Tag Archives: Content Types

Business

GameStop’s meteoric gains have almost entirely disappeared — here’s advice for those who didn’t get out in time

Leave a comment

The author of the Cracked Market blog, Jani Ziedins, last week warned the traders piling into the videogames retailer GameStop not to get greedy — or more specifically, not to be a pig.

Well.

As the chart shows, that short squeeze worked until it didn’t. Momentum fizzled after Robinhood and other brokerages limited access to trading in GameStop
GME,
-42.11%
and other securities that were surging in popularity. As to why, there will be Congressional hearings to find out the culprit — hedge funds or good-old-fashioned margin requirements — but the end result is the same.

GameStop may still have its moments. “As for what comes next, GME will be insanely volatile for weeks and even months. That means 50% and 100% moves in both directions. But at this point, a 50% bounce only gets us back to $75. Maybe we get back to $100 or even $125, but waiting for anything higher is just wishful thinking,” Ziedins says.

Here’s Ziedins’ advice now. “For those that still have money left in the market, there is no reason to ride this all the way into the dirt. Cash in what you have left, learn from this lesson, and come back to the market better prepared next time,” says the Cracked Market blogger.

Cue, Frank Sinatra.

And those traders are inexperienced. Cardify, a consumer-data firm, did a survey of 1,600 self-directed investors in GameStop and cinema chain AMC Entertainment
AMC,
-20.96%
and found that most were inexperienced investors — 44% having less than 12 months of experience, and another quarter with one to two years’ experience. Nearly half made their biggest-ever do-it-yourself trading investment in the last four weeks, according to the survey that ended on Monday.

Why? Of these overwhelmingly young and male investors, 45% said for quick financial profits. Nearly 20% said it was part of a long-term investing strategy, and 16% said to spite big hedge funds and institutional investors, according to Cardify.

The buzz

The U.S. added 49,000 nonfarm payrolls jobs in January while the unemployment rate fell to 6.3%, according to the Labor Department.

The U.S. Senate in the early hours of the morning approved a budget resolution that will allow for a fast tracking of the $1.9 trillion coronavirus relief plan proposed by the Biden administration to be approved without Republican support. Vice President Kamala Harris cast the tiebreaking vote. Johnson & Johnson
JNJ,
+0.93%
meanwhile submitted its coronavirus vaccine for Food and Drug Administration approval.

Pinterest
PINS,
+0.91%
shares jumped 11% in premarket trade, as the art-sharing social-media service reported forecast-beating earnings on a 76% jump in revenue during the fourth quarter. Another social-media service, Snap
SNAP,
-1.60%,
also beat expectations. Besides using social media, people stuck at home were playing videogames, as Activision Blizzard
ATVI,
-0.10%
gained 8% after it reported stronger earnings and bookings than expected, increased its dividend by 15%, and authorized a $4 billion share buyback plan.

Ford Motor Co.
F,
+1.52%
reported a surprise profit and topped expectations.

Exercise-bike maker Peloton Interactive
PTON,
+7.04%
slumped 7% as it did beat on earnings but flagged a rise in shipping and other costs. T-Mobile US
TMUS,
+0.95%,
the mobile service operator, also beat earnings expectations but guided to a softer 2021 than expected.

Luckin Coffee, the U.S.-listed Chinese coffee retailer, filed for bankruptcy protection, less than a year after an accounting scandal.

The market

After the S&P 500
SPX,
+1.09%
ended Thursday at a record for the sixth time in 2021, U.S. stock futures
ES00,
+0.37%

NQ00,
+0.20%
pointed to another day of gains.

The yield on the 10-year Treasury
TMUBMUSD10Y,
1.158%
moved up to 1.16%, after ending Thursday at its highest in 11 months.

The chart

The more things change, the more they stay the same. Today’s technology giants are following a similar trajectory to the radio makers of the 1920s, as well as the dot-com era around the turn of the century. “So the point is that you can be a firm believer in tech’s ability to transform our lives but still think valuations might be in a bubble,” said Jim Reid, strategist at Deutsche Bank.

Random reads

This local government meeting over Zoom
ZM,
+2.50%
turned into a chaotic, internet sensation.

Chocolate sales were 40% to 50% higher in areas with an increased number of COVID-19 cases, according to confectioner Hershey
HSY,
+0.44%.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Want more for the day ahead? Sign up for The Barron’s Daily, a morning briefing for investors, including exclusive commentary from Barron’s and MarketWatch

Read original article here

Business

Asian markets retreat as caution sets in

Leave a comment

TOKYO — Asian shares mostly fell Thursday as caution set in over company earnings reports, recent choppy trading in technology stocks and prospects for more economic stimulus for a world battling a pandemic.

Japan’s Nikkei 225
NIK,
-1.03%
slipped 0.5% in early trading, while South Korea’s Kospi
180721,
-1.90%
dropped 1.6%. Australia’s S&P/ASX 200
XJO,
-0.87%
slipped 0.6%. Hong Kong’s Hang Seng
HSI,
-1.35%
lost 1.2%, while the Shanghai Composite
SHCOMP,
-1.38%
was down 1%. Stocks rose in Indonesia
JAKIDX,
+0.63%
and Malaysia
FBMKLCI,
-0.25%
but fell in Singapore
STI,
-1.29%
and Taiwan
Y9999,
-0.43%.

Also on market players’ minds is the global vaccine rollout, which is becoming more organized in the U.S., but yet to play out in much of Asia, except for China, where the pandemic started.

“As the rally waned for the U.S. market, Asia markets can be seen left to their own devices into the Thursday session, and it appears that investors may be locking in some of the recent gains,” said Jingyi Pan, a senior market strategist for IG in Singapore.

Wall Street ended with modest gains, with the S&P 500
SPX,
+0.10%
inched up 3.86 points, or 0.1%, to 3,830.17, after swinging between a gain of 0.6% and a loss of 0.3%. The tiny gain extended the benchmark index’s winning streak to a third day.

The Dow Jones Industrial Average
DJIA,
+0.12%
gained 36.12 points, or 0.1%, to 30,723.60. The tech-heavy Nasdaq
COMP,
-0.02%
slipped 2.23 points, or less than 0.1%, to 13,610.54. The index had briefly been above its all-time high set last week.

Energy, communications and financial stocks helped lift the market. Those gains were primarily kept in check by declines in companies that rely on consumer spending and technology stocks.

GameStop and other recently high-flying stocks notched modest gains Wednesday. GameStop
GME,
+2.68%
rose 2.7% and AMC
AMC,
+14.71%
climbed 14.7%. The stocks have been caught up in a speculative frenzy by traders in online forums who seek to inflict damage on Wall Street hedge funds that have bet the stocks would fall. GameStop plunged 60% on Tuesday, and AMC Entertainment lost 41.2%.

“There’s a tug of war that’s been brewing for a week or so now, that markets are ripe for a correction and whether the events of last week are a precipitating event,” said Jamie Cox, managing partner at Harris Financial Group.

Stocks have been mostly rallying this week, an encouraging start to February after a late fade in January as volatility spiked amid worries about the timing and scope of another round of stimulus spending by the Biden administration, unease over the effectiveness of the government’s coronavirus vaccine distribution and turbulent swings in GameStop and other stocks hyped on social media.

That volatility has subsided this week, with Wall Street focusing mainly on corporate earnings reports while it keeps an eye on Washington for signs of progress on a new aid package.

Democrats and Republicans remain far apart on support for President Joe Biden’s $1.9 trillion stimulus package, but investors are betting that the administration will opt for a reconciliation process to get the legislation through Congress.

In energy trading, benchmark U.S. crude
CLH21,
+0.63%
gained 15 cents to %55.84 a barrel. Brent crude
BRNJ21,
+0.51%,
the international standard, added 6 cents to $58.52 a barrel.

In currency trading, the U.S. dollar
USDJPY,
+0.13%
inched down to 105.02 Japanese yen from 105.06 yen.

Read original article here

Business

McKinsey Agrees to $573 Million Settlement Over Opioid Advice

Leave a comment

Consulting giant McKinsey & Co. has reached a $573 million settlement with states over its work advising OxyContin maker Purdue Pharma LP and other drug manufacturers to aggressively market opioid painkillers, according to people familiar with the matter.

The deal, reached with 47 states and the District of Columbia and expected to be publicly announced Thursday, would avert civil lawsuits that attorneys general could bring against McKinsey, the people said. The majority of the money will be paid upfront, with the rest dispensed in four yearly payments starting in 2022.

McKinsey said last week it is cooperating with government agencies on matters related to its past work with opioid manufacturers, as state and local governments sue companies up and down the opioid supply chain. At least 400,000 people have died in the U.S. from overdoses of legal and illegal opioids since 1999, according to federal data.

The consulting firm stopped doing opioid-related work in 2019 and said in December its work for Purdue was intended to support the legal use of opioids and help patients with legitimate medical needs.

While some companies have reached deals with individual states to avoid trials, the McKinsey settlement marks the first nationwide opioid pact to come from the flood of litigation that began in 2017. A much larger, $26 billion deal with three drug distributors and Johnson & Johnson has been in the works for more than a year but is still being negotiated.

The Wall Street Journal reported last week that McKinsey was close to a settlement with states and that a deal could be worth hundreds of millions of dollars. The negotiations occurred as hundreds of exhibits describing McKinsey’s work to boost OxyContin sales were made public in recent months during Purdue’s chapter 11 bankruptcy case in White Plains, N.Y.

Memos McKinsey sent Purdue executives in 2013 that have been made public in bankruptcy court filings included recommendations that the company’s sales team target health care providers it knew wrote the highest volumes of OxyContin prescriptions and shift away from lower-volume prescribers. McKinsey’s work became a Purdue initiative called “Evolve to Excellence,” which the U.S. Justice Department described in papers released last year in connection with a plea agreement with Purdue as an aggressive OxyContin marketing and sales campaign.

According to bankruptcy court records, McKinsey sent recommendations to Purdue in 2013 that consultants said would boost its annual sales by more than $100 million. McKinsey recommended ways Purdue could better target what it described as “higher value” prescribers and take other steps to “Turbocharge Purdue’s Sales Engine.”

Stamford, Conn.-based Purdue pleaded guilty in November to three felonies, including paying illegal kickbacks and deceiving drug-enforcement officials. The drugmaker filed for chapter 11 protection in 2019 to address thousands of opioid-related lawsuits brought against it. Purdue said in a lawsuit filed last week against its insurers that creditors have asserted hundreds of thousands of claims in the bankruptcy case and collectively seek trillions of dollars in damages.

McKinsey also advised other opioid makers on sales initiatives. The firm’s work for

Johnson & Johnson

came up in a 2019 trial in a case brought by Oklahoma against the drug company for contributing to the opioid crisis in the state through aggressive marketing of prescription painkillers. The trial ended with a $572 million verdict against Johnson & Johnson, which was later reduced to $465 million and is still on appeal.

The vast majority of the money McKinsey will pay in the settlement will be divided among the participating states, with $15 million going to the National Association of Attorneys General to reimburse it for costs incurred in the investigation, one of the people familiar with the deal said.

The settlement also includes some nonmonetary provisions, like requiring McKinsey to create a repository of documents related to its work for opioid makers, the person said.

The holdout states include Nevada, which said Wednesday night that its investigation into the consulting giant continues “and we are conversing with McKinsey about our concerns.”

Purdue has been negotiating with creditors, which include states, since filing for bankruptcy, but finalizing a deal has been slowed by demands from some states that the company’s owners, members of the Sackler family, contribute more than the $3 billion they have agreed to.

States have been keenly focused on ensuring any settlement money from the opioid litigation goes toward helping alleviate the impact of the crisis, including through beefing up treatment programs and helping overstretched law enforcement. The states are looking to avoid the outcome of the 1990s tobacco litigation, when a $206 billion settlement was often spent to fill state budget holes. The McKinsey settlement documents say the money is intended for abatement, the person familiar with the deal said, though state laws differ widely on how settlement funds can be earmarked.

Write to Sara Randazzo at sara.randazzo@wsj.com and Jonathan Randles at Jonathan.Randles@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

World

Russian Covid-19 Vaccine Was Highly Effective in Trial, Study Finds, Boosting Moscow’s Rollout Ambitions

Leave a comment

MOSCOW—Russia’s homegrown Sputnik V vaccine showed high levels of efficacy and safety in a peer-reviewed study released Tuesday, a potential boost for the Kremlin’s aim to promote the Covid-19 shot abroad and curb the pandemic at home.

The findings, from a preliminary analysis of a large-scale clinical trial published in the British medical journal the Lancet, demonstrated that the two-shot vaccine was 91.6% effective against symptomatic Covid-19 and offered complete protection against severe cases. There were no serious side effects, the paper said. The vaccine was also found to be similarly safe and effective in elderly people.

The study could be a significant milestone for Moscow in the global vaccination race, potentially offering President

Vladimir Putin’s

government geopolitical clout in the developing world and the chance to tap into the lucrative global vaccine market. Russia—the world’s fourth worst-hit country with nearly four million cases—has also banked on Sputnik V to avoid new costly lockdowns as authorities plan to vaccinate 60% of the domestic population by the end of the year.

The shot, which was approved by Russian authorities in August before undergoing large-scale clinical trials, has stirred questions in light of its fast-tracked development and lack of published trial data. So far, Sputnik V has been administered to more than two million people world-wide, including in Argentina, Serbia and Algeria, according to Russian authorities.

The Sputnik V Vaccine

Type: Two-dose viral vector vaccine

Efficacy: 91.6% (91.8% among people older than 60 years)

Price: Less than $10 a shot

Storage and transportation temperature: 36º-46ºF

Approved for use in: Russia, Belarus, Serbia, Argentina, Bolivia, Algeria, Palestine, Venezuela, Paraguay, Turkmenistan, Hungary, UAE, Iran, Guinea, Tunisia and Armenia

Administered in: Russia, Argentina, Bolivia, Belarus, Serbia, Algeria, Kazakhstan

Sources: The Lancet, Russian Direct Investment Fund

Tuesday’s results could help clear doubts surrounding the Russian shot.

“The development of the Sputnik V vaccine has been criticized for unseemly haste, corner cutting, and an absence of transparency,” virology professors Ian Jones at the U.K.’s University of Reading and Polly Roy at the London School of Hygiene & Tropical Medicine wrote in the Lancet. “But the outcome reported here is clear and the scientific principle of vaccination demonstrated, which means another vaccine can now join the fight to reduce the incidence of Covid-19.”

Alexander Gintsburg,

the head of the vaccine’s developer, the Moscow-based Gamaleya Institute, said that the data demonstrates Sputnik V’s safety and high efficacy against the virus.

This “is a great success in the global battle against the Covid-19 pandemic,” he said.

Sputnik V’s efficacy rate compares to vaccines developed by

Moderna Inc.

and

Pfizer Inc.

and its German partner

BioNTech SE,

which are around 95% effective.

The Lancet study didn’t address the shot’s usefulness against new variants of the virus, amid some early evidence suggesting strains may prove resistant to current vaccines. Russian officials said on Tuesday that they are continuously testing Sputnik V against new variants and they expect the shot to achieve the same level of efficacy. They also expect it to provide long-term immunity of as long as two years, based on early experimental evidence.

The results published on Tuesday were based on an interim analysis of a Phase 3 trial of nearly 20,000 participants, three-quarters of whom received the vaccine while the rest received a placebo. The analysis was based on a total of 78 confirmed Covid-19 cases, 62 of which were identified in the placebo group and 16 in the vaccine group. The clinical trial, totaling 40,000 volunteers, is ongoing.

Researchers found that the Covid-19 vaccine didn’t produce serious adverse reactions, the Lancet paper said. Most side effects included flulike symptoms, pain at the injection site and headaches.

Among the elderly, the vaccine was well tolerated and demonstrated an efficacy of 91.8%, based on a group of 2,144 volunteers older than 60, the paper said.

Like other Covid-19 vaccines, including ones developed by

Johnson & Johnson

and

AstraZeneca

PLC and Oxford University, Sputnik V uses a so-called viral vector approach. It introduces a genetically altered form of a harmless virus, known as the adenovirus, to serve as a vehicle—or vector—for a fragment of genetic material from the coronavirus.

As wealthier countries buy up supplies of Western drugmakers’ Covid-19 vaccines that are still in development, China and Russia are offering their fast-tracked shots to poorer nations. Here’s what they’re hoping to get in return. Illustration: Ksenia Shaikhutdinova

Each of the vaccine’s two shots is based on a different adenovirus vector, which Russian scientists say achieves a stronger immune response. Sputnik V has simpler logistics requirements compared with some of its peers, with a storage and transportation temperature of between 36 and 46 degrees Fahrenheit. The Pfizer vaccine must be kept at minus 94 degrees Fahrenheit before thawing.

With Sputnik V—a reference to the satellite the Soviet Union launched into orbit ahead of the U.S. in the Cold War space race—Russia could gain clout with some countries, analysts say, as well as participate in a global coronavirus vaccine market estimated by Russian officials at $100 billion annually.

Competing on price, Russia is selling the vaccine at less than $10 a dose, lower than Pfizer and Moderna, and is targeting up to 30% market share among Covid-19 shots in the countries buying Sputnik, according to Russian officials.

AstraZeneca has said that it would test whether a combination of its Covid-19 vaccine, which has shown to be between 62% and 90% effective depending on dosage, and Sputnik V can boost efficacy. Clinical trials for a combined shot are expected to start soon in Azerbaijan, the United Arab Emirates and other countries.

Some 15 countries outside Russia have already authorized Sputnik V, and Moscow has received orders or expressions of interest for 2.4 billion doses, including from Brazil, Mexico and India. In a bid to accelerate the global rollout, Russia will also offer a one-dose vaccine, dubbed Sputnik Light, which Russian authorities say would be between 73% and 85% effective.

To produce its vaccine, Russia relies on a global supply chain, including manufacturing hubs in Brazil, South Korea, India and China. Russia has also mounted an aggressive public-relations campaign abroad, including posting weekly video updates in English and maintaining a Twitter account for Sputnik V.

Sputnik V hasn’t been approved by Western health authorities or received authorization from the World Health Organization, which many developing countries rely on for vetting vaccines. Russia is in talks with the European Medicines Agency about approving the shot in the European Union and has applied for WHO authorization.

In Iran, health-care professionals and lawmakers criticized the government’s announcement that it would import Sputnik V, saying that the vaccine had not been approved by international bodies and that the purchase was politically motivated. Government officials said on Tuesday that Tehran would buy up to 1.5 million doses, with the first batch arriving as early as Saturday.

The domestic rollout has also faced challenges, including production delays and a skeptical populace.

Authorities have recently said that manufacturing is now being ramped up following initial equipment problems. They now expect to produce 11 million doses this month, up from seven million in January.

Around 46% of Russians said they would get a vaccine in a January survey by British polling firm Ipsos MORI, up 5 percentage points compared with December. Still, Russians were among the most reluctant to get inoculated globally, compared with 55% in France, 63% in the U.S. and 86% in the U.K.

Russia doesn’t publish daily vaccination rates, but regional data shows that at least 1.3 million Russians have received a dose so far.

Irina Levashova, a kindergarten teacher in Romodanovo, a small town some 400 miles southeast of Moscow, received her second shot last month along with her husband.

“I have many acquaintances who have been ill or even died from this disease, so I wanted to protect myself and my family,” Ms. Levashova, 58, said, adding that she didn’t experience any major side effects. “As soon as they started talking about vaccinations, I immediately told myself that me and my family would do it.”

—Valentina Ochirova contributed to this article

Write to Georgi Kantchev at georgi.kantchev@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

GameStop Day Traders Are Moving Into SPACs

Leave a comment

Special-purpose acquisition companies—shell companies planning to merge with private firms to take them public—are rising more than 6% on average on their first day of trading in 2021, up from last year’s figure of 1.6%, according to University of Florida finance professor

Jay Ritter.

Before 2020, trading in SPACs was muted when they made their debut on public markets.

Now, shares of blank-check companies almost always go up. The last 140 SPACs to go public have either logged gains or ended flat on their opening day of trading, per a Dow Jones Market Data analysis of trading in blank-check companies through Thursday. One hundred and seventeen in a row have risen in their first week. The gains tend to continue, on average generating bigger returns going out to a few months.

The gains in companies that don’t yet have any underlying business underscore the wave of speculation in today’s markets. Merging with a SPAC has become a popular way for startups in buzzy sectors to go public and take advantage of investor enthusiasm for futuristic themes.

But lately, day traders are even putting money into SPACs before they have revealed what company they are buying. At that stage, they are pools of cash, so investors are wagering that the company will eventually complete an attractive deal.

Despite the risks, many are embracing the trade, underscoring how online investing platforms and social-media groups now send individuals flocking to new corners of markets, including shares of unprofitable companies such as GameStop and

AMC Entertainment Holdings Inc.

AMC 53.65%

That trend also is playing out in everything from shares of silver miners to SPACs, which were relatively rare before last year but are suddenly ubiquitous in finance.

“I would just have a bad case of FOMO if I wasn’t in SPACs,” said

Marco Prieto,

a 23-year-old real-estate agent living in Tucson, Ariz., referring to the fear of missing out that is driving many individuals to put money into markets.

He has a roughly $50,000 portfolio and about 60% of his holdings tied to blank-check companies. Some of his positions are early on in shell firms such as

Social Capital Hedosophia Holdings Corp. VI,

while others are based on rumors tied to possible deals by companies including

Churchill Capital Corp. IV.

Share-price performance of existing SPACs without deals announced*

Amount of cash

held by SPAC:

Biotechnology/Life science/Health care

Share-price performance of existing SPACs without deals announced*

Amount of cash

held by SPAC:

Biotechnology/Life science/Health care

Share-price performance of existing SPACs without deals announced*

Amount of cash

held by SPAC:

Biotechnology/Life science/Health care

Share-price performance of existing SPACs without deals announced*

Amount of cash

held by SPAC:

Biotechnology/Life science/Health care

Shares of that company have more than doubled since Bloomberg News reported on Jan. 11 that it is in talks to combine with electric-car firm Lucid Motors Inc. Trading got so frenzied that the SPAC put out a statement a week later saying it wouldn’t comment on the report and that it is always evaluating a number of possible deals. The stock has still been gyrating in the days since.

Investors betting on SPACs even before such reports is extraordinary because the underlying value of a blank-check firm before it pursues a deal is the amount of money it raises for a public listing. That figure is typically pegged at $10 a share. Still, it has become common for investors to buy at higher prices such as $11 or $12 to back big-name SPAC founders such as venture capitalist

Chamath Palihapitiya

and former Citigroup Inc. deal maker

Michael Klein.

In another sign blank-check firms are now frequently traded by individuals, several SPACs and companies that have merged with them recently joined GameStop and AMC on a list of stocks that had position limits on Robinhood Markets Inc., a popular brokerage for day traders. Those restricted included Mr. Klein’s Churchill Capital IV and a few of Mr. Palihapitiya’s SPACs in the

Social Capital Hedosophia

SPCE 2.74%

franchise.

The flood of money pouring in is a concern for skeptics who worry that everyday investors don’t understand the dangers of the trade. Even recent losses in a few hot companies such as electric-truck startup

Nikola Corp.

NKLA -0.39%

and health-care firm MultiPlan Inc. that merged with blank-check firms aren’t deterring investors because of the gains in other SPACs.

“It’s a tremendous amount of speculation,” said

Matt Simpson,

managing partner at Wealthspring Capital and a SPAC investor. His firm invests when SPACs go public or right after, then takes advantage when shares rise and typically sells before a deal is completed. He advertised an expected return from the strategy of 6% to clients, but last year it returned 20%.

Ninety-one SPACs have raised $25 billion so far this year, putting the market on track to shatter last year’s record of more than $80 billion, according to data provider SPAC Research.

Fast gains in the shares can result in big payoffs for their founders and the first investors in blank-check firms like Mr. Simpson. These earliest investors always have the right to withdraw their money before a deal goes through. The traders who get in later don’t have those same privileges, but that hasn’t been a deterring factor.

“If you don’t take a risk, there’s really no opportunity at all,” said

Chris Copeland,

a 36-year-old in upstate New York who started day trading on the platform Robinhood with his girlfriend last month. Roughly three-quarters of his portfolio is tied to SPACs such as

GS Acquisition Holdings Corp. II.

Mr. Prieto checks SPACs on his phone. ‘I would just have a bad case of FOMO if I wasn’t in SPACs,’ he says.



Photo:

Cassidy Araiza for The Wall Street Journal

Trading volumes in many popular blank-check firms have increased lately, an indication of investors’ heightened activity. That trend is even drawing attention from some SPAC founders.

“It worries me,” said veteran investor and SPAC creator

Bill Foley.

Trading volumes have surged in one of the SPACs founded by the owner of the Vegas Golden Knights hockey team, especially since it announced a $7.3 billion deal to take

Blackstone Group Inc.

BX 0.21%

-backed benefits provider Alight Solutions public last week.

One reason traders are getting into blank-check firms when they are just pools of cash is that the time it takes for a SPAC to unveil a deal has dwindled. Blank-check firms normally give themselves two years to acquire a private company, but many these days need only a few months.

SHARE YOUR THOUGHTS

Are you investing in SPACs? Why or why not? Join the conversation below.

It also doesn’t take long for investor speculation about a blank-check firm’s acquisition to build, particularly because SPACs can indicate the sector in which they hope to complete a deal.

Excitement can be triggered by a SPAC pioneer like Mr. Palihapitiya, who sometimes hints to his more than 1.2 million Twitter followers when activity is coming. The former Facebook Inc. executive took space-tourism firm

Virgin Galactic Holdings Inc.

public in 2019 and last month reached a deal with Social Finance Inc.

Even though he invests in a number of blank-check firms other than his own—often when SPACs need to raise more money to complete deals—shares of his own companies can climb following such tweets. One example came Jan. 21, when one of his blank-check firms rose about 4% after Mr. Palihapitiya started a tweet by saying “I’m finalizing an investment in ‘???.’”

The SPAC has since given back those gains after no news about an acquisition came out and it was revealed that Mr. Palihapitiya’s investments were in companies unrelated to his own. He declined to comment.

Mr. Palihapitiya also has thrown himself into the frenzy of activity around GameStop trading, publicizing an options trade last week in the stock and taking profits on it.

Reports about possible mergers like those surrounding the Churchill Capital IV SPAC and a possible combination with Lucid Motors also quickly attract hordes of buyers. That blank-check firm is now owned by many individuals, including Messrs. Prieto, Copeland and

Jack Oundjian,

a 40-year-old who lives in Montreal.

“I’m very excited that we have a chance to be able to participate in what could be future unicorn companies,” or startups valued at $1 billion or more, Mr. Oundjian said. He said he views SPACs as long-term investments rather than fast trades, and holdings tied to the sector make up about 30% of his roughly $1.2 million portfolio.

Private companies are flooding to special-purpose acquisition companies, or SPACs, to bypass the traditional IPO process and gain a public listing. WSJ explains why some critics say investing in these so-called blank-check companies isn’t worth the risk. Illustration: Zoë Soriano/WSJ

Write to Amrith Ramkumar at amrith.ramkumar@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8



Read original article here

Business

Stock Futures Climb as Online Traders Send Silver Soaring

Leave a comment

U.S. stock futures climbed Monday, suggesting that the major benchmarks will recover some ground following their worst week since October.

S&P 500 futures rose 0.7% and Dow Jones Industrial Average futures strengthened 0.6%. Contracts linked to the tech-heavy Nasdaq-100 index gained 0.7%. Changes in futures don’t necessarily predict moves after the markets open.

Silver futures rose over 11% from Friday’s close, fueled by a wave of fresh enthusiasm from online traders. Silver has rallied in recent trading sessions after users on Reddit’s WallStreetBets forum posted about executing a “short squeeze” similar to ones credited with fueling recent gains in other stocks popular on the internet.

Elsewhere in commodities, international benchmark Brent crude rose 1.1% to $55.63 a barrel. Gold also gained 0.8% to $1,866.00 a troy ounce.

Overseas, the Stoxx Europe 600 climbed 0.9% shortly after the market opened. Industrials and energy sectors led gains while the real-estate sector lost ground. The U.K.’s FTSE 100 gained 0.4%.

The Swiss franc was mostly flat against the U.S. dollar, with one franc buying $1.12. The euro fell 0.1% against the dollar, with 1 euro buying $1.21. The British pound was up 0.1% against the U.S. dollar, with 1 pound buying $1.37.

German 10-year bund yields declined to minus 0.518% from minus 0.515% and the 10-year gilts yield was down to 0.323% from 0.329%. 10-year U.S. Treasury yields rose to 1.082% from 1.064%. Yields move inversely to prices.

Indexes in Asia mostly climbed. Hong Kong’s Hang Seng gained 2.2%, Japan’s Nikkei 225 index advanced 1.6%, and China’s benchmark Shanghai Composite climbed 0.6%.

GameStop and other stocks and assets have been volatile as online investors make big bets on Reddit forums.



Photo:

Andre M. Chang/Zuma Press

—An artificial-intelligence tool was used in creating this article.

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Exxon, Chevron CEOs Discussed Merger

Leave a comment

The chief executives of

Exxon Mobil Corp.

XOM -2.65%

and

Chevron Corp.

CVX -4.29%

spoke about combining the oil giants after the pandemic shook the world last year, according to people familiar with the talks, testing the waters for what could be one of the largest corporate mergers ever.

Chevron Chief Executive

Mike Wirth

and Exxon CEO

Darren Woods

discussed a merger following the outbreak of the new coronavirus, which decimated oil and gas demand and put enormous financial strain on both companies, the people said. The discussions were described as preliminary and aren’t ongoing but could come back in the future, the people said.

Such a deal would reunite the two largest descendants of

John D. Rockefeller’s

Standard Oil monopoly, which was broken up by U.S. regulators in 1911, and reshape the oil industry.

A combined company’s market value could top $350 billion. Exxon has a market value of $190 billion, while Chevron’s is $164 billion. Together, they would likely form the world’s second largest oil company by market capitalization and production, producing about 7 million barrels of oil and gas a day, based on pre-pandemic levels, second only in both measures to Saudi Aramco.

But a merger of the two largest American oil companies could encounter regulatory and antitrust challenges under the Biden administration. President Biden has said climate change is one of the biggest crises the country faces. In October, he said he would push the country to “transition away from the oil industry.” He hasn’t been as vocal about antitrust matters, and the administration has yet to nominate the Justice Department’s head of that division.

One of the people familiar with the talks said the sides may have missed an opportunity to consummate the deal under former President

Donald Trump,

whose administration was seen as more friendly to the industry.

Darren Woods, CEO Exxon Mobil Corp., at an industry conference in 2018



Photo:

Andrew Harrer/Bloomberg News

A handful of sizable oil and gas deals were completed last year, including Chevron’s $5 billion takeover of Noble Energy Inc. and

ConocoPhillips

COP -2.63%

’ roughly $10 billion takeover of Concho Resources Inc., but nothing close to the scale of combining San Ramon, Calif.-based Chevron and Irving, Texas-based Exxon.

Such a deal would significantly surpass in size the mega-oil-mergers of the late 1990s and early 2000s, which included the combination of Exxon and Mobil and Chevron and Texaco Inc.

It also could be the largest corporate tie-up ever, depending on its structure. That distinction currently belongs to the roughly $181 billion purchase of German conglomerate Mannesmann AG by Vodafone AirTouch Plc in 2000, according to Dealogic.

Many investors, analysts and energy executives have called for consolidation in the beleaguered oil-and-gas industry, arguing that cutting costs and improving operational efficiencies would help companies weather the pandemic-induced downturn and prepare for an uncertain future as many countries seek to reduce their dependence on fossil fuels to combat climate change.

In an interview discussing Chevron’s earnings Friday, Mr. Wirth, who like Mr. Woods also serves as his company’s board chairman, said that consolidation could make the industry more efficient. He was speaking generally and not about a possible Exxon-Chevron merger.

“As for larger scale things, it’s happened before,” Mr. Wirth said, referring to the 1990s and early-2000s megamergers. “Time will tell.”

Paul Sankey,

an independent analyst who hypothesized a merger of Chevron and Exxon in October, estimated at the time that the combined company would have a market capitalization of about $300 billion and $100 billion in debt. A merger would allow them to cut a combined $15 billion in administrative expenses and $10 billion in annual capital expenditures, he wrote.

An abundance of fossil fuels combined with advances in technology to harness wind and solar power has sent energy prices crashing around the world. WSJ explains how it all happened at once. Photo illustration: Carlos Waters/WSJ

Exxon was America’s most valuable company seven years ago, with a market value of more than $400 billion, nearly double Chevron’s. But Exxon has fallen from its heights following a series of strategic missteps, which were further exacerbated by the pandemic. It has been eclipsed as a profit engine by tech giants such as

Apple Inc.

AAPL -3.74%

and

Amazon.com Inc.,

AMZN -0.97%

in recent years and was removed from the Dow Jones Industrial Average last year for the first time since it was added as Standard Oil of New Jersey in 1928.

Exxon’s shares have fallen nearly 29% over the last year, while Chevron’s are down about 20%. Chevron briefly topped Exxon in market capitalization in the fall.

Exxon endured one of its worst financial performances ever in 2020. It is expected to report a fourth consecutive quarterly loss for the first time in modern history on Tuesday and already has posted more than $2 billion in losses through the first three quarters of 2020.

Chevron also has struggled, reporting nearly $5.5 billion in 2020 losses Friday. But investors have expressed more faith in Chevron because it entered the downturn with a stronger balance sheet—in part because it walked away from its $33 billion bid to buy Anadarko Petroleum Corp. before the pandemic, having been outbid by

Occidental Petroleum Corp.

OXY -4.25%

in 2019.

Exxon has about $69 billion in debt as of September, while Chevron has around $35 billion, according to S&P Global Market Intelligence.

Some investors have grown increasingly concerned about Exxon’s direction under Mr. Woods as the company faces a rapidly changing energy industry and growing global consciousness about climate change. Some are also worried that Exxon may have to cut its hefty dividend, which costs it about $15 billion annually, due to its high debt levels. Many individual investors count on the payments as a source of income.

Mr. Woods embarked on an ambitious plan in 2018 to spend $230 billion to pump an additional one million barrels of oil and gas a day by 2025. But before the pandemic, production was up only slightly and Exxon’s financial flexibility was diminished. In November, Exxon retreated from the plan and said it would cut billions of dollars from its capital spending every year through 2025 and focus on investing in only the most promising assets.

Meanwhile, the company’s woes have helped draw the attention of activist investors. One of them, Engine No. 1 LLC, has argued that the company should focus more on investments in clean energy while cutting costs elsewhere to preserve its dividend. The firm nominated four directors to Exxon’s board Wednesday and called for it to make strategic changes to its business plan.

Exxon also has been in talks with another activist, D.E. Shaw Group, and is preparing to announce one or more new board members, additional spending cuts and investments in new technologies to help it reduce its carbon emissions.

Rivals such as

BP

BP -2.80%

PLC and

Royal Dutch Shell

RDS.A -3.53%

PLC have embarked on bold strategies to remake their business as regulatory and investor pressure to reduce carbon emissions mounts. Both have said they will invest heavily in renewable energy—a strategy that their investors so far haven’t rewarded.

Exxon and Chevron haven’t invested substantially in renewables, instead choosing to double down on oil and gas. Both companies have argued that the world will need vast amounts of fossil fuels for decades to come, and that they can capitalize on current underinvestment in oil production.

Write to Christopher M. Matthews at christopher.matthews@wsj.com, Emily Glazer at emily.glazer@wsj.com and Cara Lombardo at cara.lombardo@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

AMC Entertainment Holdings Inc. Cl A stock rises Friday, outperforms market

Leave a comment

Shares of AMC Entertainment Holdings Inc. Cl A
AMC,
+53.65%
rocketed 53.65% to $13.26 Friday, on what proved to be an all-around dismal trading session for the stock market, with the NASDAQ Composite Index
COMP,
-2.00%
falling 2.00% to 13,070.69 and Dow Jones Industrial Average
DJIA,
-2.03%
falling 2.03% to 29,982.62. AMC Entertainment Holdings Inc. Cl A closed $7.10 short of its 52-week high ($20.36), which the company achieved on January 27th.

Trading volume (590.8 M) eclipsed its 50-day average volume of 97.8 M.


Editor’s Note: This story was auto-generated by Automated Insights using data from Dow Jones and FactSet. See our market data terms of use.

Read original article here

Business

Stock Futures Point to More Losses; GameStop in Focus

Leave a comment

U.S. stock futures dropped, putting Wall Street on course to extend losses amid investor concerns about a slowing economic rebound and froth in markets, exemplified by the wild trading in retailer

GameStop.

Futures tied to the S&P 500 fell 0.2% after the benchmark stocks gauge posted its biggest two-day decline since October. Contracts for the Nasdaq-100 declined 0.8%, after earnings from several technology giants including

Apple

underwhelmed investors late Wednesday. Futures tied to the Dow Jones Industrial Average, which has fallen for five-consecutive days in its longest losing streak since February, were roughly flat.

The stumble in stocks follows a strong start to the year that some investors say had pushed share prices beyond levels justified by corporate fundamentals. The selloff has taken place amid wild swings in individual stocks including GameStop and

AMC Entertainment,

fueled by a battle between day traders and hedge-fund professionals.

“There is some over-excitement in the market,” said

Olaf van den Heuvel,

chief investment officer for

Aegon

Asset Management in the Netherlands, pointing to the surge in GameStop shares as one example. “It was bubble territory.”

Individual stocks remained volatile ahead of the bell in New York. GameStop shares jumped 28%, having rocketed 135% Wednesday. AMC clawed back earlier losses to climb 6.1%, extending Wednesday’s gains of more than 300%.

The stumble in stocks has taken place amid wild swings in individual shares, including GameStop and AMC Entertainment.



Photo:

Courtney Crow/Associated Press

The slow vaccine rollout and Covid-19 restrictions in major economies have prompted investors to take some money off the table, Mr. van den Heuvel added. He said Aegon would likely view the selloff as a chance to buy risky assets when markets settle down.

Technology stocks dropped ahead of the bell in New York. Shares of Apple fell 2.9% after the iPhone maker reported its most profitable three months on record but didn’t provide specific revenue guidance for the current quarter.

Tesla dropped 6.1% after the electric-vehicle maker—whose shares have soared in recent months—posted its first full-year profit but missed Wall Street’s expectations.

Facebook,

which posted record net income but warned that uncertainty from regulatory probes and ad-targeting limits could create headwinds, fell 0.8% in premarket trading.

In one sign of rising risk aversion, the yield on the benchmark 10-year U.S. Treasury note dropped below 1% for the first time since Jan. 6, before climbing back to 1.008%, according to

Tradeweb.

Bond yields fall as prices rise. Falling yields are often an indicator that investors see the economic outlook weakening.

The dollar strengthened against various currencies including the Australian dollar and the Korean won. The WSJ Dollar Index, which measures the greenback against a basket of other currencies, rose 0.2%.

Comcast,

American Airlines

and

Mastercard

are scheduled to publish results before markets open. Investors will also parse data on jobless claims—due to be published at 8:30 a.m. ET and expected to show that the number of workers seeking benefits declined last week—for fresh clues about how the economy is weathering the pandemic.

The Federal Reserve maintained its easy money policies Wednesday, saying that business activity has softened with the resurgence of Covid-19 cases.

“Any removal of fiscal stimulus any time soon could lead to a falter in the recovery,” said

Mary Nicola,

a portfolio manager for PineBridge Investments.

The selloff in U.S. stocks extended overseas. The pan-continental Stoxx Europe 600 fell 0.7%, led lower by shares of oil-and-gas and financial companies.

Shares in several heavily-shorted European stocks that shot up Wednesday, when the short squeeze spread beyond the U.S., came under pressure. Commercial real-estate firm

Unibail-Rodamco-Westfield

lost 2.4% and German drugmaker

Evotec

fell 4%.

“It is nerve-racking,” said

Remi Olu-Pitan,

a fund manager at Schroders, referring to the big moves in stock prices fueled by day traders swapping tips online. She said the volatility likely induced some professional investors, including those caught with loss-making short positions, to take money off the table, weighing on broader markets.

“You will see more violent pullbacks,” Ms. Olu-Pitan said. “There are parts of the market that are in a bubble.”

Among other individual movers,

Prudential

dropped 7.5% after the insurer said it was weighing an equity offering and would separate off its Jackson National arm in the U.S. Diageo gained 4.8%, as analysts cheered strong first-half sales in North America by the alcohol producer.

Markets broadly retreated in Asia. Hong Kong’s Hang Seng dropped 2.6%, the Shanghai Composite Index fell 1.9% and Japan’s Nikkei 225 declined 1.5%. Container-shipping giant Cosco Shipping led losses in mainland China, sliding 10%.

In a sign of jitters in Chinese markets, money-market rates continued to rise. The one-week Shanghai interbank offered rate rose 0.012 percentage point to 2.981%, its highest since 2015, according to FactSet.

Short-term borrowing costs have risen in recent days as the People’s Bank of China unexpectedly drained funds from the financial system. Earlier this week, a major business newspaper also published remarks by

Ma Jun,

an adviser to the central bank, who warned of asset bubbles emerging due to loose monetary policy.

Tai Hui,

chief Asia market strategist at J.P. Morgan Asset Management, said new pockets of coronavirus outbreaks in China had also dented investor sentiment.

Write to Joe Wallace at Joe.Wallace@wsj.com and Chong Koh Ping at chong.kohping@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

World

Biden Freezes U.S. Arms Sales to Saudi Arabia, U.A.E.

Leave a comment

The Biden administration has imposed a temporary freeze on U.S. arms sales to Saudi Arabia and the United Arab Emirates as it reviews billions of dollars in weapons transactions approved by former President

Donald Trump,

according to U.S. officials.

The review, the officials said, includes the sale of precision-guided munitions to Riyadh as well as top-line F-35 fighters to Abu Dhabi, a deal that Washington approved as part of the Abraham Accords, in which the Emirates established diplomatic relations with Israel.

U.S. officials said it isn’t unusual for a new administration to review arms sales approved by a predecessor, and that despite the pause, many of the transactions are likely to ultimately go forward.

But in line with campaign pledges made by President

Biden,

Washington is seeking to ensure that American weapons aren’t used to further the Saudi-led military campaign in Yemen, where its conflict with the Iranian-aligned Houthis has resulted in thousands of civilian deaths and widespread hunger.

Mr. Biden “has made clear that we will end our support for the military campaign led by Saudi Arabia in Yemen, and I think we will work on that in very short order,” Secretary of State

Antony Blinken

said at his confirmation hearing last week. Washington will continue to help defend the Saudis against Houthi attacks, Mr. Blinken said.

Officials at the Saudi and Emirati embassies in Washington didn’t immediately comment on the developments.

Congress and the U.S. defense industry were informed of the review in recent days, one U.S. official said. It is unclear how long the review will last.

Officials couldn’t offer a precise dollar figure for the weapons sales under review. But the review, they said, includes a $23 billion deal between Washington and the Emirates for the F-35 jet fighters, Reaper drones and various munitions that was finalized on Mr. Trump’s last full day in office, according to a statement on the website of the UAE’s Washington embassy.

It also includes billions in contracts with Riyadh, including a deal for $290 million in precision-guided munitions that the U.S. government approved in late December.

“The (State) Department is temporarily pausing the implementation of some pending U.S. defense transfers and sales under Foreign Military Sales and Direct Commercial Sales to allow incoming leadership an opportunity to review,” a department spokesman said.

Calling it “a routine administrative action,” the spokesman said the review “demonstrates the administration’s commitment to transparency and good governance, as well as ensuring U.S. arms sales meet our strategic objectives of building stronger, interoperable, and more capable security partners.”

Write to Warren P. Strobel at Warren.Strobel@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here