Microsoft Corp. is in advanced talks to acquire messaging platform Discord Inc. for $10 billion or more, according to people familiar with the matter, as the software giant seeks to deepen its consumer offerings.
Microsoft and Discord are in exclusive talks and could complete a deal next month, assuming the negotiations don’t fall apart, the people said.
Originally favored by gamers, San Francisco-based Discord offers voice, text and video chatting. The platform’s popularity has surged since the pandemic took hold as people stay home and connect online—as has that of other chat services, like Facebook Inc.’s WhatsApp and Signal Messenger LLC. Discord has been considering an IPO.
Microsoft, which has a market value of more than $1.7 trillion, has been on the hunt for an acquisition that would help it reach more consumers. Last summer, it held talks to buy the popular video-sharing app TikTok amid a high-profile geopolitical standoff prompted by the Trump administration, before abandoning the effort.
VentureBeat reported this week that Discord was exploring a sale and had entered exclusive discussions with an unnamed suitor.
GameStop shares were down 20.2%, at $145.05, in midday trading.
Michael M. Santiago/Getty Images
GameStop
stock was falling fast on Wednesday after the company’s fiscal fourth-quarter results disappointed analysts. There’s also another elephant in the room: The company is considering selling more stock, which could dilute its shares.
GameStop stock (ticker: GME) closed down 33.8%, at $120.34. The S&P 500 index fell 0.6%, while the
Dow Jones Industrial Average
ended flat.
In a filing with the Securities and Exchange Commission, GameStop said it has been evaluating whether or not to increase the size of its previously announced $100 million at-the-market stock-sale program. The company had announced the ATM program in December, with Jefferies acting as the sales agent. The company said it didn’t sell stock as its valuation surged.
GameStop stock received a mix of downgrades, price target cuts, and raises from analysts following the report. “Many on Wall Street have wondered why GameStop has not done an ATM transaction to take advantage of the elevated share price,” Telsey Advisory Group analyst Joseph Feldman wrote. “The answer may be that its balance sheet is in great shape, with cash and cash equivalents of $635MM (incl. restricted cash of $110MM) and debt of $363MM at the end of 2020. The new commentary seems to be a signal that an ATM transaction could be on the way.”
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Heading into Tuesday, Feldman had the highest price target listed by FactSet. He lowered his to $30 from $33, calling the event “anti-climactic.” On the flip side, Jefferies analyst Stephanie Wissink raised her target by 1,066% to $175. That’s the new Street-high, in case there was any doubt.
Wissink argued the moves by Chewy co-founder and GameStop board member Ryan Cohen to transform the company into more of a technology firm warrant a completely different valuation method. The company’s earnings release was paired with another trio of hires with e-commerce backgrounds, including
Amazon
alum Jenna Owens as its next chief operating officer.
Wissink wrote that she moved from basing her target on earnings before interest, taxes, depreciation, and amortization, or Ebitda, to a sales multiple that factors in a shift to e-commerce.
She also makes the point that GameStop has the potential to participate in the rise of non-fungible tokens, or NFTs, and the hosting of shoppable content streams.
“As a result, we expect store closures to persist & sales to transfer to dot com,” Wissink wrote. “Total revs may come down, but value per dollar of sales should increase if non-retail streams are realized.”
S&P Global Ratings analysts Mathew Christy and Andy Sookram wrote in a note on Wednesday that they believe the turnaround will involve sizable execution risks and possibly a material increase in its capital investment.”The recent increase and volatility in GameStop’s share price have not affected our fundamental view of its business or the risks the company faces,” they wrote. “However, we note the potential financial flexibility afforded by its improved equity market standing if it chose to raise additional capital to reposition its business or reduce its debt.”
BofA Global Research analyst Curtis Nagle maintained his $10 price objective and Underperform rating. He notes that while GameStop’s adjusted earnings per share of $1.34 beat his estimate for $1.22, he notes that the beat was driven by a large tax credit during the quarter. The company’s Ebitda came in short of his expectations by 66%.
“We continue to be very skeptical on GME’s efforts to address its long standing issue of digital disintermediation and the fact that its core market in new and pre-owned physical console gaming is shrinking at a rapid pace,” Nagle added. “GME also called out leveraging its existing digital assets like its PowerUp rewards program but this has seen declining engagement for years.”
Wedbush analyst Michael Pachter lowered his rating on GameStop to Underperform from Hold, but raised his price target to $29 from $16. While he still thinks GameStop is well-positioned to benefit from the new consoles from
Sony
and
Microsoft,
he says the short squeeze has spiked the stock to “levels that are completely disconnected from the fundamentals of the business.”
“Our downgrade isn’t a reflection of our opinion of company management, which remains very high; rather, it appears that the ‘real’ value of GameStop shares (the price willing buyers are prepared to pay in the open market) vastly exceeds the ‘fundamental’ value we believe investors expecting a financial return can reasonably expect,” he wrote.
A giant boxship ran aground in the Suez Canal on Tuesday, blocking all vessel traffic and creating a backlog of ships on one of the world’s busiest trade routes.
The Ever Given, a 400-meter (1,312 foot) container ship, was stuck in the canal sideways, with its bow wedged in one bank and its stern nearly touching the other, according to ship operators and images posted on social media.
The ship, operated by Taiwan-based Evergreen Group, is one of the biggest ocean vessels. It can move more than 20,000 containers and is taller than the Empire State Building if turned upright.
“There are at least 100 ships waiting to transit between the Red Sea and the Mediterranean,” said a London broker. “Tug boats are trying to refloat it, but it’s not going to be easy.”
The Suez Canal Authority, which operates the canal, wasn’t immediately available for comment. An Evergreen spokesperson said the ship was probably hit by strong winds “causing the hull to deviate from the channel and run aground.”
GameStop Corp. stock was unsettled in the extended session Tuesday as the videogame retailer at the center of the so-called meme-stock phenomenon said it had laid the groundwork for its “transformation” and reported lower-than-expected adjusted fourth-quarter earnings and sales.
GameStop
GME,
-6.55%
shares initially rose by more than 8% after the report, but pared gains later on, and was last down 3%. The retailer said it earned $80.5 million, or $1.19 a share, in the quarter, compared with earnings of 32 cents a share in year-ago quarter.
Adjusted for one-time items, GameStop earned $90.7 million, or $1.34 a share, compared with $1.27 a share a year ago.
Sales fell to $2.12 billion, compared with $2.19 billion in the fiscal 2019 fourth quarter, reflecting store closures related to the pandemic, the company said.
Analysts polled by FactSet expected the videogame retailer to report adjusted earnings of $1.35 a share on sales of $2.21 billion.
GameStop said same-store sales rose 6.5% in the quarter, with online sales rising 175% for the quarter and 191% for fiscal 2020. The analysts surveyed by FactSet had expected same-store sales to rise 4.7% in the quarter.
The company said it “strengthened” its balance sheet and ended the year with $635 million in cash, “laying the foundation for transformation.”
In a separate press release, GameStop said it had appointed Jenna Owens as chief operating officer, with a start date of Monday, March 29. Owens was a director and distribution manager Amazon.com Inc.
AMZN,
+0.86%.
The company also named Neda Pacifico, who was an executive at Chewy Inc.
CHWY,
-1.39%,
as senior vice president of e-commerce. Pacifico also starts on Monday.
Chewy co-founder Ryan Cohen and two of his allies joined GameStop’s board earlier this year, leading to hopes he’d direct an overhaul.
GameStop’s stock is often cited as one of the meme stocks that have skyrocketed in recent months thanks to frenzied boosts from Reddit comments and social-media posts.
See also: GameStop: what’s the fun in fundamentals, ask Reddit traders on the rocket-emoji launchpad
Shares of GameStop have gained more than 800% in the past three months, compared with gains around 7% for the S&P 500 index
SPX,
-0.76%.
Pfizer Inc. aims to expand its vaccine business by becoming a leader in the new gene-based technology behind its successful Covid-19 shots.
Pfizer will develop new shots using the technology, called mRNA, to target other viruses and pathogens beyond the coronavirus, Chief Executive Albert Bourla said in an interview. He said the company’s scientists and engineers gained a decade’s worth of experience in the past year working on the Covid-19 vaccine with Germany’s BioNTech SE , and is ready to pursue mRNA on its own.
“There is a technology that has proven dramatic impact and dramatic potential,” Mr. Bourla said. “We are the best positioned company right now to take it to the next step because of our size and our expertise.”
Pfizer will increase R&D in the technology, including adding at least 50 employees whose assignments will include mRNA, and it will harness the new mRNA manufacturing network it assembled in the past year to compete.
“We are now ahead and we plan to maintain the gap,” he said of the mRNA vaccine market.
TOKYO—A fire at a factory of one of the world’s leading auto chip makers has added to the troubles of car makers that already have slashed production because of a semiconductor shortage.
The fire Friday left a swath of charred equipment in the factory owned by a subsidiary of Renesas Electronics Corp. in Hitachinaka, northeast of Tokyo. The company said it would take at least a month to restart the damaged operations.
Shares of Japan’s three leading car makers— Toyota Motor Corp. , Nissan Motor Co. and Honda Motor Co. —all fell by more than 3% on Monday, worse than the overall market, while Renesas shares were down 4.9%.
Renesas said heat from an electrical problem inside a single piece of equipment caused the fire and contaminated clean rooms needed to make semiconductors. It said two-thirds of the chips made at the fire-affected factory were automotive chips.
Renesas’s chief executive, Hidetoshi Shibata, said Sunday the impact on global chip supplies would be significant. Mariko Semetko, a credit analyst at Moody’s Japan, said the fire was likely to damp the recovery of global auto production this year, while auto makers said they were still assessing the impact.
in a merger valued at about $25 billion that would create the first freight-rail network linking Mexico, the U.S. and Canada.
The companies said Sunday their boards agreed to a deal that values Kansas City at $275 a share in a combination of cash and stock. Kansas City investors will receive 0.489 of a Canadian Pacific share and $90 in cash for each Kansas City common share held.
If approved by regulators, the deal would unite two of the major North American freight carriers, linking factories and ports in Mexico, farms and plants in the midwestern U.S. and Canada’s ocean ports and energy resources.
The combined company would have about $8.7 billion in annual revenue and employ nearly 20,000 people. It would be run by Canadian Pacific CEO
Keith Creel.
Kansas City Southern is the smallest of the five major freight railroads in the U.S. but plays a key role in U.S.-Mexico trade. Its network mainly runs up the length of Mexico through Texas to its namesake city. The company last year rejected takeover bids worth roughly $20 billion from a group of institutional investors seeking to take it private, The Wall Street Journal reported.
Canadian Pacific has long sought a union with Kansas City to extend its reach into its busy freight routes that stretch from Mexico through southern and midwestern U.S. states. CP’s major rail lines run across Canada, some northern U.S. states and south to Chicago.
The Canadian railway’s leader, Mr. Creel, worked closely with former chief
Hunter Harrison,
who made a number of unsuccessful overtures to buy Kansas City. Mr. Harrison died in 2017 after taking over and revamping another U.S. operator,
CSX Corp.
“This will create the first U.S.-Mexico-Canada railroad,” Mr. Creel said in a statement.
Railway mergers face significant regulatory hurdles in the U.S. Under Mr. Harrison, Canadian Pacific abandoned a $30 billion pursuit of
Norfolk Southern Corp.
in 2016 after regulators expressed concern about reduced competition and potential safety issues.
Kansas City and Canadian Pacific currently have a single point where their two networks connect, in a Kansas City, Mo., facility they jointly operate. The merger could allow trains traveling north and south to avoid having to interchange cars and potentially bypass Chicago, a busy and often congested hub in the U.S. freight system.
The merger partners said the proposed combination wouldn’t reduce choice for customers since there is no overlap between their systems. They said the possibility for single-line routes would shift trucks off U.S. highways, reducing congestion and emissions in the Dallas-to-Chicago corridor.
The freight-rail industry suffered a sharp drop in volume last year as the pandemic slowed trade and temporarily shut many U.S. stores, but volume has bounced back as factories continued to operate and economies recovered. Trade volume has overwhelmed some U.S. ports, causing congestion and delays.
GameStop stock has been on a wild ride for two months.
Justin Sullivan/Getty Images
After two months of wild trading,
GameStop
will report results for its January quarter on Tuesday. What that means for the stock is anyone’s guess.
In a note Thursday, Wedbush analyst Michael Pachter wrote that GameStop is “well-positioned to be a primary beneficiary of the new console launches.” But he thinks the stock is trading at levels that are disconnected from fundamentals. Though Pachter rates the stock at Neutral, he has a $16 price target. GameStop stock was down 0.7% to $200.27 on Friday.
By now, many Americans know why. GameStop stock was widely panned by Wall Street analysts, with the stock falling around the price of a Happy Meal a year ago. It garnered an obscene short interest, meaning hedge funds were lining up to bet on a price decline. But when short sellers get ahead of themselves, positive news can send stocks soaring as they rush to buy shares to close out their bets in the face of unlimited downside.
In the second half of last year, Chewy co-founder
Ryan Cohen
entered the mix. He revealed a stake and later called for major changes. He upped his stake in December and joined the board in January with two associates.
Keying in on the stock’s short interest, and the possibility that GameStop could find a second life as a gaming-focused e-commerce player, retail traders on Reddit’s WallStreetBets forum piled into GameStop stock. Technical quirks of options activity, the aforementioned short interest, and the newfound enthusiasm sent GameStop stock surging in January.
WallStreetBets made it to the front pages of national newspapers, and the bearish hedge funds got torched. It also kicked off a debate about short selling, as well as one about retail traders’ access to financial markets after Robinhood and other brokers temporarily limited buying of the stock due to financial requirements from their clearinghouses.
GameStop stock fell back around $40 but surged again in the past month. Though GameStop announced a hunt for a new chief financial officer, some promising e-commerce-focused hires, and a board committee chaired by Cohen to guide its transformation into a technology company, it hasn’t provided an update on sales or its prospects since its holiday sales release on Jan. 11, which signaled a disappointing December.
For the full fiscal fourth quarter, Pachter, the analyst at Wedbush, expects sales of $2.3 billion, comparable sales up 4.8% year-over-year, and adjusted earnings of $1.38 a share. He notes that GameStop’s holiday sales report indicated same-store sales were down year-over-year in December and lagged behind positive industrywide data from NPD. He notes the company has lost market share in recent periods to competitors amid a shift to internet spending.
BofA Global Research analyst Curtis Nagle wrote in a Friday note that he expects an underwhelming quarter, albeit a profitable one. He wrote that while the recent announcements related to Cohen and new hires are positive, in theory, there haven’t been actual details on cost, timeline, and impacts to earnings of a turnaround plan. He has a $10 price objective with an Underperform rating, noting that the stock’s current valuation and historic multiple would imply earnings before interest, taxes, depreciation, and amortization of $3.5 billion, about four times its peak Ebitda from 2015.
Nagle’s note included an analysis on the impact of $1,400 direct payments on the stock, the idea being that retail investors will use their latest windfall on GameStop stock. His takeaway is that the “stimmies,” as he calls them, will not impact GameStop stock going forward.
Of course, what analysts have said about GameStop stock hasn’t had much of an impact on its recent moves. A positive update on the turnaround plan could thwart the remaining bears in the near term. On the flip side, any commentary on possible stock sales could be negative. Pachter had expected short sellers to abandon their bets, with the stock returning to more fundamental-based levels. That hasn’t happened, he noted.
“Activists control the company’s board, and lead activist Ryan Cohen, founder of Chewy, intends to unveil a new strategy sometime soon,” Pachter added. “When the new strategy is revealed and we are able to evaluate it, we will revisit our estimates and PT.”
When a Boeing 777’s engine cover broke apart and rained parts on a Denver suburb on Feb. 20, the news rang familiar to Christopher Behnam. In February 2018, the 777 he was piloting as captain suffered a similar emergency with the same engine type.
His plane, United Airlines Flight 1175 to Honolulu, was over the ocean 120 miles from the runway carrying more than 370 passengers and crew when a violent blast rocked it.
The jet shook uncontrollably, rolled sharply, and the noise was deafening, said Capt. Behnam. An engine had suffered severe damage. Years of training kicked in, the pilots regained control and shut the engine down. Even so, the plane was hard to handle. A third pilot went into the cabin and looked out the window: The engine hadn’t just failed; its cover had ripped away.
“After the explosion, it felt like she was going to fall apart,” Capt. Behnam said. “I knew I could fly the airplane. The issue was, can I fly it long enough to land it?” The pilots brought the plane to a safe landing in Hawaii.
The National Transportation Safety Board, which investigates U.S. aviation failures, concluded that a roughly 35-pound fan blade broke in the plane’s Pratt & Whitney PW4000 engine due to fatigue, spiraling forward and causing parts of the engine cover to drop into the sea.
Big U.S. companies are discovering that “hybrid” work comes with plenty of complications.
As employers firm up plans to bring white-collar workers back into offices while still allowing them to do some work at home, many are encountering obstacles. Companies are grappling with what new schedules employees should follow, where people should sit in redesigned offices and how best to prevent employees at home from feeling left out of impromptu office discussions or being passed over for opportunities, say chief executives, board directors and others.
The insurer
Prudential Financial Inc.,
PRU -0.08%
which expects most of its roughly 42,000 employees to work in the office half the time starting after Labor Day, wants to make certain not all staffers choose to stay home Mondays and Fridays and then work in the office midweek. At the travel company
Expedia Group Inc.,
EXPE -2.41%
executives are trying to figure out how to have in-person meetings that don’t disadvantage those who aren’t in the room. Other employers, including the software company
Twilio Inc.,
predict that the new era of work could lead to shuffling between teams, with staffers gravitating to bosses who embrace their preferred styles of working.
Hybrid work “is going to redefine expectations, rules, permissions,” says Kevin McCarty, chief executive officer of the Chicago-based consulting firm West Monroe, which employs 1,360 people, and is rethinking when its employees should work at home or come into its offices.
The new style of work is bound to be another transition for workers who a year ago had to adjust to life at home. Though executives say it would be easier to manage if every employee returned to an office, or all stayed remote, surveys have repeatedly shown that most workers want a mixed approach as more adults are vaccinated. In a February survey of 1,000 companies commissioned by LaSalle Network, a national staffing and recruiting firm, the majority of companies said they would adopt a hybrid model.
Companies have also polled their organizations to find out how employees feel. At
Prudential,
PRU -0.08%
most employees indicated that they enjoyed working remotely but missed the planning, ideation and collaboration that takes place in person, says
Rob Falzon,
vice chair of the company.
Prudential has been redesigning its office space floor by floor and repurposing most of it for meeting rooms, collaboration and open space so people will be more likely to interact. Mr. Falzon says he insisted on adding video capacity in more small meeting spaces, not just conference rooms, so people working from home won’t feel excluded.
Like many employers, the company is reducing its physical footprint so there won’t be available desks for people who want to go to the office more frequently, with exceptions for some employees including traders. “We don’t have a desk for you every day,” Mr. Falzon says. “We have a desk for you three days a week.”
Hybrid models range by company. The technology company
Adobe Inc.
plans to allow employees to work from home up to two to three days a week, with staffers able to make reservations for office desks, says
Gloria Chen,
the company’s chief people officer. Other companies are hesitant to put out a specific number on days allowed at home. Factors including the length of a commute, type of job and an employee’s seniority could determine how often an employee needs to visit an office, executives say.
“We won’t prescribe” from a company level, says
David Henshall,
CEO at the technology company
Citrix Systems Inc.
“Based on the type of role you have, you’ll find that right balance.”
Prominent tech companies are embracing remote work in the midst of an exodus of skilled labor from Silicon Valley. WSJ looks at what that could mean for innovation and productivity and what companies are doing to manage the impact.
With flexibility can come challenges. If a team comes together in-person, but not all can make it, that potentially creates a subpar experience for those not in the room, says Expedia CEO
Peter Kern.
The travel company opened the first phases of an expansive campus—complete with Wi-Fi-equipped rocks —on the shores of Seattle’s Elliott Bay before the pandemic, and plans to initially permit spaced group team meetings at its headquarters.
Mr. Kern, though, says he has questions about whether those on Zoom will get the same level of learning, encouragement and career growth as those in the room. Then there are the scheduling issues.
Managers may need to “set up group meetings according to some crazy algorithm of: Who’s available when? Who’s got a flexible day, when?” Mr. Kern says. “There’s a lot of friction in all of that. It’s a lot easier to say, ‘Everybody go to work.’ Now someone calls a meeting, and you’re all there.”
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A new way of working will require the company to think differently about performance, Mr. Kern says. Managers must be careful not to have biased judgments against those who may spend less time in the office, requiring the company to be “really thoughtful about how we assess people and give people opportunity so that we don’t end up with skewed outcomes.”
Training and onboarding might be more challenging in a hybrid environment, especially if new employees have a harder time grasping the company’s culture without regular, in-person interaction with colleagues, says Tom Gimbel, CEO of LaSalle Network. With younger employees, “for them to learn anything, they need to be around the more experienced people,” he says.
Other companies have said they would allow for remote work in limited circumstances. In a memo, executives at the
New York Times Co.
said the company planned to reopen its main offices in September and didn’t intend to become fully remote. The company would “approve remote work only in places where the team and nature of the work can accommodate it.”
Some human-resources professionals say companies will have little choice but to accommodate workers’ demands, as an inflexible workplace could drive employees away as the economy rebounds, and because many workers have proven themselves adept at working anywhere.
“The employer before just could say, ‘Our culture is this,’” says
Tara Wolckenhauer,
a human-resources executive at the payroll processor
Automatic Data Processing Inc.
“Employers have to take a step back and think about it very differently.”
—Krithika Varagur contributed to this article.
Write to Emily Glazer at emily.glazer@wsj.com and Chip Cutter at chip.cutter@wsj.com