Before the Bell: Meta Follows the Fold, AMC Stock Swap Scheme Endangered

Drew Angerer / Getty Images News via Getty Images

Premarket action on Tuesday had the three major U.S. indexes trading higher. The Dow Jones industrials were up 0.23%, the S&P 500 up 0.25% and the Nasdaq 0.30% higher.

Seven of 11 market sectors closed higher on Monday. Consumer cyclicals (1.18%) and industrials (0.83%) rose the most. Utilities (−0.77%) and health care (−0.31%) posted the biggest losses. The Dow closed up 0.22%, the S&P 500 up 0.31% and the Nasdaq up 0.63%.

Two-year Treasuries closed unchanged at 4.78% on Monday, and 10-year notes slipped by three basis points to close at 3.92%. In Tuesday’s premarket, two-year notes were trading at around 4.80% and 10-year notes traded at 3.94%.

Oil traded down by 0.8% Monday, and it traded up 1.4% early Friday at $76.76.

Monday’s trading volume was below the five-day average. New York Stock Exchange winners outpaced losers by 1,843 to 1,240, while Nasdaq advancers led decliners by about 3 to 2.

No market-moving data is expected Tuesday. The Conference Board’s Consumer Confidence index will be released after markets open and is forecast to improve from January’s level of 107.1 to 108.0.

Among S&P 500 stocks, Union Pacific Corp. (NYSE: UNP) added 9.35% on Monday after promising to replace CEO Lance Fritz who has presided over the railroad since 2015. The hoped-for replacement is Jim Vena, a disciple of the late Hunter Harrison, former CEO of Canadian Pacific and CSX who is credited with developing a precision scheduling system that runs few, but longer, trains on tighter schedules.

Dish Networks Corp. (NASDAQ: DISH) was Monday’s worst-performing S&P 500 stock, dropping 8.06% following a service outage that occurred last Thursday and had not been solved as of Monday afternoon. Dish also reported quarterly results last week that included an exodus of some 268,000 paying customers in the fourth quarter. The satellite TV provider’s stock is down 60% over the past year.

In yet another instance of Meta Platforms Inc.’s (NASDAQ: META), long and storied history of copying good ideas, CEO Mark Zuckerberg said Monday that the company formerly known as Facebook is putting together a new product group to focus on generative artificial intelligence (AI), the technology behind ChatGPT and other chatbot systems introduced more recently by the likes of Microsoft, Google and others.

According to Zuckerberg, the new group is going to “turbocharge our work in this area,” but he also admitted that Meta is way behind competitors in “getting to the really futuristic experiences.” Nonetheless, Zuckerberg says he is “excited about all the new things we’ll build along the way.”

No word on how the metaverse is shaping up. But Meta always has a good strategy in its back pocket–fire more people. It did not get as big a share-price bump as, say, Coinbase or Wayfair when those two companies announced cuts of 20% and 10%, respectively, to their workforces. But Meta’s one-day bounce of more than 5% after firing around 13% of its workforce was the stock’s biggest daily move of the past year.

And now, the earnings report we have all been waiting for. AMC Entertainment Holdings Inc. (NYSE: AMC) will reveal fourth-quarter results after markets close Tuesday. We already have taken a look at what you can expect to hear about the company’s business. But the really big news is how its scheme to get shareholder approval to issue more shares of common stock may be delayed by a shareholder lawsuit that threatens to derail the plan.

At a shareholder meeting scheduled for March 14, holders of AMC’s preferred shares (NYSE: APE) would be able to vote their shares of newly converted APE shares to AMC common shares in favor of altering the company’s charter to authorize more shares of common stock. Because this would result in a huge payoff to APE holders, to say nothing of arbitrage traders who own piles of APE shares, the resolutions are expected to pass easily at the March 14 meeting.

But a Delaware court has set a hearing date of April 27 to hear a request by AMC common shareholders for a preliminary injunction to stop the scheme. Now the risk arbitrageurs face a significant headwind and would have to hold on to those APE shares for at least six weeks longer than they had expected to. That is not the way the arbitrage game is played. Comatose money for six weeks? Holders of AMC’s common stock were delighted, however. AMC stock soared nearly 23% on Monday to close at $7.61. APE shares dropped about 5.1% to close at $2.05.

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