HP Enterprise to acquire Cray for $35 per share

HP Enterprise to acquire Cray in deal valued at $1.3B

HP Enterprise to buy Cray Research, Stockwinners

Hewlett Packard Enterprise (HPE) and Cray (CRAY) announced that the companies have entered into a definitive agreement under which HPE will acquire Cray for $35.00 per share in cash, in a transaction valued at approximately $1.3B, net of cash.

Cray Inc. designs, develops, manufactures, markets, and services computing products for high-performance computing, data analytics, and AI markets. It operates through Supercomputing, Storage and Data Management, Maintenance and Support, and Engineering Services and Other segments. 

Cray sold to HPE for $1.3 billion, Stockwinners

“Bringing together HPE and Cray enables an enhanced financial profile for the combined company that includes several revenue growth opportunities and cost synergies.

The companies expect the combination to drive significant revenue growth opportunities by:

Capitalizing on the growing HPC segment of the market and Exascale opportunities; Enhancing HPE’s customer base with a complementary footprint in federal business and academia and the company’s ability to accelerate commercial supercomputing adoption; Introducing new offerings in AI / ML and HPC-as-a-service with HPE GreenLake; We also expect to deliver significant cost synergies through efficiencies and by leveraging proprietary Cray technology, like the Slingshot interconnect, to lower costs and improve product performance.”

As a result of the enhanced financial profiles of the combined companies, the deal is expected to be accretive to HPE non-GAAP operating profit and earnings in the first full year following the close.

As part of the transaction, HPE expects to incur one-time integration costs that will be absorbed within HPE’s FY20 free cash flow outlook of $1.9B-$2.1B that remains unchanged.

The transaction is expected to close by the first quarter of HPE’s fiscal year 2020, subject to regulatory approvals and other customary closing conditions.

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Verifone sold for $3.4 billion

Verifone to be acquired by Francisco Partners for $23.04/share

Verifone sold for $3.4 billion. Stockwinners
Verifone sold for $3.4 billion

Verifone Systems (PAY) announced that they have entered into a definitive agreement under which an investor group led by Francisco Partners and including British Columbia Investment Management Corporation will acquire Verifone for $23.04 per share in cash, representing a total consideration of approximately $3.4 billion, which includes Verifone’s net debt.

Under the terms of the agreement, Verifone stockholders will receive $23.04 in cash for each share of Verifone common stock held, representing a premium of approximately 54% to the company’s closing share price of $15.00 on April 9, 2018.

The Verifone Board of Directors has unanimously approved the definitive agreement and recommends that Verifone stockholders vote in favor of the transaction.

Upon completion of the transaction, Verifone will become a privately held company. The transaction is not subject to a financing condition and is expected to close during the third calendar quarter of 2018, subject to customary closing conditions, including receipt of stockholder and regulatory approvals.

The merger agreement includes a “go-shop” period, which permits Verifone’s Board and advisors to actively initiate, solicit, encourage, and potentially enter into negotiations with parties that make alternative acquisition proposals through May 24, 2018.

There can be no assurance that this process will result in a superior proposal, and Verifone does not intend to disclose developments with respect to the solicitation process unless and until the Board makes a determination requiring further disclosure.

PAY closed at $15.00.


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Barron’s is bullish on banks, bearish on Twitter and Snap

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH   MENTIONS: 

Bigger bank payouts amid looser regulation – Helped by higher capital levels and more leeway from regulators, large-cap banks should be increasing dividends over the next several years, Lawrence Strauss writes in this week’s edition of Barron’s. Those include Bank of America (BAC), BB&T (BBT), Citigroup (C), Citizens Financial (CFG), Fifth Third Bancorp (FITB), PNC Financial (PNC), Regions Financial (RF), SunTrust (STI), U.S. Bancorp (USB) and Wells Fargo (WFC), the report notes.

Delta, Apple among stocks merit a look – Shares of Delta (DAL), Apple (AAPL), Starbucks (SBUX), D.R. Horton (DHI), Verizon (VZ), American Electric Power (AEP) and NextEra Energy (NEE) have fallen but estimates for their earnings have risen, Jack Hough writes in this week’s edition of Barron’s. These names should be worth consideration by bargain hunters, he adds.

Wells Fargo looks inexpensive, regulatory risks remain– Shares of Wells Fargo (WFC) have badly trailed rivals as the bank grapples with the fallout from scandals, Ben Walsh write’s in this week’s edition of Barron’s. And while Wells Fargo looks inexpensive relative to some other big banks, regulatory risks remain and changing the bank’s aggressive culture will not be easy, the report adds.

Market volatility putting bitcoin to the test – Bitcoin started to rebound last week, but its usefulness as a hedge against stock market volatility has lately been called into questions, Avi Salzman writes in this week’s edition of Barron’s. While Bulls argue that short-term price action does not change the longer trend, bitcoin price drop has been fueled by the same problems that it has had for year, namely unreliable exchanges and worries about manipulation and fraud, the report notes. If bitcoin is to survive as an alternate currency, the hype will have to fade and it will have to become useful, Salzman adds

BEARISH  MENTIONS

Twitter/Snap ‘hot for now,’ may not last – Results from Twitter (TWTR) and Snap (SNAP) beat expectations last week and both notched double-digit percentage gains, but this cannot last, with the thrill likely to fade in coming weeks, Tiernan Ray writes in this week’s edition of Barron’s. Twitter and Snap have years ahead of them to develop their product and innovate in ways that may give them a broader appeal, but for now they are boutiques in an advertising market of giants that includes not only Facebook (FB) but Alphabet (GOOG; GOOGL) and Amazon (AMZN), Ray adds.


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Nasdaq to trade bitcoin futures

Nasdaq assessing bitcoin futures that are different to rivals

Bitcoin hits $8000. See Stockwinners.com for details
Nasdaq assessing bitcoin futures that are different to rivals

Nasdaq (NDAQ) is reviewing ways to offer cryptocurrency futures that operate differently from those offered by Cboe (CBOE) and CME Group (CME), CNBC reports, citing CEO Adena Friedman.

“We are continuing to investigate the idea of a cryptocurrency futures with a partner and we continue to look at the risk management around that, making sure we are putting the right protocols in place, making sure there’s proper demand, and that the contract is different from what’s already out there,” Friedman told CNBC.

“What we might look at is more of a total return futures, so it’s a little bit of a different construct,” adding that it meant it was “more of an investment than a tracking stock.”


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Watch these bank earnings

What to watch in bank space earnings reports

What to watch in bank earnings. Stockwinners.com
What to watch in bank earnings.

Bank of America (BAC) and Goldman Sachs (GS) are scheduled to report quarterly results on January 17, while Morgan Stanley (MS) is expected to report on January 18.

What to watch for:

1. TAX REFORM:

Goldman Sachs estimates that the enactment of the new tax legislation will result in a reduction of approximately $5B in the firm’s earnings for Q4 and year ending December 31, 2017, approximately two-thirds of which is due to the repatriation tax.

The remainder includes the effects of the implementation of the territorial tax system and the re-measurement of U.S. deferred tax assets at lower enacted corporate tax rates.

Earlier this month, Morgan Stanley (MS) said it also estimates the net income for the quarter ending December 31, 2017 will include an aggregate net discrete tax provision of approximately $1.25B, comprised of an approximate $1.4B net discrete tax provision as a result of the enactment of the Tax Cuts and Jobs Act, primarily from the re-measurement of certain net deferred tax assets using the lower enacted corporate tax rate, partially offset by an approximate $160M net discrete tax benefit, primarily associated with the re-measurement of reserves and related interest relating to the status of multi-year Internal Revenue Service tax examinations.

2. CRYPTOCURRENCY:

On December 14, Bloomberg reported that Goldman Sachs is seeking a 100% margin on some bitcoin future trades deterring some customers from looking to clear their trades through the bank and resulting in some taking their business elsewhere.

A week later, the publication said the bank was establishing a trading desk to make markets in digital currencies such as bitcoin. The company intends to get the business running by the end of June, if not earlier, the report added.

Also last month, Morgan Stanley said in a regulatory filing that it had purchased an 11.4% stake in Overstock (OSTK), which launched cryptocurrency trading with its tZERO subsidiary.

3. FAVORABLE OUTLOOK:

On November 29, JPMorgan analyst Kian Abouhossein raised his price target for Goldman Sachs to $270 from $263 and called it his top investment banking pick for 2018.

The analyst said he is more positive around the strength of the franchise and believes its fixed income, currencies and commodities business revenue growth opportunity of $1B-plus is more likely to be achieved. Goldman has shown “excellent progress” when it comes to delivering shareholder value, #Abouhossein contended.

Last month, BofA/Merrill analyst Michael #Carrier added Goldman Sachs to the U.S. 1 List, citing an increasing favorable outlook with rising GDP growth, favorable risk/reward, low expectations, and potential catalysts from de-regulation, tax reform, and increased volatility.

Carrier reiterated a Buy rating on the stock and raised his price target on the shares to $300 from $290.

4. BREXIT

On November 20, Goldman Sachs CEO Lloyd Blankfein said the bank will have two EU hubs, in Frankfurt and Paris, post-Brexit, according to Reuters. “We will have more employees on the continent. Some, if they want to, would come from London, we will hire others,” Blankfein said.

“Brexit pushes us to decentralize our activities. In the end, it’s the people who will largely decide where they prefer to live.”


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Worldwide IT spending to reach $3.7T in 2018

Gartner says worldwide IT spending to reach $3.7T in 2018 

worldwide IT spending to reach $3.7T in 2018. Stockwinners.com
Worldwide IT spending to reach $3.7T in 2018

Worldwide IT spending is projected to total $3.7 trillion in 2018, an increase of 4.5 percent from 2017, according to the latest forecast by Gartner, Inc.  (IT)

“Global IT spending growth began to turn around in 2017, with continued growth expected over the next few years. However, uncertainty looms as organizations consider the potential impacts of Brexit, currency fluctuations, and a possible global recession,” said John-David Lovelock, research vice president at Gartner.

“Despite this uncertainty, businesses will continue to invest in IT as they anticipate revenue growth, but their spending patterns will shift.

Projects in digital business, blockchain, Internet of Things, and progression from big data to algorithms to machine learning to artificial intelligence (AI) will continue to be main drivers of growth.”

The devices segment is expected to grow 5.6 percent in 2018. In 2017, the devices segment experienced growth for the first time in two years with an increase of 5.7 percent.

End-user spending on mobile phones is expected to increase marginally as average selling prices continue to creep upward even as unit sales are forecast to be lower.

PC growth is expected to be flat in 2018 even as continued Windows 10 migration is expected to drive positive growth in the business market in China, Latin America and Eastern Europe.

The impact of the iPhone 8 and iPhone X was minimal in 2017, as expected. However, iOS shipments are expected to grow 9.1 percent in 2018.


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AMD gives an update on processor security issues

AMD CTO Mark Papermaster gives update on processor security issues

AMD gives update on processor security issues. Stockwinners.com
AMD gives update on processor security issues.

AMD (AMD) CTO Mark Papermaster said:

“The public disclosure on January 3rd that multiple research teams had discovered security issues related to how modern microprocessors handle speculative execution has brought to the forefront the constant vigilance needed to protect and secure data.

These threats seek to circumvent the microprocessor architecture controls that preserve secure data.

At AMD, security is our top priority and we are continually working to ensure the safety of our users as new risks arise. As a part of that vigilance, I wanted to update the community on our actions to address the situation.

Google (GOOG, GOOGL) Project Zero Variant 1, Bounds Check Bypass or Spectre,is applicable to AMD processors. We believe this threat can be contained with an operating system patch and we have been working with OS providers to address this issue.

Microsoft (MSFT) is distributing patches for the majority of AMD systems now. We are working closely with them to correct an issue that paused the distribution of patches for some older AMD processors, AMD Opteron, Athlon and AMD Turion X2 Ultra families, earlier this week.

We expect this issue to be corrected shortly and Microsoft should resume updates for these older processors by next week. For the latest details, please see Microsoft’s website.

Linux vendors are also rolling out patches across AMD products now. GPZ Variant 2, Branch Target Injection or Spectre, is applicable to AMD processors. While we believe that AMD’s processor architectures make it difficult to exploit Variant 2, we continue to work closely with the industry on this threat.

We have defined additional steps through a combination of processor microcode updates and OS patches that we will make available to AMD customers and partners to further mitigate the threat.

AMD will make optional microcode updates available to our customers and partners for Ryzen and EPYC processors starting this week. We expect to make updates available for our previous generation products over the coming weeks.

These software updates will be provided by system providers and OS vendors; please check with your supplier for the latest information on the available option for your configuration and requirements. Linux vendors have begun to roll out OS patches for AMD systems, and we are working closely with Microsoft on the timing for distributing their patches.

We are also engaging closely with the Linux community on development of ‘return trampoline,’ Retpoline, software mitigations. GPZ Variant 3, Rogue Data Cache Load or Meltdown, is not applicable to AMD processors. We believe AMD processors are not susceptible due to our use of privilege level protections within paging architecture and no mitigation is required.

There have also been questions about GPU architectures. AMD Radeon GPU architectures do not use speculative execution and thus are not susceptible to these threats. We will provide further updates as appropriate on this site as AMD and the industry continue our collaborative work to develop mitigation solutions to protect users from these latest security threats.”

AMD closed at $12.14.


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Kodak enters cryptocurrency frenzy

Kodak jumps after announcing blockchain initiative and cryptocurrency

Kodak jumps after announcing blockchain initiative and cryptocurrency
Kodak jumps after announcing blockchain initiative and cryptocurrency

Shares of Kodak (KODK) surged after the company and WENN Digital, in a licensing partnership, announced the launch of the KODAKOne image rights management platform and KODAKCoin, a photo-centric cryptocurrency to “empower photographers and agencies to take greater control in image rights management.”

Kodak CEO Jeff Clarke said: “For many in the tech industry, ‘blockchain’ and ‘cryptocurrency’ are hot buzzwords, but for photographers who’ve long struggled to assert control over their work and how it’s used, these buzzwords are the keys to solving what felt like an unsolvable problem.

Kodak has always sought to democratize photography and make licensing fair to artists.

These technologies give the photography community an innovative and easy way to do just that.” The initial coin offering will open on January 31, 2018 and is open to accredited investors from the U.S., UK, Canada and other select countries.

Following the company’s announcement, Kodak shares are up $2.72, or 85%, to $5.85.


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Overstock rises on plans for new blockchain venture

Overstock rises after reporting plans for new blockchain venture 

Overstock rises on plans for new blockchain venture. Stockwinners.com
Overstock rises on plans for new blockchain venture

In a regulatory filing last night, Overstock.com (OSTK) disclosed that on December 27 the company, its wholly owned subsidiary Medici Ventures, Patrick Byrne and Hernando de Soto entered into a Memorandum of Understanding that provides that the parties will form a company, “Desoto,” that will be owned 50% by Medici, 33% by Hernando de Soto and 17% by Patrick Byrne, who is the CEO and a member of the Board of Directors of Overstock, and also serves on the board of directors of Medici.

The goal of the new company is to develop a blockchain-based system to develop a global property registry system focused on the property rights of people in the developing world.

Overstock and/or Medici will pay or contribute $14M to help launch the project, $8M of which will be used to fund DeSoto, and Medici will receive a 50% ownership interest in DeSoto.

Patrick Byrne personally will contribute $14M to help launch the project, and will receive a 17% ownership interest in DeSoto.

Hernando de Soto will serve as Chairman of DeSoto and as a director of Medici. Patrick Byrne will serve as Co-Chairman and CEO of DeSoto, in addition to his positions with Overstock and Medici.

“The MOU contemplates a more detailed future agreement, and provides that the parties will cooperate in good faith to reach more detailed agreements in the future,” the filing added.

In pre-market trading, Overstock has risen $1.95, or 2.7%, to $73.50 per share.


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Bitcoin drops after S. Korea requires real name in crypto trading

S. Korea to require real-name accounts in crypto trading

Bitcoin hits $8000. See Stockwinners.com for details
Bitcoin lower after S. Korea requires real name for crypto trading

Hong Nam-ki, South Korean minister of the Office for Government Policy Coordination, announced the country would ban the use of anonymous virtual accounts in cryptocurrency transactions as the government “can’t let this abnormal situation of speculation go on any longer,” the Korea Herald reports, citing the announcement.

Under the ban only real-name back accounts and matching virtual accounts can be used for deposits and withdrawals, while exchanges will be banned from issuing new virtual accounts to clients.

Bitcoin-related names Overstock (OSTK), Digital Power (DPW), Long Blockchain (LTEA), Seven Stars Cloud Group (SSC), Riot Blockchain (RIOT), Longfin (LFIN), Social Reality (SRAX) and Parateum (TEUM) are all trading lower in the pre-market and heading for a second straight big down day as Bitcoin extends its slide overnight below $14,000.

Speculation over South Korea regulators considering options that could include a shutdown of some cryptocurrency exchanges is fueling today’s decline. The cryptocurrency is now down over 25% from last week’s record high.

Riot Blockchain (RIOT) drops, levels to watch.  The stock was last down over 6% to $28 in pre-market trading following news that the South Korean government may seek to regulate cryptocurrencies. Bitcoin fell sharply in the wake of that news, last down over 7.2%, which is off the earlier drop of more than 10%. At the current price of $28, next support is at $26.12.

After forming a high of $16,416 this week, the cryptocurrency came under a selling pressure as traders showed their reaction to South Korea’s news. The country is determined to curb the speculative market and it would take measures to stop and review various crypto-exchanges.


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Pareteum soars on cryptocurrency billing

Pareteum adds Blockchain settlement for cryptocurrency to platform

Cryptocurrency mania continues as the bitcoin bubble expands

Pareteum-Corp soars on cryptocurrency billing - Stockwinners.com
Pareteum soars on cryptocurrency billing

Pareteum Corp. (TEUM) announced that it has completed development enabling it to add support of Blockchain technology to its billing and settlement services.

“This newest service capability enables Pareteum customers to participate in the transformational ‘Digital Economy Monetization to the Cloud’ and now accept and process Bitcoin, Ethereum, Litecoin, Airtokens and other forms of cryptocurrencies,” said the company, whose share were halted pending the news release.

Hal Turner, Executive Chairman and Principal Executive Officer of Pareteum, added:

“We envision a time in the not too distant future when Pareteum could create its own currency payments and settlements among the millions of subscribers on its platform globally.

As we consider the new global mobile landscape, and Pareteum’s service and capabilities developments in 2017, which have opened doors for us in the Internet of Things, Smart Cities, and use of Artificial Intelligence and Machine Learning creating predictive analytics for the vast amounts of digital data we are capable of securely processing, we maintain an optimistic view towards 2018 and beyond.”

CRYPTO TREND

Cryptocurrency revenues have been pointed to as reasons to be bullish on Advanced Micro Devices (AMD) and Nvidia (NVDA) in select research. Overstock (OSTK), Digital Power (DPW), Long Blockchain (LTEA), Seven Stars Cloud Group (SSC), Riot Blockchain (RIOT), Longfin (LFIN) and Social Reality (SRAX) are other stocks that have been touted, or promoted themselves, as a way to play the crypto theme.

Pareteum (TEUM) jumps 99% to $2.54 after adding blockchain technology.


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Barron’s is bullish on Apple, Western Digital

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names: 

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review 

BULLISH  MENTIONS

Apple may hit $1T in market value next year- Apple (AAPL) could soon reach a milestone, namely to be the first U.S. company with a $1T market valuation, with iPhone X and a rising stream of service revenue helping it get there, Jack Hough writes in this week’s edition of Barron’s. Hough does not thing the peak is near as Apple seems to be escaping its product supercycle peaks and troughs to post more-consistent year-to-year growth.

Opportunity seen in semiconductors as Bitcoin plummets on Friday – Last Friday, the price of Bitcoin plummeted over 25% before bouncing back, and no major crypto asset was immune to the selloff, with even Bitcoin Investment Trust momentarily changing hands at more than a 5% discount of its NAV, Crystal Kim writes in this week’s edition. But in every “bloodbath” there is an opportunity to buy, she adds, noting that while bitcoin is a possibility, a better one may be the stocks of semiconductors companies that make the chips and equipment needed to mine bitcoin and other cryptocurrencies.

Some tech still a bargain– For investors looking to buy low, there are a number of good candidates to pick up, such as Qorvo (QRVO) that features in Apple’s (AAPL) iPhone and Finisar (FNSR) that also got the nod from Apple to produce parts for augmented reality and that may be a target for Oclaro (OCLR), Tiernan Ray writes in this week’s edition of Barron’s. Additionally, Ray sees Universal Display (OLED) as the biggest beneficiary of the iPhone rise, while Cisco Systems (CSCO) should get a lift from the new tax law.

PG&E looks like a buy– A sharp drop last week in shares of PG&E (PCG) could present a buying opportunity, Andrew Bary writes in this week’s edition of Barron’s. Shares of California utilities Sempra Energy (SRE) and Edison International (EIX) also fell this past week amid concerns about their liability for this month’s wildfire outbreak in Southern California, Barron’s adds.

Investors should give REITs a chance – Income investors should give real estate investment trusts a chance, Bill Alpert writes in this week’s edition of Barron’s. Among REITs with nice payouts are Macerich (MAC), Simon Property Group (SPG), Agree Realty (ADC), National Retail Props (NNN) and Realty Income (O), he contends

Western Digital (WDC) could be worth $120 – Flash-memory prices are expected to fade in 2018, which has worried investors in Western Digital, Andrew Bary writes in this week’s edition of Barron’s. However, at $83, Western Digital shares look undervalued, as the stock could be worth $120 at $10 a share in free cash flow, Bary notes.

BEARISH  MENTION

 Bitcoin bourses should be avoided by small traders – Derivatives exchanges Chicago Board Options Exchange (CBOE) and CME (CME) recently launched futures trading on the digital cryptocurrency bitcoin, but these securities do not trade actual bitcoin and are instead based on indexes of bitcoin prices that are calculated differently, Theresa Cary writes in this week’s edition of Barron’s. Putting aside the risk reflected in last week’s bitcoin plunge, these are not retail-friendly products in their current form, she notes, adding that market observers expect that to change over the next six months.

Cryptocurrency mania may not end well – Cryptocurrency mania is obvious in the stock market activity of companies like beverage seller Long Island Iced Tea (LTEA), with shares soaring after the company said it would change its name to Long Blockchain, Vito Racanelli writes in this week’s edition of Barron’s. The real risk is regulatory as governments around the world will gradually see the cryptocurrencies as a threat to their fiat currencies and policies, he notes, adding that it is a mania and eventually the bubble will pop amid tears.


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Long Island Iced Tea to rebrand as ‘Long Blockchain Corp.’

Long Island Iced Tea to rebrand as ‘Long Blockchain Corp.’

Long Island Iced Tea to rebrand as 'Long Blockchain Corp.' Stockwinners.com
Long Island Iced Tea to rebrand as ‘Long Blockchain Corp.’

Long Island Iced Tea Corp. (LTEA) announced that the parent company is shifting its primary corporate focus towards the exploration of and investment in opportunities that leverage the benefits of blockchain technology.

In connection with the shift in strategic direction, the company has approved changing its name from “Long Island Iced Tea Corp.” to “Long Blockchain Corp.” and has reserved the web domain www.longblockchain.com.

The company intends to request Nasdaq to change its trading symbol in connection with the name change.

The company will continue to operate Long Island Brand Beverages, LLC as a wholly-owned subsidiary and maintain the focus of this business on the ready-to-drink segment of the beverage industry, specifically, premium, ‘better-for-you’ brands marketed at an affordable price.

In conjunction with the shift in business strategy, the company has submitted a request to the SEC to withdraw its previously filed S-1 registration statement relating to a proposed underwritten public offering, which was filed on November 11, Long Island noted.

LTEA closed at $2.44. It last traded at $12.05 in pre-market trading. This seems to be the bubble mentality at its worse!


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Metropolitan Bank invests in bitcoin

Metropolitan Bank discloses $110M in bitcoin deposits

Metropolitan Bank converts deposits into bitcoin. Stockwinners.com
Metropolitan Bank converts deposits into bitcoin.

Metropolitan Bank (MCB) said in its quarterly regulatory filing yesterday, “In response to the recent articles published in certain investor websites regarding the impact of cryptocurrencies on our financial statements, we are providing further details regarding our involvement in this area.

Metropolitan Commercial Bank maintains a diversified approach to generating deposits through a number of verticals including borrowing relationships, retail relationships and debit card issuing relationships.

As a part of this strategy, we also have a relationship with a cryptocurrency exchange.

This customer maintains two different types of accounts with us. One account is for its general corporate purposes and the other account is for settlement activities for the benefit of its customers.

The funds deposited by this customer consist of U.S. dollars, not cryptocurrency.

During the three months ended September 30, 2017, this customer maintained an average balance of $108 million in its corporate non-interest bearing account with us. We use these funds in the normal course of business and realize a net interest margin on them.

During the three months ended September 30, 2017, the customer maintained an average balance of approximately $137 million in its non-interest bearing settlement account with us.

We do not use funds in the settlement account for our general funding purposes. These balances are transactional in nature and are kept in the overnight funds with the Federal Reserve Bank. Income realization on these funds is limited to the overnight Fed Funds rate.

As of September 30, 2017, Metropolitan Commercial Bank had total deposits of $1.5 billion.

Deposit balances related to the cryptocurrency corporate account represents roughly 7% of our total deposit base while that of the settlement account represents 9% of our total deposit base.

Since the settlement account is not used for funding purposes, it does not constitute a material source of income or, we believe, liquidity risk for Metropolitan Commercial Bank.

In addition, in the normal course of its business, we provide cash management solutions to our customers including wire transfers, ACH and foreign exchange conversion which are also offered to the cryptocurrency exchange customer.

These solutions are provided at the normal fee that is charged to all other customers. An increase in transactions results in an increase in our non-interest income.”

ANALYST COMMENTS

Piper Jaffray analyst Matthew #Breese raised his earnings estimates for Metropolitan Bank by 6% after the company detailed its exposure to a cryptocurrency exchange.

Metropolitan’s exposure to a cryptocurrency exchange averaged $245M in Q3, or 16% of total deposits, Breese tells investors in a research note.

He estimate these items aggregate to 7% of net interest income and 9%-11% of earnings. Yesterday’s disclosure is important on both the impact of earnings, the percentage of deposits tied to one customer, and that the bank has exposure to a “controversial industry,” Breese tells investors in a research note.

The analyst, despite raising his earnings estimates, keeps a Neutral rating on Metropolitan Bank shares with a $46 price target. He views the company’s cryptocurrency exposure as a “double-edged sword for the stock.” On the one hand, cryptocurrencies represent a “unique source of potential earnings growth” for Metropolitan, Breese writes. On the other, the volatility and potential regulatory concerns surrounding cryptocurrencies may cause some trepidation for traditional depository investors, the analyst adds.

MCB closed at $44.50.


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Pinnacle Entertainment sold for $2.8 billion

Pinnacle Entertainment sold for $32.47 per share

 Penn National to acquire Pinnacle Entertainment in deal valued at $2.8B. Stockwinners
Penn National to acquire Pinnacle Entertainment in deal valued at $2.8B

Penn National Gaming (PENN) and Pinnacle Entertainment (PNK) announced that they have entered into a definitive agreement under which Penn National will acquire Pinnacle in a cash and stock transaction valued at approximately $2.8B.

Under the terms of the agreement, Pinnacle shareholders will receive $20.00 in cash and 0.42 shares of Penn National common stock for each Pinnacle share, which implies a total purchase price of $32.47 per Pinnacle share based on Penn National’s closing price on December 15, 2017.

The transaction reflects a 36% premium for Pinnacle shareholders based on Pinnacle’s closing price of $21.86 and Penn National’s closing price of $22.91 on October 4, 2017.

The transaction has been approved by the boards of directors of both companies and is expected to close in the second half of 2018.

Pinnacle owns and operates 16 gaming and entertainment facilities in 11 jurisdictions across the United States.

Following the acquisition of Pinnacle and the planned divestiture of four of its properties to Boyd Gaming (BYD) , Penn National will have significantly greater operational and geographic diversity and operate a combined 41 properties in 20 jurisdictions throughout North America.

The transaction is expected to generate $100M in annual run-rate cost synergies following integration and is anticipated to be immediately accretive to free cash flow in the first year. Pro forma for the divestitures and synergies, the acquisition reflects a multiple of 6.6x LTM EBITDA.

Gaming and Leisure Properties (GLPI), the landlord for Penn National and Pinnacle under their respective master lease agreements, has entered into an agreement to amend the terms of the Pinnacle master lease to permit the divestitures.

In connection with the transaction, Penn National, GLPI and Boyd have agreed to the following:

Penn National and GLPI will enter into a sale and leaseback of the real estate associated with Belterra Park and Plainridge Park Casino for approximately $315M.

An amendment to the terms of the Pinnacle master lease following closing of the merger to reflect an annual fixed rent payment of $25M for Plainridge Park Casino and $13.9M in incremental annual rent to adjust to market conditions.

At closing, GLPI and Boyd will enter into a master lease agreement for the divestitures pursuant to which Boyd will lease the divested real property from GLPI.

Penn National will assume the existing master lease and Pinnacle’s existing lease for the Meadows Casino and Racetrack in Pennsylvania. Penn National’s master lease with GLPI will not be affected by this transaction. The companies expect the transaction to close in the second half of 2018.

PNK closed at $30.95.  PENN closed at $29.69.


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