Britain would continue to make EU contributions. Mrs May said Britain would not pay “large sums of money into the future” but did not rule out EU budget contributions in the two years after Brexit in March 2019; the UK’s net contributions are about £9bn a year.
Mr Johnson has argued for a short transition and says the UK should not pay for access to the single market; some have speculated he is paving the way to quit in the aftermath of the Florence speech. Downing Street is braced for the possibility that Mr Johnson could walk out before the Conservative conference in Manchester at the end of this month but, for now, Mrs May is trying to present a show of unity.
She said the cabinet was united behind the Lancaster House agenda, including securing “the right withdrawal agreement and the right deep and special partnership between the EU and UK in the future”.
The prime minister said that “by definition” Britain would save billions of pounds from EU contributions in the long run, but she declined to endorse Mr Johnson’s claim it would amount to £350m a week.
Mrs May will move on from Canada to New York, where she will come face to face with Mr Johnson at the same session of the UN general assembly. The two have not spoken since Mr Johnson’s intervention on Saturday.
Uber’s London licence to soar from £3,000 to £3m
Ride-hailing app hit as regulator overhauls fee it charges private hire operators
Uber’s licensing costs in London will rise from £3,000 to £3m during the next five years, as the city’s transport regulator confirmed plans to overhaul the fees it charges private hire operators.
Transport for London said on Monday that it will change the fees for operating licences based on the size of companies’ operations from this week, in order to meet the rising costs of regulation.
The move is the latest development in a long-running battle by TfL to deal with the growing number of private hire cars in the UK capital.
Helen Chapman, TfL general manager of Taxi & Private Hire, said: “There has been a huge growth in the industry in recent years and it is only fair that the licence fee reflects the costs of regulation and enforcement.”
The number of licensed private hire drivers has expanded from 65,000 in 2013-14 to more than 116,000 today, according to TfL. The regulator estimated that the costs of enforcement during the next five years will reach £30m, up from a previous estimate of £4m.
Under the new rules, the cost of a five-year operating licence will be based on the size of the operator’s fleet, with a new eight-tier structure.
Charges range from about £2,000 for a five year licence for operators with 10 vehicles or fewer, to £2.9m for the largest with more than 10,000 vehicles — namely Uber, which has 40,000 drivers in London. The US ride-hailing group is due to have its licence renewed at the end of September, when it will be subject to the new fee scale.
The £2.9m charge that will apply to Uber is higher than initial plans outlined in April. However, Addison Lee, the second-largest operator in the capital, faces a lower fee than initially thought. It is no longer included in the top tier, and faces a fee of £700,000.
Ms Chapman said: “The safety of Londoners is TfL’s top priority, and the changes to fees will help us fund additional compliance officers who do a crucial job cracking down on illegal and dangerous activity.
“We have listened to the views of stakeholders in the consultation and have amended the fees structure to give small and medium-sized operators more flexibility in how they manage the size of their fleets.”
Uber did not comment on today’s changes, but said it has previously supported the principle of larger operators paying higher fees in consultation responses.
The ride-hailing app has long been criticised for increasing road congestion and pollution with its large fleet. In July, MPs called for a cap on the number of Uber cars on London roads in a cross-party report on the future of UK taxis, backed by London black cab drivers.
Addison Lee said: “We recognise that these measures need to be paid for and are grateful that TfL has listened to our consultation response and developed an equitable framework for the charges necessary to cover the enforcement work they will undertake.”