Gapping up
In reaction to strong earnings/guidance: LEN +3.2%, EHIC +2%, MKC +1.3%
M&A news: ADMP +25.2% (to acquire privately held US Compounding; expected to close in the second quarter of 2016), YHOO +0.5% (wants a deadline of April 11 for bids, according to WSJ)
Other news: KERX +19.8% (announces positive top-line results from phase 3 study of ferric citrate for the treatment of iron deficiency anemia in adults with non-dialysis dependent chronic kidney disease), CNL +13.2% (receives regulatory clearance for sale of co), OHRP +10.5% (reaches agreement on the Special Protocol Assessment with the FDA on the design of the Phase III trial for drug candidate squalamine lactate ophthalmic solution), GALE +8.5% (clinical trial with Neuvax achieves 70 qualifying disease free survival events), OREX +8% (in sympathy with other biotechs this morning), MNOV +4.7% (cont vol pre-mkt), BLRX +4.2% (announces 'positive' top-line results from BL-8040's Phase 2 clinical trial in relapsed or refractory acute myeloid leukemia), NQ +3.6% (announces proposed $101 mln investment from Chairman Dr. Vincent Wenyong Shi at $5.25/share), TTM +2.6% (still checking), NURO +2.5% (announces that Premera Blue Cross will pilot the Quell Wearable Pain Relief device within their organization), LCI +2.3% (receives FDA approvals for potassium chloride extended-release capsules & temozolomide capsules), GPRO+2.1% (in symp with peer AMBA upgrade), FL +1.7% (to join S&P 500),WYNN +1.7% (positive industry M&A chatter)
Analyst comments: AMBA +5.8% (upgraded to Overweight at Morgan Stanley)
In reaction to strong earnings/guidance: LEN +3.2%, EHIC +2%, MKC +1.3%
M&A news: ADMP +25.2% (to acquire privately held US Compounding; expected to close in the second quarter of 2016), YHOO +0.5% (wants a deadline of April 11 for bids, according to WSJ)
Other news: KERX +19.8% (announces positive top-line results from phase 3 study of ferric citrate for the treatment of iron deficiency anemia in adults with non-dialysis dependent chronic kidney disease), CNL +13.2% (receives regulatory clearance for sale of co), OHRP +10.5% (reaches agreement on the Special Protocol Assessment with the FDA on the design of the Phase III trial for drug candidate squalamine lactate ophthalmic solution), GALE +8.5% (clinical trial with Neuvax achieves 70 qualifying disease free survival events), OREX +8% (in sympathy with other biotechs this morning), MNOV +4.7% (cont vol pre-mkt), BLRX +4.2% (announces 'positive' top-line results from BL-8040's Phase 2 clinical trial in relapsed or refractory acute myeloid leukemia), NQ +3.6% (announces proposed $101 mln investment from Chairman Dr. Vincent Wenyong Shi at $5.25/share), TTM +2.6% (still checking), NURO +2.5% (announces that Premera Blue Cross will pilot the Quell Wearable Pain Relief device within their organization), LCI +2.3% (receives FDA approvals for potassium chloride extended-release capsules & temozolomide capsules), GPRO+2.1% (in symp with peer AMBA upgrade), FL +1.7% (to join S&P 500),WYNN +1.7% (positive industry M&A chatter)
Analyst comments: AMBA +5.8% (upgraded to Overweight at Morgan Stanley)
Gapping down
In reaction to disappointing earnings/guidance: ALXA -21.4%, (believes sufficient capital resources until the end of April 2016), CONN -13.7%, SID-8.3%, SNX -8%, ICON -2.9%, CCM -1.9%
M&A news: AFFX -0.9% (Origin withdraws $17.00 per share all-cash offer due to 'unreasonable demands and timeline')
Select metals/mining stocks trading lower: RIO -3.3%, BHP -3.3%, FCX-3%, AA -1.2%
Select oil/gas related names showing early weakness: SDRL -7.4%, RIG-6.1%, CHK -4.3%, WLL -3.5%, PBR -2.4%, RDS.A -1.2%
Other news: GEVO -29.3% (prices $3.5 million public offering of common stock at $0.35/share and warrants), TROV -18.8% (terminates the employment of CEO and CFO for cause; filed a complaint against each for breach of fiduciary duty), BPMX -18.4% (to offer and sell common stock and warrants in an underwritten public offering ), PRKR -17.2% (Parkervision announces that the US Supreme Court has declined its pettition requesting a review of the decision of the US Court of Appeals b/t the co and Qualcomm), PBYI -16.2% ( plans to submit NDA for the approval of neratinib for the treatment of extended adjuvant breast cancer in mid-2016 after meetings with FDA), TERP -15.5% (in symp with SUNE), MDVN -6.2% (Senate and House members send letter to the Department of Health and Human Services and the NIH to step in to lower the cost of a prostate cancer drug Xtandi)
Analyst comments: SWKS -2.5% (downgraded to Neutral from Buy at Citigroup), CMG -2.1% (downgraded to Underperform from Neutral at Wedbush), MU -1.7% (downgraded to Underperform at Needham), BWA-1.5% (downgraded to Neutral from Buy at Citigroup), LNKD -1.6% (downgraded to Equal Weight from Overweight), EBAY -1.5% (downgraded to Underweight at Barclays)
In reaction to disappointing earnings/guidance: ALXA -21.4%, (believes sufficient capital resources until the end of April 2016), CONN -13.7%, SID-8.3%, SNX -8%, ICON -2.9%, CCM -1.9%
M&A news: AFFX -0.9% (Origin withdraws $17.00 per share all-cash offer due to 'unreasonable demands and timeline')
Select metals/mining stocks trading lower: RIO -3.3%, BHP -3.3%, FCX-3%, AA -1.2%
Select oil/gas related names showing early weakness: SDRL -7.4%, RIG-6.1%, CHK -4.3%, WLL -3.5%, PBR -2.4%, RDS.A -1.2%
Other news: GEVO -29.3% (prices $3.5 million public offering of common stock at $0.35/share and warrants), TROV -18.8% (terminates the employment of CEO and CFO for cause; filed a complaint against each for breach of fiduciary duty), BPMX -18.4% (to offer and sell common stock and warrants in an underwritten public offering ), PRKR -17.2% (Parkervision announces that the US Supreme Court has declined its pettition requesting a review of the decision of the US Court of Appeals b/t the co and Qualcomm), PBYI -16.2% ( plans to submit NDA for the approval of neratinib for the treatment of extended adjuvant breast cancer in mid-2016 after meetings with FDA), TERP -15.5% (in symp with SUNE), MDVN -6.2% (Senate and House members send letter to the Department of Health and Human Services and the NIH to step in to lower the cost of a prostate cancer drug Xtandi)
Analyst comments: SWKS -2.5% (downgraded to Neutral from Buy at Citigroup), CMG -2.1% (downgraded to Underperform from Neutral at Wedbush), MU -1.7% (downgraded to Underperform at Needham), BWA-1.5% (downgraded to Neutral from Buy at Citigroup), LNKD -1.6% (downgraded to Equal Weight from Overweight), EBAY -1.5% (downgraded to Underweight at Barclays)
Early premarket gappers
Gapping up: KERX +31%, QTW +14.4%, CNL +13%, OREX +8.1%, NQ+6.3%, AMBA +5.6%, ALDR +2.5%, LEN +2.3%
Gapping down: TROV -41.3%, SUNE -35.7%, GEVO -28.3%, SDRL -7.4%,RIG -6.1%, PBR -4.6%, BHP -3.6%, CHK -3.6%, BBL -3.5%, RIO -3.1%, DB -1.6%, EBAY -1.4%, RDS.A -1.1%, BP -1.1%
Gapping down: TROV -41.3%, SUNE -35.7%, GEVO -28.3%, SDRL -7.4%,RIG -6.1%, PBR -4.6%, BHP -3.6%, CHK -3.6%, BBL -3.5%, RIO -3.1%, DB -1.6%, EBAY -1.4%, RDS.A -1.1%, BP -1.1%
Activists face attacks for short-termism
Prominent US lawmakers including Elizabeth Warren and Bernie Sanders are supporting a new bill that aims to curb activist hedge funds, but it seems that financial markets are already taking the wind out of activists’ sails without them.
While concern about whether activists exacerbate corporate short-termism has now reached Capitol Hill, it has been building for some time among the wider shareholder community.
Activist hedge funds have been on site at an accumulating number of corporate disasters, of which the plunging share price of Valeant Pharmaceuticals is just the latest.
By urging companies to improve their returns to shareholders, these activists are supposed to benefit the wider investor community at the same time as making fat profits for their own funds — but on both counts they have often been found wanting.
“Activism is a credibility game,” says Alper Ince, an investor in hedge funds at fund of funds group Paamco. “You have to have credibility with management and a good reputation. At the end of the day this is also a stock picking strategy, so if your batting average goes down with bad picks then it will become more difficult to convince the market of your view.”
Last week, Valeant, a company effectively built by the activist fund ValueAct, repudiated its entire corporate culture as one where “the tone at the top of the organisation and the performance-based environment . . . may have been contributing factors resulting in the company’s improper revenue recognition”.
It is not the first time that activists have been blamed for pushing companies to enhance short-term shareholder value at the expense of the long term. Between 2012 and 2014, ADT, the alarms business, bought back more than $2bn in stock, partly at the behest of activist fund Corvex; the buybacks were followed by a profit warning that the company blamed on its failure to match rivals’ investment in marketing.
Corvex got $44 per share selling back the bulk of its stake to the company before the profit warning, a share price the company has never seen since.
More recently, LPL Financial, a stockbroking business, went on a debt-funded buyback spree under pressure from Marcato Capital, which is run by Mick McGuire, a protégé of Bill Ackman, only to see its shares crash 40 per cent this year as faltering earnings prompted concerns about its debt load.
The debacles risk robbing activists of one of the things that gives them their edge: their reputation for adding shareholder value.
Activist funds lost 9 per cent, after fees, in the year to February 29, according to HFR, and have returned just 2.8 per cent a year over the past three years, a period when the broader stock market returned an annualised 10.8 per cent. The industry’s biggest stars dimmed: Daniel Loeb’s activist portfolio lost 3 per cent in 2015; Carl Icahn lost 18 per cent; and Mr Ackman suffered a 20 per cent meltdown last year that has only worsened in the opening months of this year.
The reaction has been swift. For the first time since the financial crisis, investors pulled money out of activist funds in the fourth quarter of 2015, a net $1.5bn, about 1 per cent of their total assets, and there is an expectation that this year’s first-quarter figure could be even worse.
Anthony Scaramucci, founder of the fund of hedge funds company SkyBridge Capital, reduced his company’s investments with several high-profile funds late last year when it became clear that profits were no longer rolling in, despite an apparently benign environment for activism.
“The activists over the past 24 months have had only tailwinds,” Mr Scaramucci said. “There has been tons of cash on S&P 500 balance sheets, near-zero interest rates and all the positive rules in the Dodd-Frank act that improved minority shareholder rights and allowed activists to exert more power over companies. They had these huge tailwinds and yet they did not do well.”
The so-called Brokaw Bill introduced on Capitol Hill earlier this month is designed to add some headwinds. It is named after the little Wisconsin town where locals blame the closure of a paper mill by Wausau Paper on pressure from activist fund Starboard Value.
“We cannot allow our economy to be hijacked by a small group of investors who seek only to enrich themselves at the expense of workers, taxpayers and communities,” said Tammy Baldwin, the Democratic representative who has co-authored the proposed legislation.
The bill aims to make life harder for activist hedge funds by forcing them to disclose their stakebuilding and derivatives positions more quickly — within two days of hitting a 5 per cent stake, rather than the current 10 days — and limiting their ability to work with other funds.
For the time being, the bill has received little traction beyond the core group of liberals who signed up earlier this month, but that might not matter. The skies are getting darker for activists regardless.
“This is an unforgiving industry,” says Paamco’s Mr Ince. “Making mistakes can lead to massive outflows.”
MergerMarket
Tech remains most attractive area
Activity in traditional sectors continues to mature
Domestic tech M&A increasing
Israel is poised for a record-breaking end to the first quarter with the remainder of the year also looking strong as interest in cybersecurity and from Asia continues to grow, dealmakers told Mergermarket.
Following a record 103 deals valued at USD 7.789bn in 2015, 1Q16 to date has had 18 deals valued at USD 3.437bn, making it the largest Q1 by value on record and putting it on track to surpass 4Q10 which had USD 3.7bn on 21 deals to become the fourth largest quarter by value on record, according to Mergermarket data.
Activity continues as companies look to sell, sources said. Regulatory demands, such as the Business Concentration Law (BCL), among other requirements, remain a key driver, they said. BCL requires companies over a certain size to choose between their financial and non-financial holdings within the next few years.
A slow IPO market may also cause companies to look at alternatives, such as a stake sales, the dealmakers said.
Tech and healthcare remain the strongest sectors, while activity in traditional sectors continues to mature, Roy David, Managing Director of Ridgeback Capital Partners, said. He pointed to consumer, retail, and financial services, specifically insurance and banking, as examples of active M&A sectors.
A government panel set up to increase competition in the banking industry will likely force Israel's largest banks - Bank Leumi [TLV:LUMI] and Bank HaPoalim [TLV:POLI] - to sell their credit card divisions, Leumicard and Isracard, respectively, in the next few years, as reported. The two companies - the largest credit card companies in Israel - are expected to attract foreign private equity and financial institutions, David said. The companies could be sold for NIS 2bn to NIS 3.5bn (USD 514m-USD 900m), as reported.
Large companies in other sectors that have unique products or technology are also attracting the interest of foreign buyers, Itay Makov, Head of Investment Banking at Citi Israel, said.
The largest cross-border deal in 2016 could end up being the sale of Keter Plastics, a local investment banker said. It has attracted PE bidders including TPG, Apollo, Carlyle, Apax, Onex, Bain, and KKR, and could be sold for between USD 1.5bn-USD 2bn, as reported.
Two of the largest cross-border deals so far this year have been the sale of a 36.3% stake in Israeli food company Osem [TLV:OSEM] to Nestle [VTX:NESN] for USD 836.7m and China-based NanJing Xinjiekou Department Store Co's acquisition of home healthcare provider Natali Seculife for USD 294.49m, according to Mergermarket data.
Overall, the majority of deals lie between USD 75m to USD 150m, Rick Mann, Partner at Israeli law firm GKH, said.
Technology
Fintech, internet, and especially cybersecurity are among the most attractive areas in tech, the dealmakers said.
Cybersecurity M&A is being driven by increasing consolidation of public and large private companies trying to offer a full solution and to grow margins, an investor said. Most deals in Israel are early stage companies without sales, Mann said.
Potential buyers in the space include major security vendors such as Microsoft [NASDAQ: MSFT], CA [NASDAQ: CA], IBM [NYSE: IBM], and Google [NASDAQ: GOOG], the investor said. Israeli security vendors such as Check Point [NASDAQ: CHKP], Imperva [NYSE: IMPV], and CyberArk [NASDAQ: CYBR], and PE firms, such as Insight Ventures, have also been active, Dan Yachin, a research director at IDC, said.
Other trends driving cybersecurity M&A include cloud security and mobile/BYOD security, Yachin said. Included in cloud security are cloud security gateways, cloud identify and access management, cloud encryption and other solutions that enable to protect and maintain control over users, data and workloads in cloud environments, he added.
There is also a growing need for IoT security, which will drive security M&A activity, he said.
Other established Israeli security vendors include Varonis [NASDAQ:VRNS] and Forescout, he said. Notable start-ups include Cybereason, LightCyber, Skybox, Cato Networks, Skycure, Indegy, Tufin, and CyberObserver.
Local and global buyers
Foreign buyers continue to come from the US, followed by Europe, and then Asia, Makov said. Local PE funds are also very active in making acquisitions, a second investment banker said. For example, Tene Capital acquired a 51% stake in Peanuts & Cotton Marketing Limited for an estimated USD 32m in January.
Chinese companies are looking for targets, including in healthcare, that have an existing sales force and strong brand and can act as a gateway to target markets such as the US and Europe, Manor Zemer, Head of Asia Practice at Clal Finance Underwriting in Israel, said. They are also looking for large scale M&A opportunities.
Examples of Chinese companies looking in Israel include Huawei, Baidu [NASDAQ:BIDU], Alibaba [NYSE:BABA], Fosun, Ping An Insurance [SHA:601318], and SunPower Group, the second investment banker said.
Investors from Singapore are also interested in Israel, Zemer said, explaining that they are looking for military tech that used for civilian applications, including robotics, drones, and aviation.
Emerging and potential trends
"M&A last year was fueled by low interest rates and strong economics. The first two months of 2016 has seen a bit of a slow down in the markets on the back of 2015 which could drive boards and CEOs to be more cautious given market volatilities," Makov said.
An increase in domestic deals is expected to continue in tech and between local PE funds as the market matures, such as ironSource’s acquisition of SuperSonic Ads and the acquisition in 2015 of a 50% share for NIS 100m in Marina Mushrooms by Sky Fund from Kedma Capital, David said.
Activity between Japan and Israel is accelerating, Kenichi Hartman, an IP lawyer and blogger on Japanese-Israeli business activity, noted. Japanese companies see how aggressive Korea and China are in growing their economies and want to take more action. While activity with Israel is still mainly partnerships and small seed investments, one notable exception was the acquisition of Altair Semiconductor for USD 212m by Sony Corporation [NYSE:SNE] in January.
Digital Garage (DG) Incubation, SBI Group [TYO:8473], and Mitsui [TYO:8031] are among Japanese investors interested in Israel, as reported.
Starwood Hotels/Marriot: Nobody's ready to tap out yet
TAG notes the increase in the bid to $82.75 from $79.53 (both of which exclude Vistana) from Anbang does not seem out of reach for MAR, while they believe the Anbang consortium could have the advantage in terms of leverage tolerance. While MAR shares moved positively on the Anbang bid, they hesitate to become too bullish on MAR ahead of a potential counter offer from the co. They consider the possibility realistic that MAR could bid higher as the strategic rationale for the deal is generally sound, although it becomes increasingly difficult to own the stock in the near term should it choose that course. The read-across remains increasingly positive for HLT and H, which are owners of assets and are trading at 10.3X and 8.7X 2016E EV/EBITDA, respectively, which is considerably lower than the levels of HOT's prospective deal. In particular, they believe HLT shares should benefit more from the lift in hotel valuations given that it is in the process of establishing a REIT for its asset ownership in 2016.
Affirms FY16 EPS $8.10-8.45 v $8.25e, Organic local currency sales +1-3%; offer new five-year long-term guidance targets - analyst day
- Affirms FY16 free cash flow conversion 95-105%
- Guides five-year 2016-2020 financial objectives: EPS +8-11%, organic local currency sales +2-5%, ROIC +20%, 100% free cash flow conversion
- CEO: Going forward, we remain focused on controlling the controllable, investing for the long term, and leveraging our scientific capabilities to create even greater value for our customers and shareholders.
Drunk passenger charged £102 for £15 journey after Uber driver takes 20-mile detour around London
{http://www.telegraph.co.uk/technology/2016/03/29/uber-driver-charges-drunk-passenger-102-for-15-journey/}
aniel Kaizen fell asleep during the minicab ride home and almost 'spat out his tea' when he awoke to see the route his driver took.
An Uber driver charged a drunk passenger £102.17 for a journey, after taking him on a 20-mile detour around London while he slept.
Daniel Kaizen ordered a minicab from Old Street to Wood Green, north London this weekend, a five-mile trip which he said he was told would cost around £15.
But the late-night detour around the capital meant that his journey took five times longer than he expected and the bill came to over £100.
He said that Uber has since apologised and promised to refund the money.
Mr Kaizen, 26, ordered an Uber minicab in the early hours of Bank Holiday Monday morning and said that he slept most of the way back.
But instead of being driven through north London on what would have been the quickest route, he spent the night riding due east to Barking before being taken around the North Circular to his destination.
• Uber taxi seized by police investigating murder of Muslim shopkeeper Asad Shah
After waking up at his destination, he switched on his phone to give his driver a star rating and said “I nearly spat out my tea laughing at the route”.
Looking at his phone, he could see the round-about route the driver had taken as well as the car going beyond where he says he was dropped off.
He wrote on Facebook: "Well, I was drunk, but damn Uber, £105 for a £15 journey."
He added on Twitter: "Great start to my Easter Monday."
Mr Kaizen says Uber have now apologised and say they will refund the amount in the next five days.
It comes after another Uber passenger, Jonny Bee, was charged £93 for a five-minute journey after he says he was wrongly charged for a luxury car. Uber claimed the driver had forgotten to cancel the previous journey from his machine.
The highly successful app has sparked protests around the world by taxi drivers who claim that Uber's private hire car drivers are not subject to the same level of regulation as they are.
TerraForm Global anticipates that the filing of the Annual Report on Form 10-K for the fiscal year ended December 31, 2015 will be delayed beyond March 30, expects to file a Form 12b-25 on or prior to March 30, 2016; cautions of SunEdison (SUNE) bankruptcy (2.50)
- "Under the Management Services Agreement with SunEdison, Inc., our financial reporting and control processes rely significantly on SunEdison, Inc. systems and personnel. As a result, if there are control deficiencies at SunEdison, Inc., including with respect to the systems we utilize, it is necessary for us to assess whether those deficiencies could affect our financial reporting and, if so, address them to the extent necessary and appropriate prior to filing our Form 10-K. Additionally, we have not yet completed all steps and tasks necessary to finalize our financial statements and other required disclosures. We currently have identified a material weakness in internal controls over financial reporting primarily due to SunEdison, Inc.'s ineffective controls over accounting consolidation and reporting system that we rely upon. We are working to remediate these issues as promptly as practicable. To date, we have not identified any material misstatements or restatements of our audited or unaudited financial statements or disclosures for any period previously reported."
- SunEdison has not performed as obligated under the Management Services Agreement, in particular with respect to financial reporting and control matters. Additionally, SunEdison has not or may not be able to perform under other agreements, including agreements with respect to the pending contribution of the projects in Uruguay and India, which were part of TerraForm Global's IPO portfolio, and the pending dropdown of the additional India project portfolio aggregating 425 MW purchased by TerraForm Global, LLC in the fourth quarter of 2015. If SunEdison does not perform under these agreements, it could have a material adverse effect on TerraForm Global. SunEdison and its subcontractors are continuing to perform substantially under the operations and maintenance contracts for our operating projects.
- "In addition, due to SunEdison's liquidity difficulties, there is a substantial risk that SunEdison will soon seek bankruptcy protection. Such an action would have a material adverse effect on TerraForm Global given our reliance on SunEdison as discussed in the Form 10-Q and the Form S-1 and SunEdison's obligations with respect to pending transactions (discussed below). TerraForm Global does not rely substantially on SunEdison for funding or liquidity and believes that, in the event SunEdison seeks bankruptcy protection, TerraForm Global will have sufficient liquidity to support its ongoing operations. Our revolving credit facility, which we do not believe is critical to the continued business and operation of TerraForm Global, requires that the 2015 Form 10-K and audit be delivered by March 30, 2016 with a 10 business day cure period. We are in active discussions with our revolving credit lenders to obtain an extension with respect to the required delivery of our Form 10-K for the year ended December 31, 2015 and the related audit report."