Daily Archives: May 14, 2008

High Profile Failures At Motorola (MOT) And Blockbuster (BBI) Make Icahn Yahoo! Bid Questionable

Carl Icahn has made the announcement that he plans a proxy fight to either control or influence the Yahoo! board. It is a remarkably poor idea.

Microsoft (MSFT) has made it clear that it does not want Yahoo!. At this point the bad blood between the two companies is such that a buy-out is almost certainly out of the question. MSFT may go after AOL or MySpace, but it will not go back with a $33 offer with Yahoo! trading at $28.50. It would ruin Steve Ballmer’s reputation as a negotiator forever.

No one else stepped up to offer even $30 for Yahoo!. It is not worth that much to any media company. Its earnings growth is too modest and its search business is being eaten by Google.

Icahn has two high profile failures right now, Motorola (MOT) and Blockbuster (BBI). He can’t make money on Yahoo!. A fight would be long and expensive.

And, he does not need a third failure.

Douglas A. McIntyre

Posted on: May 14, 2008 – 7:06 pm in Uncategorized, , , ,

GE’s Ever-Changing Portfolio Mix (GE)

It seems the calls and progress in changing the shape of General Electric Co. are just never-ending.  The Wall Street Journal is reporting that General Electric Co. (NYSE: GE) is hiring Goldman Sachs to explore the sale or auction for its appliances business operations.  After seeing this and looking over our own ideas about the future of GE, this might make some sense and it also says something about what’s ahead.

This would take out the slower growth unit with about $7 Billion in annual sales.  The appliances unit obviously isn’t a bright spot since the housing market is on skid row.  Obviously, GE isn’t holding out for a return to housing and appliances recovery in the next 18 months. 

This will allow GE to work more on its Ecomagination unit and other higher growth units around technology, medical tech, infrastructure, and oil. 

What is becoming more and more evident is that the GE conglomerate of tomorrow is looking less and less like the conglomerate GE of old.

The good news is that the push button tag on my gas stove that keeps wanting to come off may be a lot cheaper than that $189 the GE rep quoted me.

You can join our open email distribution list to hear about other secondary offerings, IPO’s, secondary offerings, special financings, mergers, spin-offs, and other special situations.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 4:29 pm in Conglomerates,

Google (GOOG) Tops List Of Most Visited US Sites For First Time

Search has already trumped all other models on the internet for making money, and now its popularity has reached the point where the Google (GOOG) sites have passed Yahoo! (YHOO) as the most visited online destination in the US.

According to the AP "The lead is tiny — 466,000 visitors out of about 141 million apiece."

What may be small in number is great in symbol. The old line portals including Yahoo!, Time Warner’s (TWX) AOL, and Microsoft’s (MSFT) MSN used to hold the top positions on the comScore list. Those times are likely past and unlikely to return.

Google has simply dusted everyone else.

Douglas A. McIntyre

Posted on: May 14, 2008 – 3:46 pm in Internet, , ,

To Microsoft (MSFT) Xbox Goes The Victory Wreath

Microsoft (MSFT) claims that its Xbox 360 has reached the sale of ten million units in the US ahead of the Nintendo Wii and Sony (SNE) PS3.

The news is somewhat, if not entirely hollow, PR without substance or justification.

As Reuters points out "The Xbox 360 was the first of this latest generation of game machines to launch in the United States when it was released in November 2005. The PS3 and Wii were launched in the United States a year later."

Although the Wii has been in the market for a much shorter time, it has sold almost nine million units.

The people at the device division of Microsoft must not have enough to do.

Douglas A. McIntyre

Posted on: May 14, 2008 – 3:38 pm in Video Games, ,

ShengdaTech Raising Cash (SDTH)

ShengdaTech Inc. (NASDAQ: SDTH) announced that it will plans to offer an aggregate of $100 million of senior convertible notes due 2018, in an offering to qualified institutional buyers under a 144A placement.  Neither the notes nor the underlying shares will be registered in this offering.

The notes will bear interest and be convertible into shares of ShengdaTech’s common stock at terms and a conversion price to be determined at the time of pricing of the offering.

Shengda is a manufacturer of nano precipitated calcium carbonate (NPCC) in the People’s Republic of China and a manufacturer of coal-based chemical products in Tai’an City, Shandong Province. Its NPCC products are used in paper, paints, rubber, plastic, tire, and polyvinyl chloride building materials industries.

The company expects to use approximately $56 million of the net proceeds from the offering of the notes to expand its NPCC production capacity; and it plans to use the remaining proceeds for potential coal-based chemical acquisitions, strategic investments and to fund working capital requirements.

As far as what the $100 million means to the company, its market cap at todays close of $9.31 was $504 million.  Its 52-week trading range is $3.95 to $15.57.

You can join our open email distribution list to hear about other secondary offerings, IPO’s, secondary offerings, special financings, mergers, spin-offs, and other special situations.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 3:18 pm in China, Secondary Offering,

The 52-Week Low Club (IMB)(TMA)(WFMI)(URRE)

IndyMac Bancorp (IMB) Fitch cuts debt rating  Down to $1.83 from 52-week high of $37.50.

Thornburg Mortgage Asset  (TMA) Ongoing concerns about company losses. Drops to $.64 from 52-week high of $28.23.

Whole Foods Market (WFMI) Big earnings miss. Sells off to $28.96 from 52-week high of $53.65.

Uranium Res (URRE) Company does private placement at low share price. Dips to $4.06 from 52-week high of $14.99.

Douglas A. McIntyre

Posted on: May 14, 2008 – 2:59 pm in HI/LOW, , , ,

Geron Given FDA Hold (GERN)

Geron Corporation (NASDAQ: GERN) announced today that the company received a verbal notice from the FDA that Geron’s Investigational New Drug (IND) submission for GRNOPC1, its cell therapy for spinal cord injury, has been placed on clinical hold.   This is an order that the FDA issues to a company to delay a proposed trial or to suspend an ongoing investigation.

As the company has not seen the reasons for the hold in writing via a letter, it is unable to comment specifically.   The company said in the release that it has been in communications with the FDA for 4 years leading to its filing.

NASDAQ halted trading of the stock at 14:30:29 pending news, so it is now not trading.  Shares did manage to trade down almost 4% to $4.71 before this halt took effect.  Geron’s market cap was almost $367 million before the halt, and its 52-week trading range was $3.97 to $9.85.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 1:40 pm in Biotech, FDA,

As UK Inflation Rises, A Ripple In US?

The CPI showed that prices for food rose .9% in April, the most in 18 years. Overall, total inflation was more muted and the market was relieved.

In the UK, the picture was not so bright. The Bank of England commented that not only was inflation in the country unusually high, but that food and fuel could push it higher.

According to The New York Times "The central bank governor, Mervyn King, said that inflation, which rose to 3 percent in April, would probably remain that high or rise even further because of higher prices for energy and food."

The comments raise the question of whether the US numbers are being misinterpreted. Is the situation in the UK substantially different than that in America? It is hard to see how the answer could be "yes".

Inflation is worse than the Labor Department figures show. They must be with food and fuel rocketing up every day.

The numbers for May are likely to be much worse.

Douglas A. McIntyre

Posted on: May 14, 2008 – 1:37 pm in Economy

Merrill Lynch (MER): Rate More Stocks As “Sell”, See If It Works

The Zeppelin commanders who run the research operations at Merrill Lynch (MER) have told their analysts that 20% of the stocks which the cover must be rated as "sell", or "underperform" as the call it at the firm where they are bullish on America.

It is not quite clear what analysts will do if they do not actually have a fifth of the companies in their coverage universe that they think are dogs. They may simply have to take some of the ones where they have a "neutral" rating and downgrade them

According to Bloomberg, Merrill’s new “dispersion guidelines” will also limit “buy” ratings to 70 percent of the shares an analyst covers, while “neutral”-rated stocks won’t exceed 30 percent.

It may be that Merrill thinks that their analysts have no idea how to do their jobs, so the mother ship needs tol tell them what to do.

Douglas A. McIntyre

Posted on: May 14, 2008 – 11:38 am in Research,

Verso Paper Corp. Slashes IPO Expectations (VRS, IP)

Verso Paper Corp. has just slashed its IPO terms in an amended IPO filing this morning.  The company’s prior range was up to 18.75 million shares and an expoected price range of $16.00 to $18.00.  That is now history. The company said in its filing that it now expects to sell 14 million shares at an estimated $12.00 price per share.  The company will still keep the proposed "VRS" ticker on the NYSE.

Credit Suisse and Citi are the lead underwriters, with co-managers listed as Deutsche Bank, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, and  Utendahl Capital Partners.

Verso is a North American supplier of coated papers to catalog and magazine publishers.  As the company says, the coated paper is used primarily in media, catalogs, magazines, commercial printing, high-end advertising brochures, annual reports, and direct mail advertising.  This was also essentially a cave-out from International Paper Co. (NYSE: IP).

After this offering, there will be 52,046,647 shares fully outstanding, or 54,146,647 if the over-allotment is exercised.  This may or ma y not matter, but as of the end of 2007 the company based the results on a share count of 38,046,647 common shares outstanding. Without the over-allotment, the company’s implied market cap at the $12.00 IPO pricing would be an approximate $624.5 million.  On a combined basis, the company would have posted $1.628.8 Billion in 2007 revenues and a net loss including restructuring and other issues of -$111.5 million.

Hmm… rising postage, magazine subscription trends, lower marketing, higher transport and commodity costs, and a softening economy… no wonder the terms were lowered.  Despite the company being the lowest cost producer, there are some outside macro-trends and secular-trends that may be outside of the company’s control.  The company has also rolled its subsidiaries into one company.

Apollo Management L.P. is no longer going to sell 2.8 million shares at the IPO.  Interestingly enough, part of the capital raised will go to repay debt, which looks like was used to finance a dividend to Apollo.

You can join our open email distribution list to hear about other secondary offerings, IPO’s, secondary offerings, special financings, mergers, spin-offs, and other special situations.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 11:25 am in IPOs, Private Equity, ,

GM (GM) Wants To Raise Money, Lehman Says It Must

GM (GM) said yesterday that it might want to raise some capital. Today, Lehman indicated that the car company may not have a choice.

According to Reuters, an analyst at the broker said "GM will need to refinance close to $8.7 billion of debt due between now and January 2010, as well as absorb additional cash burn of close to $11 billion."

In this environment, with tight credit, a company which has a junk rating is likely to have trouble raising money. When the capital does come in, the coupons are certain to be very high.

The news from both GM and Lehman is a tacit acknowledgment that North America will be a market where it is nearly impossible to make money, at least for the next several years.The domestic market is shrinking too fast. Some estimates are that only 14.5 million cars and trucks will be sold this year compared to 16.1 million in 2007.

The competition for each sale becomes more fierce as the pie shrinks. Toyota (TM) and Nissan have already said they expect a difficult year or two in the US.

Detroit’s problems are bigger than auto execs are willing to say. But, everyone else has already figured it out.

Douglas A. McIntyre

Posted on: May 14, 2008 – 10:25 am in Autos, ,

JP Morgan (JPM) Moves Into Oil Trading, Just Too Good To Pass Up

JP Morgan (JPM) will start to trade oil by the end of this year, and that is not just futures. According to Reuters "We will start trading in physical oil and refined products by the end of this year," the bank said.

JP Morgan is betting, to at least some significant extent, that oil prices will continue to move up.

When the smart money starts to think that way, crude may sell off to $50.

Douglas A. McIntyre

Posted on: May 14, 2008 – 10:09 am in Oil & Gas,

Uranium Resources Raising Cash For More Deals (URRE, BHP)

Uranium Resources, Inc. (NASDAQ: URRE) announced this morning that it entered into a private placement based on the closing prices yesterday after the close.  While it does not imply that BHP Billiton Ltd. (NYSE: BHP) is part of this, there is a tie in at the end about an existing acquisition that the company is involved in.

The company is raising north of $14.3 million in gross proceeds before placement fees.  The sale of 3,295,599 shares was placed at $4.34 per share.  That represents a 10% discount to the closing price.  The company also gave up warrants to purchase 988,680 shares of common stock at $5.78 per share, which represents a 20% premium to yesterday’s closing price.

The warrants expire 60 months after issuance.  There are also some ratchet warrants tied that have a 12-month expiration from issuance.  These are immediately exercisable if the company sells additional shares at an implied rate of under $4.34 and there are additional terms and conditions to these.

The use of proceeds will be used for the acquisition, permitting, exploration and development of additional uranium properties located in Texas in an effort to extend annual production in 2010 and 2011 at the current rates and for general corporate purposes.

The company is in conversation with its advisers and BHP Billiton Ltd. (NYSE: BHP) to discuss the financing of the acquisition of Rio Algom Mining LLC, which these funds raised here will not be used for.

You can join our open email distribution list to hear about other secondary offerings, IPO’s, secondary offerings, special financings, mergers, spin-offs, and other special situations.

Shares of Uranium Resources are down 9% at $4.38 in early trading.  Prior to any implied dilution from this deal, the company has a market cap listed as roughly $229 million.

Jon C. Ogg
May 14, 2008

Jon Ogg produces and edits the "10 Stocks Under $10" newsletter and he does not own securities in the companies he covers.

Posted on: May 14, 2008 – 9:56 am in Metals, Nuclear, Secondary Offering, ,

Chindex Hit On Filing (CHDX)

Chindex International Inc. (NASDAQ: CHDX) is seeing shares under pressure this morning after it filed last night for a secondary offering of up to $100 million.  The filing is for the company to sell shares of common stock, warrants, and rights.  Some will come from the company and some may be sold by shareholders.

No underwriters have yet been named according to the preliminary prospectus.  Chindex is US-based, but primarily operates in China and Hong Kong.

The company put the use of funds that will receive for general corporate purposes, including expansion of our Healthcare Services and Medical Products divisions.  The company will not receive any proceeds from shares being sold by existing shareholders.

You can join our open email distribution list to hear about other break-ups, IPO’s, secondary offerings, special financings, mergers, spin-offs, and other special situations.

Shares are down over 4% in early trading at $20.96 and its 52-week trading range is $10.17 to $29.20.  The current market cap is about $261 million.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 8:51 am in China, Medical, Secondary Offering,

A Deere, a Cat & a Titan All Stuck in the Headlights (DE, CAT, TITN)

Deere & Co. (NYSE: DE) shares are going to be a drag today.  The giant manufacturer of farm and construction machinery posted $1.74 EPS on a 19% revenue fain to $7.47 Billion.  First Call had estimates at $1.75 EPS and $$7.61 Billion in revenues.

The company said that equipment sales are projected to increase about 20% for Q3 and up about 20% for Fiscal 2008.  Included in the forecast is about 5% of currency translation impact for the year.  Its previous guidance of +17%. 

The company has noted that rising material costs and the availability of various parts and components will pressure results for the rest of 2008. 

This can’t be a shock to anyone, except maybe that it wasn’t even worse, but Deere is looking for a 3% drop in equipment tied to housing and forestry.

If agriculture infrastructure companies can’t out-pace materials costs in the current Ag-trade environment, then what does this tell you about investing in that sector from here with new money after this sector has seen huge gains????

Deere shares are down almost 6% at $84.92 after closing at $90.19 yesterday; its 52-week trading range is $56.50 to $94.89.

This is also pulling shares of Caterpillar Inc. (NYSE: CAT) down by about 1.25% at $83.00 in pre-market trading; its 52-week trading range is $59.60 to $87.00.

But the real impact from this is going to be in Titan Machinery Inc. after its hugely successful post-IPO trading. Titan owns and operates full service agriculture and construction equipment stores. Its shares are down over 3% at $20.25 pre-market; and its post-IPO range is $11.50 to $24.50.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 8:24 am in Agriculture, Earnings, Infrastructure, , ,

CPI Looks Great, Just Avoid Gas Stations and Grocery Stores

April CPI was released from the Labor Department with a nominal rate of +0.2% and a core rate of +0.1%.  According to Bloomberg estimates, those expectations were +0.3% on nominal CPI and and +0.2% Core CPI.

On an annualized basis this was 3.9% on the nominal CPI report, and up 2.3% on an annualized core CPI basis.

As far as individual urban expenses year over year, most costs are still higher.  So as long as you don’t stop by the gas station and as long as you don’t go to the grocery store and as long as you don’t have any real living expenses that aren’t locked in under long-term contracts, then these numbers will sound pretty good.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 7:54 am in Economy

US Food Price Inflation Gets Out Of Hand

The cost of food in the US was up .9% last month, the highest increase in 18 years.

The news reinforces the concern that the rising price of agricultural commodities is taking a toll on the buying power of consumers. That, added to the cost of gasoline, may put some households in a position where they will have to pick among buying food, buying gas, or making mortgage payments.

Looking back, there may be an argument that the Fed eased too much, but that view is overly simplistic. The rising demand for food is international and is being driven, in part, by the need for corn to make ethanol and the displacement of farmers from land in Africa.

The numbers do make it clear that food and gas price inflation are now troubles that are as great as, if not greater, than the credit crisis. It forces the government to fight a two front war and undermines much of the purpose for sending out tax rebates. The amount being distributed to many citizens in not enough to keep them financially afloat.

Douglas A. McIntyre

Posted on: May 14, 2008 – 7:52 am in Economy

Fluor Adds Wind To Its Pocket (FLR, SI, RDS.A)

Fluor Corporation (NYSE:FLR) won a contract from Scottish & Southern Energy to construct a 500 MW wind farm, the world’s largest, off the coast of Suffolk in the UK. Fluor will book the $1.8 billion contract in the second quarter of 2008. On Monday, Fluor reported a 63% jump in earnings and revenue growth of 32%, boosting the stock price by nearly $25.00 yesterday. This single project is equal to nearly a third of the company’s reported new business in the first quarter of 2008. Fluor’s stock is off $1.46 in pre-open trading.  On any other day besides after a huge earnings move, this contract would have likely moved the stock differently.

The Greater Gabbard Offshore Wind Farm will generate enough electricity to power more than 415,000 homes, approximately the entire demand from Suffolk. Each of the 140 turbines will generate 3.6 MW. A division of Siemens (NYSE:SI) will supply the turbines. Construction is scheduled to begin in 2009, and the project is expected to be completed in 2011.

Earlier this month, Shell (NYSE:RDS.A) withdrew from an 1 GW wind farm project located in the Thames estuary that would have generated enough power to supply one-quarter of the homes in London. Shell’s move was interpreted as a significant blow to the British government’s eventual goal of 33 GW of offshore wind capacity, which would provide electricity to every home in the country. Today’s announcement by Fluor takes some of the sting out of that ill-wind.

Paul Ausick
May 14, 2008

Posted on: May 14, 2008 – 7:28 am in Alternative Energy, Infrastructure, , ,

Annaly Taps Capital (NLY)

Annaly Capital Management, Inc. (NYSE: NLY) has priced its public secondary stock offering of 60 million shares of common stock at $16.15 per share.  The gross proceeds are about $969.0 million before fees, and approximately $927.6 million on a net basis.  Annaly has granted the underwriters a 30-day over-allotment option to purchase up to an additional 9 million shares.

All of the shares are being offered by Annaly, and the company intends to use to purchase mortgage-backed securities and some for for general corporate purposes.

Morgan Stanley and Merrill Lynch are the joint book-running managers, while Credit Suisse and Deutsche Bank Securities are senior co-managers; and Citi, UBS, and JPMorgan are co-managers.

Annaly closed at $16.38 yesterday, down from $16.82 on Monday.  Based on that price, its market cap was $7.67 Billion to give a reference for the size of this sale.  Shares are down 1.2% at $16.18 in pre-market trading indications with about 1 hour and 45 minutes to the open.

You can join our open email distribution list to hear about other IPO’s, secondary offerings, special financings, mergers, spin-offs, and other special situations.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 6:47 am in Financial Stocks, Secondary Offering,

Top 10 Pre-Market Analyst Calls (ADCT, ALXN, ANAD, CCJ, ENR, GENZ, IPI, IVZ, SPLS, JAVA)

These are some of the top analyst calls we are looking at this Wednesday morning:

  • ADC Telecom (NASDAQ: ADCT) raised to Buy from Hold at Jefferies.
  • Alexion Pharma (NASDAQ: ALXN) started as Buy at Jefferies.
  • Anadigics (NASDAQ: ANAD) cut to Perform from Outperform at Oppenheimer.
  • Cameco (NYSE: CCJ) cut to Neutral from Buy at UBS.
  • Energizer (NYSE: ENR) started as Outperform at Bernstein.
  • Genzyme (NASDAQ: GENZ) raised to Outperform at Bernstein.
  • Intrepid Potash (NYSE: IPI) started as Sell at Soleil.
  • InVesco (NYSE: IVZ) started as Buy at Jefferies.
  • Staples (NASDAQ: SPLS) raised to Buy from Hold at Jefferies.
  • Sun Microsystems (NASDAQ: JAVA) Raised to Outperform from Market Perform at Wachovia.

Jon C. Ogg
May 14, 2008

Posted on: May 14, 2008 – 6:28 am in Analyst Calls, , , , , , , , , ,