After Hours Summary: MEET +18.8%, KOOL -13.1%, EXFO -7.3%, PRXL -0.8% following earnings/guidance
After Hours Gainers:
Companies trading higher in after hours in reaction to earnings: MEET +18.8%
Companies trading higher in after hours in reaction to news: VNDA +4.6% (reported positive results from the long-term maintenance REPRIEVE study of Fanapt in patients with schizophrenia), NKTR +4.3% (to replace CASY in the S&P SmallCap 600), NFLX +3.3% (co to conduct a 7-for-1 stock split), MCGC +0.9% (received a revised acquisition proposal from HC2 Holdings (HCHC)), CASY +0.6% (to replace AOL int he S&P MidCap 400)
After Hours Losers:
Companies trading lower in after hours in reaction to earnings: KOOL -13.1%, EXFO -7.3%, PRXL -0.8%
Companies trading lower in after hours in reaction to news: SYY -2.6% (confirmed that a Federal Court ruled to block co's merger with US Foods), ADHD -2.5% (announced it will present results from its Phase 2 Fragile X trial in a conference call and webcast presentation on Wednesday, June 24, at 8 AM ET), PGN -2.4% (to be replaced in the S&P SmallCap 600 by Semtech), MOFG -2.3% (announced private placement for gross proceeds of ~$8.4 mln; agreed to sell an aggregate of 300,000 newly issued shares of common stock at a purchase price of $28.00 per share to existing shareholders), PQ -1.9% (to be replaced in the S&P 600 by Unit Corp), ASTI -1.5% (received non-compliance notice from Nasdaq), BTU -1.1% (to be replaced in the S&P MidCap 400 by Cable ONE), ARO -1.1% (to be replaced in the S&P SmallCap 600 by TopBuild), ATI -1.0% (to be replaced in the S&P 500 by Columbia Pipeline Group; to replace Unit Corp in the S&P MidCap 400)
IMF's Lagarde said to have expressed to IMF board there is likelihood of possible Greek deal this week - financial press
Rocket Internet wins green light for €4.5bn fundraising
Rocket Internet, the German ecommerce incubator, won permission from shareholders to raise up to €4.5bn in debt and equity to fuel future acquisitions at its annual meeting on Tuesday.
The Berlin-based lossmaking company received approval for an option to issue a convertible bond of up to €2bn, and to increase its capital by 50 per cent. Both options must be exercised by 2020.
Rocket, which has stakes in over 100 start-ups, wants the option of raising further cash “to be prepared for very flexible and vibrant markets”, it said.
Oliver Samwer, chief executive, told investors that growth would be strong in Rocket’s target markets, which were “undeveloped”.
The Frankfurt-listed company has invested heavily in food delivery portals since its initial public offering last year, when it raised €1.4bn. It raised a further €588m by selling new shares in February.
The controlling shareholder in the group is Global Founders Fund, the investment vehicle of the brothers who founded the business, Marc, Oliver and Alexander Samwer, which has a 41 per cent stake. Other institutional shareholders hold the remaining shares.
Rocket has few small investors, but the meeting was the first opportunity for many of them to raise questions about its business model.
Malte Diesselhorst, a notary who represents small investors in Rocket, asked the board whether its model was dependent on its market valuation and ability to divest itself of businesses to other buyers, rather than its ability to generate profits.
“How do you estimate the effect of a crisis, like the one we saw in 2007 and 2008 on this business model, and the accompanying necessity of finding capital? How dependent is your business model on the development of the market?” he said.
Rocket’s management told investors that the company’s goal is to generate profits from its network over the long term.
Shares in Rocket closed up 0.2 per cent to €38.74.
Centrica chief executive prepares to unveil turnround strategy
Centrica’s new chief executive Iain Conn is preparing a shake-up of the UK-based energy group that could pare back its struggling exploration and production arm, in an effort to restore profits growth and reverse a slide in its shares.
Mr Conn, a former BP veteran who took the top job in January, is close to concluding a strategy review that is expected to outline plans for hundreds of millions of pounds in cost savings and could lead to the sale of North Sea gasfields, where returns have dwindled after the oil price collapse.
By any measure, Centrica has been at the heart of a perfect energy storm. First came a political row over gas bills, then a competition probe. In February, the company announced the first dividend cut since its creation in 1997, as it slumped to a pre-tax loss of £1.4bn for 2014 following large asset impairments prompted by the steep falls in oil and gas prices since the summer of last year.
The owner of British Gas, Britain’s biggest domestic power supplier, is caught in a cut-throat industry. Smaller, nimbler operators have been gnawing at its customer base, squeezing profit margins. Last year, the weather added to its woes — a record mild spell in the UK meant customers used less energy than Centrica expected, while extreme cold in the US compelled the company to buy additional wholesale energy at higher prices to meet extra demand.
Meanwhile, its share price has tumbled by a third since September 2013, when the then Labour leader Ed Miliband declared that he would freeze energy prices if elected, underperforming the FTSE 100 index by about 30 per cent.
Last month’s Conservative election victory offers some relief. As the Competition and Markets Authority prepares to publish the initial findings of its probe, a break-up of the UK’s “big six” energy suppliers also looks unlikely. Yet, even after discounting political risk, Centrica’s problems remain acute.
Analysts say former Centrica chief executive Sam Laidlaw’s strategy of building a substantial exploration and production business appears to have backfired. Some investors are now urging the group to shift capital away from the struggling E&P arm and focus instead on its energy supply operations in Britain and the US.
Between 2007 and 2014, according to analysts at Jefferies, Centrica spent £9bn acquiring and investing in oil and gas assets, mainly in regions with high production costs — the North Sea and Alberta in Canada.
Centrica CEO Iain Conn
Intended as a “hedge” for the supply business, smoothing the impact of market price swings on its bigger downstream arm, these exploration and production assets were for the most part bought when oil prices were substantially higher than they are now. The proportion of Centrica’s capital spending on E&P then rose to a peak of 89 per cent in 2012, only for the recent slide in oil and gas prices to send the company’s adjusted operating profit 35 per cent lower in 2014 compared with 2013.
Peter Atherton, analyst at Jefferies, says the fall in upstream profitability, coupled with a failure of the supply business to compensate amid fierce UK competition from independent operators, suggests that Centrica’s strategy has failed.
Mr Conn has responded with a sweeping review, the conclusions of which will be unveiled with Centrica’s interim results on July 30.
His immediate priority is to maintain Centrica’s investment grade credit rating. The 30 per cent cut in the dividend was the first step, alongside a 40 per cent reduction in capital expenditure in 2015-16, much of that in the North Sea.
Analysts believe these measures should, with take-up of a scrip dividend, save about £900m a year, tackling Centrica’s shortfall in earnings and freeing up cash flow. There will also be a round of operational cost-cutting.
The bigger question is where Mr Conn will take the group. Some investors believe he should cut back Centrica’s E&P business, arguing that its meagre returns do not justify recent high levels of capital spending. The E&P arm, argues one top 20 investor, has become a burden: “Downstream is our preference as it offers higher returns and less capital intensity.”
Indeed, there are growing expectations that Mr Conn will recalibrate Centrica’s portfolio along these lines. Its current upstream production is 217,000 barrels of oil equivalent a day, but as capital spending falls, output will decline too.
Asset sales could follow, with analysts pointing to fields in the UK and Netherlands regions of the North Sea as disposal candidates.
Another large investor says: “Any legacy E&P assets are potentially for sale in domestic and overseas markets. But presumably when the price is right, not necessarily at rock bottom prices.”
A wholesale withdrawal from E&P is unlikely. Centrica’s Morecambe Bay field remains a solid contributor to earnings. Moreover, some of its larger North Sea assets are held in partnerships, which means that the group cannot unilaterally withdraw investment without renegotiating deals.
For revenue growth, Mr Conn is likely to look to the millions of customers of its core UK and US supply arms, using an 11,000-strong force of engineers to sell energy service deals to them.
The trick will be to strike the right balance between that desire for growth and Centrica’s cash needs. Verity Mitchell, analyst at HSBC, says Mr Conn needs to tread a careful line between some shareholders’ hunger for a more “asset-light” strategy and investing to benefit from an eventual commodities rebound. There will be “no silver bullet” to transform Centrica into something different, she warns.
Bouygues Turns Down Altice Offer For Telecom Unit
French telecom company says it was concerned by antitrust risk and jobs impact
PARIS— Bouygues SA Tuesday turned down an offer from Altice SA to purchase its telecom unit, delivering a blow to billionaire investor Patrick Drahi’s efforts to ease competition in the French market.
Bouygues said its board of directors unanimously decided not to pursue Altice’s proposal that, according to sources familiar with the matter, offered to pay around EUR10 billion for the rival telecom operator.
Bouygues said it believed Bouygues Telecom as a stand-alone could significantly boost profit margins in the years to come. The company also said it was concerned whether regulators would sign off on the proposed tie-up as well as its impact on jobs.
Altice has aimed to merge its French unit Numericable-SFR with Bouygues telecom for months, a deal that would have thrust it into the no. 1 position on the French market. A tie-up would have also generated massive cost savings.
Bouygues’s refusal comes amid intense political pressure from the French government. Economy Minister Emmanuel Macron in particular lashed out at Mr. Drahi this week, warning that the merger would lead to job losses.
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Altice and the French government weren’t immediately available to comment.
BN 06/23 20:56 *U.S. WARNED FOOD DISTRIBUTOR DEAL WOULD RAISE CONSUMER COSTS
BN 06/23 20:56 *SYSCO-US FOODS TIE-UP CHALLENGED BY ANTITRUST REGULATORS
BN 06/23 20:56 *SYSCO'S $3.5 BILLION US FOODS BID BLOCKED BY FEDERAL JUDGE
BN 06/23 20:56 *SYSCO-US FOODS TIE-UP CHALLENGED BY ANTITRUST REGULATORS
BN 06/23 20:56 *SYSCO'S $3.5 BILLION US FOODS BID BLOCKED BY FEDERAL JUDGE
*SYSCO’S $3.5 BILLION US FOODS BID BLOCKED BY FEDERAL JUDGE
2015-06-23 20:56:58.614 GMT
--LARRY DITORE
-0- Jun/23/2015 20:56 GMT
2015-06-23 20:56:58.614 GMT
--LARRY DITORE
-0- Jun/23/2015 20:56 GMT
How a 29-year-old grew a $1 billion tech fund in 7 months
Carpe diem! And in some cases carpe ETF may be a wise mantra. That is part of the story behind one rising star in the increasingly popular tech-fund universe.
The startup company behind an outfit named PureFunds is currently a one-man operation, but that hasn’t stopped the exchange-traded PureFunds ISE Cyber Security ETF HACK, from racking up $1.04 billion in investor money after launching a mere seven months ago.
Personal and corporate data is under siege, as evidenced by a fusillade of recent, high-profile data breaches. Those include a huge hack attack on Sony Pictures and a separate data breach that affected 4 million government employees. Even the Houston Astros baseball team has allegedly been among recent hacking victims.
The PureFunds ETF, which holds publicly traded companies selling security software and hardware, has benefited from all the hacking.
And the guy running the show? A 29-year-old wunderkind, who has shaken off early stumbles to success:
“Now, looking back, it seems obvious,” PureFunds CEO Andrew Chanin told MarketWatch, in an interview. “Smaller shops were maybe considering [focusing on cybersecurity], but a lot of times the bigger guys are looking for those much broader types of industries.”
Indeed, Chanin’s trajectory may offer a case study in trial and error. Before the success of the cybersecurity fund, his earlier ETF products didn’t fare nearly as well.
How the cybersecurity ETF was created
Chanin said he co-founded PureFunds after industry colleagues said: “Why do you keep giving us ETF ideas? You should try launching them on your own.” Those comments came as he worked at the Kellogg Group, an ETF specialist, right after graduating from Tulane University.
But the PureFunds’ first ETFs struggled. The PureFunds ISE Diamond/Gemstone ETF and PureFund ISE Mining Service ETF both closed down in early 2014. The PureFunds ISE Junior Silver ETF SILJ, which launched in 2012, is still up and running, but it has a comparatively meager $5 million in assets.
Chanin said the International Securities Exchange suggested launching a cybersecurity ETF after the two companies developed a good relationship while putting out PureFunds’ prior ETFs. ISE developed the index that the cybersecurity ETF tracks, but as an index provider and exchange, it wasn’t looking to run an actual fund.
Chanin said he was able to make PureFunds profitable in large part thanks to support from ISE, other business partners and industry colleagues, as well as from his parents, girlfriend and other family and friends. “Their support is absolutely what kept me—and my dreams of turning PureFunds into a profitable company—alive,” he said.
“It’s extremely unique that you see those narrow funds get that kind of traction,” said David Nadig, director of ETFs at financial-data provider FactSet.
He said other ETFs that have attracted investor money quickly include the iShares Exponential Technology ETF XT, and the SPDR DoubleLine Total Return Tactical ETF TOTL, but the first benefited from being a bespoke fund for well-known financial adviser Ric Edelman, while the latter comes from one of the investing world’s “superstar managers,” Jeffrey Gundlach.
Given its $1 billion in assets and expense ratio of 0.75%, the cybersecurity ETF generates revenue of $7.5 million. Chanin said the “majority” of that revenue goes to pay a wide range of partners and service providers, including index provider ISE. Still, with the recent success, he has been able to move his office to Manhattan from New Jersey, where he was raised.
But other ETF providers are threatening to grab a piece of the action, with First Trust and Direxion recently filing for cybersecurity-related ETFs.
Although launching the first cybersecurity ETF looks smart at this point, other ETF providers had reasons to hold back.
Concerns about the cybersecurity ETF
The PureFunds ETF isn’t as targeted a play on cybersecurity as many investors may think, said FactSet’s Nadig. He notes the fund holds some big tech companies that aren’t 100% focused on cybersecurity, such as Cisco CSCO, and Juniper JNPR. It holds 31 tech stocks overall, according to ETF.com data.
The fund also sports a sky-high valuation, with a price-to-earnings ratio above 660, according to an ETF.com calculation that takes into account the components that are losing money. In addition, niche ETFs are by nature on the risky side. “You’re talking about a portfolio of 30-odd stocks with a lot of microcap exposure,” Nadig told MarketWatch.
Chanin counters that the ETF offers a diversified way to invest in a volatile, growing industry, as it helps people avoid having to bet on a single company. He also notes that cybersecurity spending can be on a different cycle than outlays for other areas. Even in a less profitable year, a customer can’t necessarily cut back on cybersecurity investments, he noted.
Meanwhile, Nadig also cautions that it is possible that an investor with a large stake in the cybersecurity ETF could find it difficult to exit. “Right now it is the hotness and everybody’s piling in, but the volume on something like that could dry up tomorrow,” he said.
American Apparel exposes Dov Charney’s sordid secrets
American Apparel is baring its dirty legal laundry against its ousted chief executive, Dov Charney.
In a court filing answering Charney’s defamation suit against the company and its chairwoman, Colleen Brown, the company disclosed the sordid details of a six-month independent probe that resulted in Charney’s firing last year — an investigation that Charney claims was not independent and for which he sued the company.
The latest legal salvo — known as an Anti-SLAPP (Strategic Lawsuits Against Public Participation) motion, which addresses First Amendment rights — says Brown did nothing wrong in telling the retailer’s employees in an April 24 letter that Charney had been fired “for cause” and “was not suitable to return to the company as CEO, an executive or an employee.”
Charney sued Brown and the retailer in May, alleging defamation.
According to the filing, American Apparel recovered “voluminous evidence” from Charney’s company computers and devices showing that he had sexual liaisons with employees and models, exchanged “pornographic explicit e-mails, text messages” and took “videos and photographs” of these encounters using company property. The Anti-SLAPP motion asks the court to dismiss Charney’s defamation complaint.
“The company has knowledge that much of this information and allegations are completely false,” said Charney’s lawyer, Keith Fink.
Closing Market Summary: Stocks End Little Changed as Focus Remains on Greece
The major averages ended the Tuesday session on a modestly higher note after spending the bulk of the day near their flat lines. The S&P 500 added 0.1% after trading inside an eight-point range.
Equity indices held modest gains at the start amid continued optimism that Greece will be able to come to terms with its creditors. On that note, the Eurogroup will hold its third meeting in six days tomorrow evening. In addition, better than expected Manufacturing (52.5; consensus 52.2) and Services PMI (54.4; consensus 53.6) readings for the eurozone contributed to the upbeat sentiment overseas.
Once the U.S. session got underway, the S&P 500 held a four-point gain, but surrendered that advance just one hour into the session as heavily-weighted sectors like technology (unch), industrials (-0.2%), and consumer staples (-0.5%) weighed.
The top-weighted technology sector was able to erase the majority of its loss before the final hour, but chipmakers struggled into the afternoon. The PHLX Semiconductor Index lost 0.6% with all but six components ending in the red. On the upside, SunEdison (SUNE 32.13, +0.93) bucked the trend, spiking 3.0%.
Elsewhere, the consumer discretionary sector was underpinned by retailers and homebuilders. The SPDR S&P Retail ETF (XRT 101.69, +0.92) climbed 0.9% while iShares Dow Jones US Home Construction ETF (ITB 27.70, +0.05) added 0.2% following a better than expected New Home Sales report for May.
Also of note, the energy sector (+0.3%) struggled early, but finished among the leaders as crude oil held a solid gain throughout the day, ending the pit session higher by 1.7% at $61.02/bbl.
Similar to cyclical sectors, the four defensively-oriented groups ended the day in mixed fashion. Consumer staples (-0.5%) and utilities (-1.4%) struggled while health care (+0.2%) and telecom services (+1.3%) displayed relative strength. The health care sector eked out a slim gain even as biotechnology struggled with iShares Nasdaq Biotechnology ETF (IBB 383.25, +0.08) ending flat.
Moving on, Treasuries were little changed during afternoon action, but retreated this morning after Federal Reserve Governor Jerome Powell said that two rate hikes could take place before the end of the year if the economy doesn't suffer an unexpected slump. The 10-yr note revisited its flat line during the afternoon, but ultimately slipped into the middle of its range to send the benchmark yield higher by three basis points to 2.40%.
On a related note, the Dollar Index (95.40, +1.07) spiked 1.1% with the greenback jumping 1.6% against the euro (1.1170).
Today's participation was below average with fewer than 700 million shares changing hands at the NYSE floor.
Economic data included Durable Orders, FHFA Housing Price Index, and New Home Sales:Tomorrow, the weekly MBA Mortgage Index will be released at 7:00 ET while the third estimate of Q1 GDP will be reported at 8:30 ET (consensus -0.2%).
- Durable goods orders declined 1.8% in May after declining a downwardly revised 1.5% (from -1.0%) in April while the consensus expected a decline of 0.5%
- As expected, the entire decline can be traced to another big pullback in aircraft orders as Boeing (BA 144.43, -1.27) reported a big drop in sales in May, which translated into a 28.9% decline in defense and nondefense aircraft orders
- Motor vehicle orders were flat after increasing 0.4% in April
- Excluding transportation, durable goods orders increased 0.5% in May after a 0.3% decline in April (revised from -0.2%) while the consensus expected an increase of 0.6%
- The FHFA Housing Price Index for April rose 0.3%, which followed an unrevised increase of 0.3% in March
- New home sales hit their highest level since February 2008, increasing 2.2% in May to 546,000 from an upwardly revised 534,000 (from 517,000) in April while the consensus expected a reading of 525,000
- Regionally, there was a big disparity in demand trends with nearly the entire increase coming from an 87.5% spike in sales in the Northeast. Sales in the Midwest (-5.7%) and South (-4.3%) declined on a month-to-month basis. Sales in the West increased 13.1% to 138,000, but remain below January levels
- Nasdaq Composite +9.0% YTD
- Russell 2000 +7.5% YTD
- S&P 500 +3.1% YTD
- Dow Jones Industrial Average +1.8% YTD
China Shanghai new home sales -1.1% w/w at 246.7K sqm; avg new home prices +4.7% w/w at CNY35.5K/sqm (record high) - Uwin
- Deovolente researcher: "Inadequate supply of new houses over the past few weeks, unfavorable weather conditions as well as the recent plunge of the countrys stock market all damped home seekers momentum, with weekly transactions hovering around 250,000 square meters for the third consecutive week... However, the luxury segment continued to outperform the mass market which led to another weekly price record."