Moodys Downgrades China

The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years

The strengths of its credit profile will allow the sovereign to remain resilient to negative shocks, with GDP growth likely to stay strong

#Moody’s Investors Service has #downgraded China’s long-term local currency and foreign currency issuer ratings to A1 from Aa3 and changed the outlook to stable from negative.

Moody’s says, “The downgrade reflects Moody’s expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows. While ongoing progress on reforms is likely to transform the economy and financial system over time, it is not likely to prevent a further material rise in economy-wide debt, and the consequent increase in contingent liabilities for the government.

The stable outlook reflects our assessment that, at the A1 rating level, risks are balanced. The erosion in China’s credit profile will be gradual and, we expect, eventually contained as reforms deepen.

The strengths of its credit profile will allow the sovereign to remain resilient to negative shocks, with GDP growth likely to stay strong compared to other sovereigns, still considerable scope for policy to adapt to support the economy, and a largely closed capital account.”

China’s local currency and foreign currency senior unsecured debt ratings are downgraded to A1 from Aa3.

Take-Two Higher Despite Red Dead Redemption 2 delay

Stockwinners.com blogShares of #Take-Two $TTWO rose in Tuesday trading, rebounding from Monday’s after-hours dip following the delay of the video game maker’s highly-anticipated #RedDeadRedemption 2 to Spring of next year.

In addition, the company reported better-than-expected quarterly results and provided guidance for the first quarter and fiscal 2018.

RED DEAD DELAY: In a blog post Monday afternoon, Take-Two subsidiary Rockstar Games said that Red Dead Redemption 2 is now set to launch in Spring 2018 on #Sony’s #SNE #PlayStation 4 and #Microsoft’s $MSFT #Xbox One.

The company originally said the game, which is a sequel to 2010’s Red Dead Redemption, would be available in Fall of 2017. Commenting on the matter, Rockstar said it is “very sorry for any disappointment this delay causes,” yet noted that they would rather deliver a game “only when it is ready.”

Following the news, shares of Take-Two fell as much as 10% in after-hours trading.  Later on, Take-Two CEO Strauss Zelnick noted in the company’s quarterly earnings release that Red Dead Redemption 2 will be the first game from Rockstar to be “created from the ground up” for the latest generation of consoles, and some additional time is necessary to “ensure that they deliver the best experience possible.”

EARNINGS/GUIDANCE: Take-Two Interactive TTWO reported fourth quarter GAAP earnings per share of 89c on net revenue of $571.6M. Analysts were expecting the company to report EPS of 57c on revenue of $355.37M.

Looking ahead, the company said it expects Q1 EPS in the range of 65c-75c on revenue of $390M-$440M. Take-Two also said it sees Q1 net sales of $240M-$290M, compared to analysts’ estimates for $254.5M.

In addition, the video game maker said it sees FY18 EPS of $4.35-$4.65 on revenue of $1.95B-$2.05B and net sales of $1.42B-$1.52B. Analysts expect the company to report FY18 revenue of $2.24B.

Analyst Comments: Prior to Take-Two’s earnings report, #Jefferies analyst Timothy O’Shea said that the selloff related to the Red Dead Redemption 2 delay should be viewed as a buying opportunity. #O’Shea attributed the roughly 10% slip in shares post-market to Rockstar’s “infamous perfectionism” and doesn’t believe that it changes the overall unit sales potential for the title.

The analyst also noted that Take-Two’s shares traded down 6% when Rockstar announced in January 2013 that the release Grand Theft Auto V would be moved by six months, adding that GTA V has sold over 75M units and the stock has “more than quintupled” since that time. O’Shea maintained a Buy Rating on Take-Two with a $65 price target.

Meanwhile, #Piper Jaffray analyst Michael Olson kept an Overweight rating and $77 price target on the stock, saying that he doesn’t expect the RDR2 release change to affect overall sales of the game or average multi-year Take-Two EPS. While Olson noted that some may suggest the delay comes with two potential risks, namely a worse launch window as well as real issues with the game, he said that a spring release should not “significantly” impact overall sales of the game and that he believes Rockstar would have left the timing open-ended if in fact there were major development issues. PRICE ACTION: In afternoon trading, Take-Two (TTWO) advanced about 5% to $72.48.

OTHERS TO WATCH: Shares of the game maker’s competitors were also higher, with Activision Blizzard $ATVI up 1% and Electronic Arts $EA up 0.5% in the afternoon.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Global Sources Sold for $18 per share

stockwinners com#GlobalSources $GSOL  has entered into an Agreement and Plan of Amalgamation with Expo Holdings and Expo Holdings II, a wholly-owned subsidiary of Parent.

Subject to the terms and conditions set forth each shareholder to receive an amount equal to $18.00 in cash, without interest. The Amalgamation Consideration represents a premium of 50.0% over the company’s closing price of $12.00 per Share on May 22, 2017, the last trading day prior to the date that the Company entered into the Amalgamation Agreement, and a premium of 72.65% to the volume-weighted average closing prices of the Shares during the 30 trading days prior to May 22, 2017.

The Company expects to hold a special meeting of its shareholders to consider and act upon the Amalgamation Agreement and the transactions contemplated by the Amalgamation Agreement as promptly as practicable. Details regarding the record date for, and the date, time and place of, the special meeting will be included in a press release when finalized.

Shares of Global Sources last traded at $17.88.

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GE Receives $15 Billion Contract from Saudi Arabia

Building on its more than 80 years of partnership and experience in the Kingdom, #GE said it has taken significant steps in supporting the delivery of Saudi Vision 2030, announcing this weekend in partnership with the Kingdom a range of Memorandums of Understanding and projects valued at $15B – of which almost $7B are GE technology and solutions – across multiple sectors and partners aimed at creating a truly diverse and sustainable economic platform.

The initiatives touch upon the key pillars within #SaudiVision 2030, focusing on transforming the nation into a global investment leader and geographic hub and the upscaling of industrial skills and capabilities.

Among the projects, GE will help make Saudi power generation more efficient and provide digital technology to the operations of oil firm Saudi Aramco, aiming to create $4 billion of annual productivity improvements at Aramco. It will cooperate in medical research and training.

The agreements also place significant emphasis on human capital development and the digital transformation across multiple sectors, with the expanded application of GE’s Predix platform, which utilizes cloud-based data analytics to better ensure and enhance manufacturing efficiency.

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Blackstone to Launch $40 Billion Investment Fund with Saudi Arabia

#Blackstone $BX to launch $40B infrastructure vehicle, new infrastructure business – Blackstone and the Public Investment Fund of Saudi Arabia announced the execution of a memorandum of understanding in relation to the launch of a new investment vehicle dedicated to infrastructure with an anchor $20B contribution by PIF. Blackstone anticipates that the program will have $40B in total equity commitments in a permanent capital vehicle, including $20B to be raised from other investors.

“The MOU is non-binding and the parties will continue their negotiation to agree definitive documentation… This collaboration between PIF and Blackstone is the culmination of a year’s discussions between the two institutions, which began in May 2016…

Blackstone’s new program will help the United States address its significant need for infrastructure improvement,” Blackstone noted. Overall, through the equity in this vehicle and additional debt financing, Blackstone expects to invest in more than $100B of infrastructure projects, principally in the United States, the company said.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Nutraceutical Sold for $41.80 per share

NUTR sold for $446M#Nutraceutical $NUTR and HGGC, a leading middle-market private equity firm, announced that they have entered into a definitive agreement under which Nutraceutical will be acquired by an affiliate of HGGC in a transaction valued at approximately $446M, including debt to be refinanced.
Under the terms of the agreement, Nutraceutical stockholders will receive $41.80 in cash (without interest) for each outstanding share of Nutraceutical common stock they own, which represents a 49% premium to the company’s closing stock price on May 19, the last full trading day before today’s announcement, and a 15.6% premium to the company’s all-time high closing stock price.
The agreement has been unanimously approved by Nutraceutical’s board of directors, acting on the recommendation of a special committee of independent and disinterested directors. The special committee negotiated the terms of the agreement with the assistance of its financial and legal advisors.
The Company will undertake a 60-day “go-shop” period, commencing immediately, during which the special committee, with the assistance of its financial and legal advisors, will actively solicit, evaluate and potentially enter into negotiations with parties who offer alternative proposals.
 The transaction, which is expected to close in the second half of 2017, is subject to customary closing conditions, including Company stockholder approval and the expiration or termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
There are no financing conditions associated with the transaction. Bill Gay and Jeff Hinrichs, COO and Executive Vice President of the company, who own approximately 7.9% and 2.5% of the company’s outstanding common stock, respectively, have entered into customary voting agreements pursuant to which they have agreed to vote all of their shares in favor of the transaction.

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Russell 2000 Maybe the Canary in the Mine

 

Russell 2000 Technical on Stockwinners.com

The Russell 2000 Index is a small-cap stock market index of the bottom 2,000 stocks in the Russell 3000 Index. The index is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group.

The Russell 2000 is by far the most common benchmark for mutual funds that identify themselves as “small-cap”, while the S&P 500 index is used primarily for large capitalization stocks. It is the most widely quoted measure of the overall performance of the small-cap to mid-cap company shares.

The #Russell2000 $RUT has been in a distinct downtrend since hitting a peak of price on April 26. It is in a technically more fragile state on a short time frame than the large-cap indexes.

Pulling back to a 1-year view shows a different perspective, notably on a closing price basis chart. In that case the index has been trapped in a range since late November/early December 2016.

Resistance is easy enough to spot at 1400, a level that has only been briefly breached before selling resumes.

For support on the 1-month time frame it is the 1380 area that is key. A breakdown below 1380 that does not produce a bounce would be a distinct negative technically on a multi-month basis, but not a yearly basis. Next significant support would be at the 1360 area.

If there was a breakdown below 1360, the 1340 area would be the next level of importance. While the index is in a more bearish state on a relatively short time frame, only a break below 1340 that persists below 1340 would break the longer-term uptrend. And even then, a break below 1300 would be needed to snap the multi-year uptrend.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Yahoo to buyback $3 billion of its own shares

yahoo #Yahoo! $YHOO announced the commencement of a modified “Dutch auction” self-tender offer to purchase for cash up to $3B of shares of its common stock at prices equal to the A) “Alibaba #VWAP”, multiplied by (B) multiples specified by tendering stockholders not greater than 0.420 nor less than 0.370, provided that in no event will the purchase price be less than $37.00 per share, less applicable withholding taxes and without interest.

The terms and conditions of the tender offer are set forth in an Offer to Purchase, Letter of Transmittal and related documentation that are being distributed to holders of the company’s shares and are being filed with the U.S. SEC. The tender offer will expire on June 13, 2017 at 11:59 p.m., New York City time, unless the tender offer is extended or withdrawn by the company.

Tenders of shares must be made prior to the expiration of the tender offer and may be withdrawn at any time prior to the expiration of the tender offer, in each case in accordance with the procedures described in the tender offer materials that are being distributed to stockholders.

The “Alibaba VWAP” means the daily volume-weighted average price for an American Depositary Share of #Alibaba Group $BABA on the New York Stock Exchange, on the second trading day prior to the expiration date; provided, that in no event shall the Alibaba VWAP be less than $100.00 for the purpose of computing the purchase price.

The purpose of the tender offer is to provide liquidity to a potentially significant number of stockholders that will be forced to sell their shares at or prior to the closing of the pending sale of Yahoo’s operating business to #Verizon $VZ as a result of the fact that, upon completion of the Sale Transaction, the company will be required to register as a closed-end investment company under the Investment Company of 1940 and its shares are expected to be removed from the Standard and Poor’s 500 Composite Index and other indices.

The tender offer also enables the company to potentially return a significant amount of cash to its stockholders by repurchasing shares. The company believes that the tender offer provides a mechanism for completing a sizable repurchase of its shares more rapidly than would be possible through open market purchases.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Target to Focus on High Margin Products

target #Target $TGT appears to be taking a “less is more” strategy with ecommerce, choosing to revamp some online projects, cut relationships with digital partners, and walk away from prospective acquisitions, the Wall Street Journal reported earlier, citing sources.

“We’re not trying to be the catalog of everything. We aren’t going to add products to our website and stores just because they exist,” Target digital head Mike McNamara commented, according to the report.

Under McNamara, the company is pursuing select online projects, and is working on a curbside-pickup service, a source said. The Journal noted that Target stayed on the sidelines when #Wal-Mart $WMT acquired #Jet.com last year, considering the deal overpriced and a poor fit with Target chief Brian Cornell’s emphasis on high-margin product categories, according to sources.

Additionally, the report noted that Target was in advanced discussions last summer to potentially acquire #Sprouts Farmers Market $SFM but ultimately walked away, according to sources. More recently, Target explored acquiring an ecommerce name, including #Boxed.com, though those talks didn’t lead anywhere, sources told the Journal.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Retail Sales Rebound in April

retailsalesU.S. #retail sales rose in April, slightly beat estimates with a 0.4% April bounce and a 0.3% ex-auto increase that followed upward revisions versus the last reported March levels and prior levels through February revealed with annual revisions on April 26.

Analysts saw April retail sales boosts from gains of 0.7% for auto dealers, 1.2% for building materials, and 0.2% for gasoline after big upward revisions. Analysts saw a likely March and April sales lift from big tax refund delays from February.

Analysts left Q2 GDP growth estimates at 3.2%, though analysts now expect a 3.7% (was 3.6%) Q2 pace for real consumption. Analysts still expect a Q1 GDP growth boost to 0.9% from 0.7% with no consumption revision from 0.3% growth.

Analysts now assume a 0.6% (was 0.5%) April #PCE rise in nominal terms with a 0.4% (was 0.3%) rise in “real” terms, alongside a 0.2% PCE chain price rise that tracks today’s CPI gain.

The savings rate should slip to 5.8% from 5.9% in March.

The business inventory report later this morning will reveal a flat March sales figure after a 0.2% February increase. Today’s retail sales data are consistent with a 0.4% business sales rise in next month’s April report.

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The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Reverse Stock Splits Destroy Shareholders Value

Reverse-stock-split-thumbnail#NYSE and #Nasdaq are the two major stock exchanges in the U.S.  Both exchanges require stock prices that are traded on their platforms to have a price of one dollar or higher. Stocks that fall below this threshold are delisted. These stocks are then moved to other exchanges such as #OTC or Pink Sheet #PinkSheet which have very low liquidity.

In order to avoid this, companies with sub dollar share prices reverse split their shares. In finance, a reverse stock split or reverse split is a process by which shares of corporate stock are effectively merged to form a smaller number of proportionally more valuable shares. A reverse stock split is also called a stock merger.

If a company has 10 million shares that are trading at $1, it can declare a 1-for-5 reverse stock split. Theoretically, the book value of the company remains the same instead now the company will have 2 million shares that are trading at $5 per share.

Higher share prices however, do not necessarily mean better stock fundamentals. The higher share price, following the split, has now simply masked the company’s declining fundamentals, and market’s view of the company. The higher share price now allows short seller to short the stock although it would be harder to find shares to borrow but this is offset by those investors who give up on the stock and sell at any price.

Below are several examples of such companies:

  • Pain Therapeutics $PTIE engages in developing drugs and focuses its drug development on disorders of the nervous system, such as chronic pain. The company recently declared a 7-for-1 reverse stock split. Shares were trading at 59 cents.

 

  • #NeuroMetrix, Inc. $NURO develops and markets products for the detection, diagnosis, and monitoring of peripheral nerve and spinal cord disorders. The company recently declared an 8-for-1 reverse stock split. Shares were trading at 48 cents.

 

  • Rex Energy $REXX is an independent oil, natural gas liquids and natural gas company operates in the Appalachian Basin. The company recently declared a 10-for-1 reverse stock split. Shares were trading at 42 cents.

 

  • #Rubicon Technology $RBCN is a materials provider focusing in monocrystalline sapphire for applications in optical and industrial systems. Co. designs, assembles and maintains its own proprietary crystal growth furnaces to grow sapphire crystals. The company recently declared a 10-for-1 reverse stock split. Shares were trading at 82 cents.

 

  • The mother of all reverse stock splits award should go to #DryShips $DRYS . DryShips Inc. owns and operates ocean going cargo
    drys
    DryShips stock over the past 12 months

    vessels worldwide. The company has reverse split its shares seven times over the past thirteen months at the expense of its shareholders. The last split was today for 7-for-1, the one before that was in April for 4-for-1. The one prior to that was in February for 8-for-1. This puts the 52-week trading range for this stock at (this is not a typo!) $4.55 to $37,900.80. Shares last traded at $5.35.

 

 

Calpine is in-play below $16

CalpineThe Wall Street Journal reported yesterday that #Calpine $CPN , the largest power producer, is exploring a sale.
#Deutsche Bank sees few strategic acquirers for Calpine (CPN), making going private or remaining public the most likely outcomes in the analyst’s view.
Market power issues in #Texas make a combination with Vistra Energy $VST or NRG Energy $NRG unlikely, and while #PSEG $PEG and #Exelon $EXC could afford buying Calpine, such a deal would be a shift in strategy for both.
The analyst finds it unlikely that a go-private deal gets done much north of $16 per share.
The analyst believes, however, that a mid-teens per share takeout is possible “with some creative structuring.”
Even without a deal, Calpine offers value based on its cash flow profile, Deutsche contends. The analyst reiterates a Buy rating on Calpine with a $14 price target.
The article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility.

Moody’s Lowers its view of Canadian Banks

canada-banks#Moody’s Investors Service downgraded the #Baseline Credit Assessments (BCA), the long-term ratings and the #Counterparty Risk Assessments  (CRA) of six Canadian banks and their affiliates, reflecting Moody’s expectation of a more challenging operating environment for banks in Canada for the remainder of 2017 and beyond, that could lead to a deterioration in the banks’ asset quality, and increase their sensitivity to external shocks.

The banks affected are: #Toronto-Dominion Bank $TD , Bank of Montreal $BMO , Bank of Nova Scotia $BNS , Canadian Imperial Bank of Commerce $CM , National Bank of Canada $NTIOF , and Royal Bank of Canada $RY .

The BCAs, long-term debt and deposit ratings and CRAs of the banks and their affiliates were downgraded by 1 notch, excepting only Toronto-Dominion Bank’s CRA, which was affirmed.

The short term Prime-1 ratings of the Canadian banks were affirmed.

All relevant ratings for these banks continue to have negative outlooks, reflecting the expected introduction of an operational resolution regime in Canada.

“Today’s downgrade of the Canadian banks reflects our ongoing concerns that expanding levels of private-sector debt could weaken asset quality in the future. Continued growth in Canadian consumer debt and elevated housing prices leaves consumers, and Canadian banks, more vulnerable to downside risks facing the Canadian economy than in the past.” said David Beattie, a Moody’s Senior Vice President.

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