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Constellation Energy (NYSE: CEG) may have found a savior. Its US partner, France-based EDF, is reportedly considering making either a bid or at taking an increased stake. This is also in the midst of EDF sweetening its bid for UK nuclear power operator British Energy. We would still urge that traders consider this more rumor than fact because of the current history of mergers being rather shoddy ones for shareholders.
Daily Archives: September 17, 2008
Constellation, Maybe Not Out For The Count (CEG)
Wachovia (WB) Expresses Interest In Morgan Stanley (MS)
The New York Times is reporting that Morgan Stanley (MS) has been approached by Wachovia (WB) about a buyout. According to the paper, the broker is also considering other options.
Douglas A. McIntyre
Washington Mutual (WM) Being Auctioned?
The latest rumor on Wall St. is that Washington Mutual (WM) will be auctioned off and has retained Goldman Sachs (GS) to handle the deal. According to The New York Times, Wells Fargo (WFC), JP Morgan (JPM), and HSBC (HBC) are possible bidders.
Douglas A. McIntyre
Urban Outfitters Chairman Unloads Stock (URBN)
Urban Outfitters Inc. (NASDAQ: URBN) been immune for the most part from the stock market carnage. Shares closed down almost 5% at $34 today, but the stock still trades well nto the upper echelon of its $21.09 to $38.40 trading range of the last 52-weeks.
Insider selling is a part of the markets, and it isn’t a signal of of bad things. But when we see sales of certain sizes, we have to look further. In an SEC filing today, Chairman of the Board Richard Hayne noted he sold 1,388,000 shares at prices of $35.64 to $36.12 on Monday and Tuesday. This represents a total value of more than $49.6 million.
This is nowhere near his entire stake in the company, so don’t think that this is a wholesale exodus on his part. Hayne still owns more than 33.6 million shares, roughly 20% of the company’s common stock. But a sale of nearly $50 million will raise some eyebrows in a market when traders and investors are easily spooked.
Jon C. Ogg
September 17, 2008
The 52-Week Low Club 9/17/2008 (MS)(GS)(VSE)
Morgan Stanley (MS) tumbles on fears it will be the next victim of credit crisis. Shares falls to $16.08 from a 52-week high of $69.87.
Goldman Sachs (GS) Even the premier US investment bank is not immune. The stock drops to $97.78 from its 52-week high of $250.70.
Verasun Energy (VSE) was hurt by new public offering. It plummets to $1.37 from a 52-week high of $17.75.
Douglas A. McIntyre
GE Responding To Market Insanity (GE)
We won’t bother discussing the current market situation as being a very difficult one. But the problem isn’t just the baby being thrown out with the bathwater. Now, investors are throwing out mommy, daddy, and everyone else they know.
General Electric Co. (NYSE: GE) falls in this camp and its credit default swap spreads have been hit along with every other company that is tied to financial companies or that does business with them. GE is one of the few companies left with a solid Triple-A rating, and the company has been very clear about its intent to keep it that way. As these credit spreads have been hitting new historic highs today, we asked our contacts at GE to comment.
Midwest Banc: Dr. Jekyll or Mr. Hyde? (MBHI)
Midwest Banc Holdings Inc. (NASDAQ: MBHI) looks like it is taking an about-face move from its comments from last week. Shares of the holding company for Midwest Bank and Trust Company are hitting new lows amid the panic selling in financial stocks. The company now is selling $110 million worth of preferred stock and is suspending dividends on the common stock. Without surprise, it is raising its loan loss reserves. This is meant to shore up the balance sheet.
S&P Slams GM Hard (GM)
As if the US auto industry wasn’t already under fire enough, today we have yet another ratings action. The good news is that this is on the stock rather than the debt ratings. The brilliant analysts at Standard & Poor’s have decided that General Motors (NYSE: GM) needed a stock downgrade. The already cautious hold rating for GM’s stock has now been dowgraded to sell.
Gold Stocks to the Rescue? (ABX, GG, GLD)
Back in July we noted that two big gold miners were pulling back on 2008 guidance. Barrick (NYSE:ABX) and Goldcorp (NYSE:GG) were both predicting production at the lower end of guidance and rising costs to get that gold out of the ground. But the current financial market turmoil could make gold the last refuge as investors have to put their cash into something other than low-reward money market instruments.
Microsoft (MSFT): Buying Search Engine Share Overseas
Everyone who looks at the news knows that Microsoft (MSFT) has a search engine market share problem in the US. By most measures, it has about 10% of the pie. If it had been able to buy Yahoo! (YHOO), that number might have gone up to 30%.
Microsoft may not be able to dominate search in the US, but it could in some large markets overseas.
SEC Finally Curbs Naked Short Selling
The Securities and Exchange Commission has announced new measures this morning to curb naked short sales. The rules impose a firm close-out requirement on short sellers and their brokers. Parties must now deliver securities borrowed for short sales on the trade settlement date, which is three days after the transaction date. Supposedly, penalties will be imposed if the parties do not comply. The interim final rule will take effect as of 12:01 a.m. EDT on Thursday.
Day Trader Alert: VeraSun Energy (VSE)
VeraSun Energy (NYSE: VSE) is about to get pounced this morning. Last night, the ethanol producer announced that it now expected a quarterly loss. Analysts are looking for -$0.02 per share loss before the warning and estimates were as high as $0.05 about three months ago. It is also selling 20 million shares of common stock through Morgan Stanley and UBS. We have also seen Oppenheimer downgrade its rating on VeraSun to perform from outperform. Shares closed at $5.22 yesterday and are indicated down 29% at $3.69 right before the open. The last official NYSE Indication showed $3.00 to $5.00. This one is looking ugly today.
Jon C. Ogg
September 17, 2008
Longs Merger Plot Thickens (LDG, WAG, CVS)
Longs Drug Stores Corporation (NYSE: LDG) is doing something which may seem odd to many, which is essentially a "going with the bird in the hand" strategy. The company has just announced that its board of directors has determined not to have buyout discussions with Walgreens (NYSE: WAG). This was after consultation with its legal and financial advisors. Walgreens had sent Longs an expression of interest that was announced on September 12.
Day Trader Alert: Gilead Sciences (GILD)
Gilead Sciences Inc. (NASDAQ: GILD) is trading down this morning. Goldman Sachs maintained its buy rating on the stock, but took down its price target to $58 from $59. This report is after a negative complete response letter from FDA regarding aztreonam lysine for cystic fibrosis. Based upon the response, Goldman Sachs reduced the sales targets for 2008 by $20 million and 2009 by $110 million for the drug despite Gilead’s statement that it continues to work with the FDA on the issue.
The biotech giant is down roughly 4% at $47.70 on more than 36,000 shares. Its 52-week trading range is $37.17 to $57.63. While this is well above the 52-week lows, it is also the largest pullback from highs that we have seen over the last year.
Jon C. Ogg
September 17, 2008
Housing Starts Versus AIG: Aiming At The Wrong Target
Leaving aside the fact that the federal government has a nearly endless supply of money, especially if the Chinese continue to buy its bonds, the capital being pushed into the market is going to the wrong places.
Saving large financial firms like AIG (AIG) is a "from the top down" approach. It attacks problems once they have festered at huge institutions. The bailout solves the surface problem of liquidity, but does almost nothing to address the root issue. As a matter of fact, it may erode the recovery of the most critical portion of the crisis, the housing market.
Analysts Start Rackspace Coverage As Quiet Period Ends (RAX)
Rackspace Hosting, Inc. (NYSE: RAX) is seeing its quiet period end after its IPO, which now allows analysts in the underwriting group to initiate research coverage of the stock. So far this IPO has dropped from north of $11 after its August debut down to as low as $8.00 before coming back to close at $8.83 yesterday.
We have also provided a chart from stockcharts.com to show how it has performed since coming public.
Below is a quick snapshot of research initiations we have seen today:
- Credit Suisse started as OUTPERFORM
- Goldman Sachs started as NEUTRAL
- Jefferies started as BUY
- Merrill Lynch started as BUY
- RBC Capital started as OUTPERFORM
Shares are indicated slightly higher, but so far we have not yet seen any trades in Rackspace.
Jon C. Ogg
September 17, 2008
Top Pre-Market Analyst Upgrades (ACE, NLY, ESLR, GFIG, HOKU, ITG, GS, KR, MON, NDAQ, TRV)
These are some of the positive calls and upgrades we have seen from analysts this morning:
- ACE Ltd. (ACE) raised to buy at Goldman Sachs.
- Annaly Capital (NLY) raised to overweight at JPMorgan.
- Evergreen Solar (ESLR) raised to hold at Citigroup.
- GFI Group (GFIG) raised to outperform at KBW.
- Hoku Scientific (HOKU) raised to buy at Broadpoint.
- Investment Technology Group (ITG) raised to outperform at KBW.
- Goldman Sachs (GS) raised to outperform at Wachovia.
- Kroger (KR) raised to buy at B of A.
- Monsanto (MON) raised to buy at BB&T.
- NASDAQ OMX (NDAQ) raised to outperform at KBW.
- Travelers (TRV) raised to buy at Goldman Sachs.
Jon C. Ogg
September 17, 2008
Top Pre-Market Analyst Downgrades (BGFV, CME, QSII, TUP, SKS)
These are some of the negative calls and downgrades we have seen this Wednesday morning:
- Big 5 Sporting Goods (BGFV) cut to sell at UBS.
- CME Group (CME) cut to market perform at KBW.
- Quality Systems (QSII) cut to hold at Jefferies.
- Tupperware (TUP) cut to neutral at JPMorgan.
- Saks (SKS) started as underweight at JPMorgan.
Jon C. Ogg
September 17, 2008
Nortel (NT): A Hit To Global Broadband And Wireless
The capital spending boom born of growing broadband and wireless adoption rates may be coming to an end. At least, that is what an earnings warning from Nortel (NT) indicates.
Nortel is North America’s largest maker of telecom infrastructure equipment, and a drop in its financial fortunes means that cable and telephone companies are throttling their growth. Consumer spending problems may be catching up with the communications industry.
Bank Regulators Try To Auction Washington Mutual (WM)?
Bank regulators may be trying to find a home for Washington Mutual (WM). According to The New York Post, "The fate of Washington Mutual remained in question yesterday as federal regulators recently called a number of banks asking if they would consider buying the nation’s largest savings and loan should it eventually falter."
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