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stock plummeted earlier this week after announcing plans to raise more capital and one analyst understands why. It was one of the reasons he downgraded the stock.
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Tag: Corporate Actions
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Exxon-Pioneer merger: Here’s why FTC’s Khan may shy from a fight with the ‘800 pound gorilla.’
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Exxon Mobil Corp.
XOM,
-1.67%
is reportedly nearing a deal to buy energy-exploration company Pioneer Natural Resources Co.
PXD,
+10.45%
for $60 billion, a combination that could shake up Texas’ storied and oil-rich Permian Basin.It’s also bound to attract attention from the Biden Administration’s antitrust enforcers, including Federal Trade Commission Chair Lina Khan, given the paramount political importance of oil and gasoline prices.
“You can be sure that the FTC will give this acquisition a serious look,” Stephen Calkins, former general counsel at the FTC told MarketWatch, adding that the agency has long paid special attention to the oil and gas industry at the behest of Congress, which has long been sensitive to anything that may increase prices at the pump.
Read more: Exxon near $60 billion deal to buy shale driller Pioneer Natural Resources
The high cost of living after several years of historic inflation is one of President Joe Biden’s most important political vulnerabilities ahead of the 2024 election. A recent poll by Investors Business Daily showed only 24% of voters approve of his economic record.
The president has campaigned on gasoline prices specifically, telling an audience in Maryland last month, “I’m going to get those gas prices down again, I promise you.”
But any decision to challenge a merger must be based on the facts of the market in question and whether it would present a threat to competition that could lead to higher prices for consumers or other adverse effects.
Frederick Lawrence, director and energy analyst at Capital Alpha Partners told MarketWatch that there is much greater competition in the market for oil exploration and production, where Pioneer is a major player, than in other segments of the industry including gasoline stations, pipeline operators or refining.
Independent oil companies produce roughly 85% of natural gas and 65% of oil in the U.S., he said, and that fact will make it difficult for the Exxon acquisition to meaningfully reduce competition in oil exploration.
“People just think about big oil and they forget that there’s a very healthy independent community out there competing,” he said. “That said, this is Exxon Mobil we’re talking about, the 800 pound gorilla of the upstream oil value chain, so it’s important to acknowledge they’ll get more scrutiny.”
See also: Why gasoline prices are set to fall even as oil marches toward $100 a barrel
Investors should be prepared for the deal to take longer to consummate than a similar acquisition in another industry, Lawrence added, pointing to a recent deal between private equity firm Quantum and natural-gas producer EQT that was slowed because of additional information requests from the FTC.
The deal was ultimately consummated in August, nearly a year after it was announced.
Former FTC official Calkins said that investors should also be prepared for the FTC to get creative as it studies the deal, noting that Biden administration antitrust enforcers “have been receptive to unusual theories of competitive harm” and will study the impact of the merger on downstream businesses, like refiners and gasoline retailers.
The agency will also scour the deal for “any part of the business where there’s an anticompetitive story,” Calkins said, noting that large complex mergers often involve the transfer of a more obscure but valuable asset that could illegally boost an acquiring company’s market power.
Meanwhile, the FTC also has to contend with an already heavy workload, with ongoing cases against well-resourced companies like Amazon.com Inc.
AMZN,
+1.59% “The FTC right now is doing a lot of litigating,” Calkins said. “There is a resources question of whether they have the ideal number of staff with the right skill set to add to their already full plate.”
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Exxon near $60 billion deal to buy shale driller Pioneer Natural Resources: report
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Exxon Mobil Corp. is close to a deal to buy shale-drilling company Pioneer Natural Resources for about $60 billion, the Wall Street Journal reported late Thursday.
Citing sources familiar with the matter, the Journal said the deal could be finalized in the coming days. The Journal had reported in April that the two companies had held preliminary talks.
The acquisition would be one of the largest in the U.S. this year, and Exxon’s biggest since it bought Mobil in 1999. The Journal noted that Exxon has been flush with cash since posting record profits last year, and is looking to become the dominant player in the oil-rich Permian Basin in western Texas and New Mexico.
Exxon has a market cap of about $446 billion, as of Thursday, while Pioneer is valued at about $50 billion.
Exxon shares
XOM,
-2.25%
have fallen about 1% year to date, while Pioneer
PXD,
-0.17%
stock is down about 6% in 2023, The S&P 500
SPX,
in comparison, is up about 11% year to date.[ad_2]
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Rivian shares sink after preliminary sales estimates, plan to offer $1.5 billion in convertible notes
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Shares of Rivian Automotive Inc. slid in the extended session Wednesday after the EV maker issued preliminary quarterly sales estimates that were on par with Wall Street’s forecasts and announced plans to offer $1.5 billion worth of convertible notes.
Rivian
RIVN,
+9.22% ,
in a filing, gave a preliminary third-quarter sales estimate of between $1.29 billion and $1.33 billion. Analysts polled by FactSet expected sales of $1.31 billion. The company estimated it had cash, cash equivalents and short-term investments of $9.1 billion as of Sept. 30.Rivian also said it plans to offer, subject to market and other conditions, $1.5 billion worth of “green” convertible senior notes due in 2030. That would be in a private offering to “qualified institutional buyers,” Rivian said.
The plan would give buyers the option to purchase up to an additional $225 million in notes. The notes will be senior, unsecured obligations of Rivian. Noteholders will have the right to convert their notes in certain circumstances and during specified periods, the company said.
Shares fell 8% after hours.
Rivian stock ended the regular trading day up 9.2%, and so far this year has gained around 28%, which compares with an advance of around 10% for the S&P 500 index
SPX,
+0.81% .[ad_2]
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SmileDirectClub’s stock plummets 85% after Chapter 11 bankruptcy filing
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SmileDirectClub Inc. shares plummeted in the extended session Friday after the company said it had voluntarily filed for Chapter 11 bankruptcy protection as founders seek to recapitalize the teeth-straightening business.
SmileDirectClub shares SDC, which had been halted while up 0.9% in after-hours trading pending news, promptly dropped as much as 85% when trading in the stock reopened.
The…
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Elizabeth Warren, Bernie Sanders urge FTC’s Khan to finalize controversial merger rules
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A group of Democrats in the House and Senate are imploring the country’s top antitrust enforcement cop to implement sweeping new changes to its merger-review protocol, according to a new letter viewed exclusively by MarketWatch.
The Federal Trade Commission, along with the Justice Department’s antitrust division, recently proposed changes to forms that companies proposing deals of a certain size must submit to the government, which critics say would suppress the market for mergers and acquisitions.
The new form will require companies to provide much more information to antitrust enforcers before they seek to consummate a deal. Most controversially, that would include narrative information about the strategic rationale for a transaction as well as studies, surveys, analyses and reports which were prepared by the company as it considered the deal.
“The new proposed [form] and associated instructions will facilitate efficient premerger review and ensure effective enforcement of antitrust laws,” wrote the lawmakers, including Sens. Elizabeth Warren, a Massachusetts Democrat, and Bernie Sanders of Vermont, an independent who votes with Democrats.
The letter, dated Sept. 27, was also signed by Democrats including Sen. Mazie Hirono of Hawaii, and Reps. Becca Balint of Vermont, Henry Johnson of Georgia, Rashida Tlaib of Michigan, Summer Lee of Pennsylvania, Lori Trahan of Massachusetts, Ilhan Omar of Minnesota, Mark Pocan of Wisconsin, Katie Porter of California and Greg Casar of Texas. No Republicans signed the letter.
The lawmakers lament the state of the U.S. economy today, arguing that the updated premerger process is necessary to combat growing concentration of industry and the digital transformation of the economy.
“Unchecked consolidation hurts consumers, small businesses, workers, and the economy,” the letter reads. “Consolidation leads to higher prices, less innovation, and reduced quality for consumers. It prevents small businesses from entering markets or competing fairly: for example it is twice as expensive for small businesses to borrow money compared to dominant ones, and there are fewer startups in states where a few companies dominate markets.”
The lawmakers note that since the current premerger notification process was instituted nearly 45 years ago, the required forms have not been updated, and only require companies to provide basic information that don’t “give regulators clarity as to whether a deal may substantially lessen competition.”
The FTC and DOJ proposed the changes in July, and then extended the period for accepting public comments on the proposal to Sept. 27, and it’s possible the final rule is amended before the agencies adopt it. There is no set timeline for when the FTC will vote to adopt any changes.
Some antitrust experts are skeptical that the proposed changes will hold up in court, if they are implemented as proposed.
“The proposed changes are likely to face a rocky path ahead,” wrote Justin Hurwitz of the University of Pennsylvania’s Center for Technology, Innovation & Competition, in a recent analysis.
“They appear to violate legislative intent that [the premerger process] not unduly delay transactions or require the production of materials the firms did not already create as par of evaluating the transaction.”
Hurwitz added that “the premerger notification process serves an important function, but it is a tax on on all mergers,” and predicted that the proposed changes will likely not “survive judicial review.”
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GameStop’s stock soars after activist investor Ryan Cohen named CEO
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Shares of GameStop Corp. surged Thursday, after the consumer electronics retailer named Ryan Cohen as it president and chief executive officer, effective immediately.
The move, which wasn’t unexpected, comes a few months after the company fired then-CEO Matthew Furlong, and elected activist investor Ryan Cohen as executive chairman. At that time, Cohen said in a tweet, “Not for long.”
Cohen will relinquish his role as executive chairman when he is appointed chairman.
GameStop’s stock GME shot up 9.9% in premarket trading, putting it on track to open at a three-week high.
Cohen, who previously founded and was CEO Chewy Inc.
CHWY,
-0.06% ,
is the manager of RC Ventures, which in June disclosed a 36.85 million-share, or 12.1% stake in GameStop.“In connection with his appointment, Mr. Cohen will assume the role of principal executive officer from Mark H. Robinson effective immediately and his responsibilities will include the oversight of all other executive officers, including Mr. Robinson,” the company said in a statement.
The company said Cohen will not receive any compensation for his roles as president, CEO and chairman, and will “continue to engage in various business activities and pursuits outside of the company.”
GameStop’s stock, which was one of the original “meme” stocks, has tumbled 37.2% over the past 12 months, while the S&P 500 index
GME,
+2.21%
has gained 14.9%.Also read: GameStop and AMC fundamental filings ‘remain concerning,’ analyst says.
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Potential Bids for U.S. Steel Keep Getting Weirder
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Text size
U.S. Steel stock has been trading for more than 100 years.
Michael Nagle/Bloomberg
Can a guppie swallow a whale? Investors may find out.
Bloomberg reported Thursday that Canadian steel maker
Stelco
(STLC. Canada) was weighing a bid for
United States Steel
(X).Stelco and U.S. Steel didn’t immediately respond to a request for comment
A bid, if it happened, would be surprising. U.S. Steel is much larger than Stelco. The Canadian steel maker shipped about 2.6 million tons of steel in 2022, while U.S. Steel shipped about 15 million. Stelco’s enterprise value, including stock and debt, is about $1 billion. U.S. Steel’s is about $9 billion.
“That makes it an upstart and we suppose the key to handicapping its chances is knowing who it is partnered with. If that partner is an investor with deep pockets, we won’t be so quick to dismiss Stelco’s chances,” wrote Gordon Haskett analyst Don Bilson in a report Friday. “For now, however, we’re going to view it as a long shot.”
Stelco likely would need a partner to complete a merger.
The possible bid is surprising in another way, too. Stelco was actually once owned by U.S. Steel. The American firm bought it 2007 after Stelco filed for bankruptcy protection. Stelco filed for bankruptcy again in 2014 and was purchased by Bedrock Industries in 2017 before listing as a public company again later that year.
“Recent history has not been kind to companies that have tried to recombine with a former partner,” added Bilson, citing
Altria
(MO) and
Philip Morris International’s
(PM) attempt to re-merge in 2019 that “went nowhere” and
CBS
and Viacom’s combination.
Paramount
(PARA) shares are down about 70% since the merger plan was announced in August 2019.That bids are emerging for U.S. Steel isn’t surprising, though. On Aug. 13, the company said it was exploring strategic options, which could include a sale of the company. Since then, steel maker
Cleveland-Cliffs
(CLF) and steel service center Esmark have announced bids.Esmark processes and distributes steel, rather than producing it. The company didn’t announce financing with its bid and has dropped out of the process.
Global steelmaking giant
ArcelorMittal
(MT) was reportedly considering a bid. ArcelorMittal didn’t comment on a potential bid, which also would have been a little odd. Arcelor sold its U.S. operations to Cliffs in 2020.U.S. Steel stock was about $23 a share before its announcement and bids started to emerge. The Cliffs bid, which is a mix of cash and stock, and is the only current bid with hard numbers attached to it, is currently worth $32.21 a share.
U.S. Steel stock was at $31.80 on Friday, up 1.8%. The
S&P 500
and
Dow Jones Industrial Average
were up about 0.3% and 0.1%, respectively. Stelco stock is unchanged. Its shares are listed in Canada.Write to Al Root at allen.root@dowjones.com
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Microsoft’s Revised Activision Deal Addresses Competition Concerns, Says UK Regulator
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By Elena Vardon
Microsoft’s proposals to modify its $75 billion Activision acquisition address the concerns with the U.K. antitrust authority, the regulator said in a provisional decision Friday.
The U.K. Competition and Markets Authority said that the new deal submitted by Microsoft should lessen any harm to competition in cloud gaming.
The CMA said that the restructured transaction–through which Activision would sell its cloud gaming rights to Ubisoft–opens the door to the deal being cleared.
The regulator is consulting on remedies put forward by Microsoft to address residual concerns it has before making a final decision, it said.
The CMA opened a consultation on these remedies which will last until Oct. 6, it added.
Write to Elena Vardon at elena.vardon@wsj.com
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By buying Splunk, Cisco is closer to becoming a software company
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With Cisco Systems Inc.’s pending acquisition of Splunk Inc., the networking giant is making another major step toward becoming a software company.
On Thursday, Cisco CSCO said it was buying Splunk SPLK in a deal valued at about $28 billion, or $157 a share in cash, for the cloud-security company. The match had been speculated about for years, and Cisco has been on a buying binge this year, as it seeks to grow with more security and software offerings.
“Together, we will become one of…
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VinFast reports half-a-billion-dollar loss for its second quarter
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VinFast Auto Ltd. late Thursday reported a second-quarter loss of half a billion dollars, saying it delivered more than 9,000 electric vehicles globally for sales of about $315 million in the period.
Vietnamese EV maker VinFast VFS went public in August through a SPAC deal, and the stock more than tripled by the end of its first session, sending the company’s market valuation soaring to more than $200 billion.
VinFast’s…
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Instacart prices IPO at $30 a share, at upper end of expected range
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The grocery-delivery app Instacart on Monday priced its IPO at $30 a share, at the upper end of its expected range, raising $660 million with a fully-diluted valuation of around $10 billion after backing away from a stock-market debut last year.
The company said it plans to begin trading on the Nasdaq Global Select Market on Tuesday under the ticker symbol “CART.” It will offer 22 million shares in the IPO. On Friday, Instacart had said it expected to price the offering at between $28 and $30 a share.
Goldman Sachs and J.P. Morgan are acting as lead book-running managers for the offering. Instacart said it also granted the underwriters a 30-day option to purchase up to an extra 3.3 million shares at the IPO price. The offering is expected to close on Thursday.
The debut would come amid what appears to be a thaw in the IPO market, following a year of concerns about inflation and the broader economy. But the public debut of chip designerArm Holdings
ARM,
-4.53%
last week made big waves. The digital-marketing platform Klaviyo is set to debut this week as well.Instacart’s valuation in 2021 stood at $39 billion. Last year, as pandemic-era digital demand fizzled, the company cut its valuation multiple times, but raised it this year, according to The Information.
Instacart, in its IPO filing, said the way people shop for groceries is undergoing a “massive digital transformation.” Evercore analysts have said the company controls around a fifth of the U.S. online grocery-delivery market.
But the company faces steep competition — from the likes of Walmart Inc.
WMT,
-0.74% ,
Amazon.com Inc.
AMZN,
-0.29%
and DoorDash Inc.
DASH,
-0.01%
— and relies on a handful of grocery chains for a big chunk of its demand. And delivery fees on top of higher-priced groceries remain threats to demand.[ad_2]
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Block’s stock has been a laggard lately. Will management shakeup provide a needed jolt?
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Block Inc.’s stock has been a sizable laggard this year, and now it’s losing the leader of a critical business — albeit one that hasn’t necessarily lived up to investor expectations lately.
Alyssa Henry, the head of Block’s
SQ,
-2.99%
Square merchant business, is stepping down after a long tenure with the company, and Jack Dorsey will assume her role while continuing to lead Block on the whole, the company announced in a Monday filing.The announcement comes as Block shares have declined 18% so far this year, while the S&P 500
SPX
has risen 16%. Other payment-technology stocks, including Shift4 Payments Inc.,
FOUR,
-0.54%
Toast Inc.
TOST,
+1.34%
and even PayPal Holdings Inc.
PYPL,
-1.98%
have logged better year-to-date performances.Block’s stock closed at its lowest level since April 7, 2020 on Monday, according to Dow Jones Market Data. It was down about 2% in after-hours trading.
The stock is also down 82% from its all-time closing high achieved Aug. 5, 2021.
See also: PayPal’s ‘fresh start’ isn’t enough to help its stock, analyst cautions
The performance of the Square merchant business, which includes payment processing and other tools for sellers, has been a sore point for investors recently. Wolfe Research analyst Darrin Peller notes that Block’s second-quarter U.S. gross payment volume (GPV) was up 10% from a year earlier, a four-point spread above Visa Inc.’s
V,
+1.49%
domestic growth. Historically, the spread has been in double digits, he said.Additionally, while the 12% overall growth in Square’s GPV “continues to imply that Square is a market-share gainer, we note that this growth spread relative to the industry has trended lower and also suggests slightly softer growth trends versus competitors like Clover,” which is part of Fiserv Inc.
FI,
+0.12% ,
whose shares are up 20% on the year.“While some of Square’s success over the years should be attributed to Alyssa’s execution, the company’s more recent performance remains a concern for investors (and we suspect for management, internally),” Peller wrote.
He pointed to “mixed” feedback from investors thus far.
“Bulls argue that this change is positive, indicating that management is taking change seriously,” Peller said. “Further, it’s worth noting that Jack has been more receptive to cost management and other adjustments. Meanwhile, bears are citing that Alyssa was the ‘face’ of Seller and was more receptive to changes in Square’s business model compared to Jack (particularly around outsourced distribution).”
Block, for its part, said in its filing that Henry “provided significant contributions” to the company during a tenure that spanned more than nine years.
UBS downgraded Block shares earlier this month, in part due to concerns about the Square business. Analyst Rayna Kumar said she was concerned about a potential slowdown in gross-profit growth owing to a moderation in consumer spending.
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Klaviyo reportedly raises price range of its upcoming IPO
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Klaviyo Inc. is reportedly raising the target of its upcoming initial public offering to more than $550 million.
Bloomberg News reported late Sunday that Klaviyo has decided to raise the target range for its shares to $27 to $29, up from its previously stated range of $25 to $27 a share. At the top of that new range, the IPO would raise $557 million, with the company valued at about $8.7 billion, according to Bloomberg.
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GM and Ford’s stocks are higher as UAW strike kicks off. Their bonds tell a different story.
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Ford Motor Co.’s and General Motors Co.’s stocks were higher Friday as workers kicked off a strike, but their bonds have been under selling pressure for some time.
Nearly 13,000 U.S. auto workers went on strike early Friday after the three automakers and the UAW failed to reach an agreement before their national contract expired just before midnight.
The union has opted for targeted strikes, so workers at a Ford
F,
-0.04%
plant in Michigan and a GM
GM,
+0.83%
plant in Missouri were first to down tools, along with workers at a Stellantis N.V.
STLA,
+2.12%
plant in Ohio.UAW President Shawn Fain has said others could join later and asked all 150,000 members to be ready if and when they’re called to strike.
The strike at all three U.S. carmakers is a break with tradition, as the union for many years has elected to center strike efforts at one company to protect its strike fund and picket-line firepower.
For more, read: UAW strike: 12,700 Ford, GM and Stellantis auto workers walk off the job
Ford’s stock was last up 0.5%, while GM was up 1.4%.
But as the following charts from data solutions company BondCliQ Media Services shows, the bonds have seen far more selling than buying over the last 10 days. Bondholders are often viewed as “smarter” than shareholders, because they tend to be laser-focused on a company’s financials and cash flows, to ensure they will be repaid their principal when bonds mature.
Net customer flow of Ford and GM bonds (last 10 days). Source: BondCliQ Media Sources
The next chart shows that Ford has seen more selling than GM.
Ford and GM’s debt trading volumes (last 10 days). Source: BondCliQ Media Services
Most-active Ford issues with net customer flow (last 10 days). Source: BondCliQ Media Services
Most-active General Motors issue with net customer flow (last 10 days). Source: BondCliQ Media Services
Stellantis, meanwhile, was seeing strong buying of its U.S. dollar-denominated bonds. The company, the former Fiat Chrysler, has far less debt than Ford and GM.
Stellantis has about $26.5 billion of total debt, according to FactSet data, about $19.7 billion of which is in bonds.
Ford has $143 billion of debt and $124 billion of bonds. GM has $118 billion of debt, with about $107 billion in bonds, according to FactSet.
Most active Stellantis NV issues (USD) with net customer flow (last 10 days). Source: BondCliQ Media Services
Fitch Ratings said earlier Friday the strike will have a limited financial impact on the auto makers, at least for now with just three plants striking.
“It seems likely the UAW will try to ratchet up pressure on the automakers over time by shifting the strike to more impactful plants and adding more plants to the strike,” Stephen Brown, a senior director at Fitch, said in emailed comments. “The impact on the automakers of striking individual plants could be similar to the semiconductor-induced disruptions that we saw over the past few years.”
See also: Big Three need to step up for the automotive workers who keep them profitable
Fitch had already incorporated the potential impact of strikes in its recent decision to upgrade its ratings of Ford and GM, he said. The agency moved Ford to BBB- from BB+, moving it back into investment trade from speculative, or “junk,” status.
“Ford, GM and Stellantis all have robust liquidity positions that will help them to withstand a potentially drawn-out period of production disruption. Based on June 30 figures, we estimate Ford has over $50 billion of cash and credit facility capacity, while GM has nearly $40 billion,” said Brown.
Stellantis stock was up 2.2% Friday and has gained 36% in the year to date, outperforming GM’s 1.2% gain and Ford’s 9.0% gain. The S&P 500
SPX
has gained 17% in the same time frame.For live coverage of the UAW strikes, click here.
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Arm Stock Rises Again
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Arm Stock Is Rising Again. The Shares Are More Popular Than Tesla or Apple.
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