Novavax receives $1.6B funding from Operation Warp Speed

Novavax soars after receiving $1.6B vaccine funding

Shares of Novavax (NVAX) soared after the company said on Tuesday morning that it has received $1.6B in funding from the federal government’s accelerated COVID-19 vaccine development program.

The company has been selected to participate in Operation Warp Speed, which aims to begin delivering millions of doses of a safe, effective vaccine for COVID-19 in 2021.

Novavax receives $1.6B funding from U.S. Government

The company said the funds will be used to complete late-stage clinical development of its vaccine candidate called NVX-CoV2373, including a Phase 3 trial, and to scale up manufacturing.

The company is aiming to deliver 100 million doses of the vaccine, as early as late 2020, it said.

The agreement will fund the late-stage clinical studies necessary to determine the safety and efficacy of NVX-CoV2373, including a pivotal Phase 3 clinical trial with up to 30,000 subjects beginning in the fall of 2020.

A Phase 1/2 clinical trial of NVX-CoV2373 in 130 healthy participants 18 to 59 years of age was launched in Australia in May, Novavax said, adding that preliminary immunogenicity and safety results are expected at the end of July, and the Phase 2 portion to assess immunity, safety, and COVID-19 disease reduction is expected to begin after that.

The Phase 1/2 trial is being supported by up to $388M in funding from the Oslo-based Coalition for Epidemic Preparedness Innovations Novavax President and CEO Stanley Erck said in a statement that “The pandemic has caused an unprecedented public health crisis, making it more important than ever that industry, government and funding entities join forces to defeat the novel coronavirus together.

We are honored to partner with Operation Warp Speed to move our vaccine candidate forward with extraordinary urgency in the quest to provide vital protection to our nation’s population.”

Novavax has been awarded $1.6B by the federal government to complete late-stage clinical development, including a pivotal Phase 3 clinical trial; establish large-scale manufacturing; and deliver 100M doses of NVX-CoV2373, Novavax’ COVID-19 vaccine candidate, as early as late 2020.

NVX-CoV2373 consists of a stable, prefusion protein made using its proprietary nanoparticle technology and includes Novavax’ proprietary Matrix-M adjuvant.

Under the terms of the agreement, Novavax will demonstrate it can rapidly stand up large-scale manufacturing and transition into ongoing production, including the capability to stockpile and distribute large quantities of NVX-CoV2373 when needed.

The agreement will fund the late-stage clinical studies necessary to determine the safety and efficacy of NVX-CoV2373, including a pivotal Phase 3 clinical trial with up to 30,000 subjects beginning in the fall of 2020.

The agreement also allows for a follow-on agreement with the U.S. government for additional production and procurement to support OWS’ vaccine production goal.

This latest federal funding supports Novavax plans to file submissions for licensure with the U.S. FDA.

NVAX closed at $79.44, last traded at $105.42.

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Uber buys Postmates for $2.65B

 Uber to acquire Postmates for $2.65B in all-stock transaction

Uber and Postmates announced that they have reached a definitive agreement under which Uber will acquire Postmates for approximately $2.65B in an all-stock transaction.

Uber buys Postmates

This transaction brings together Uber’s global Rides and Eats platform with Postmates’ delivery business in the U.S.

Additionally, Postmates has been an early pioneer of “delivery-as-a-service,” which complements Uber’s efforts in the delivery of groceries, essentials and other goods.

For restaurants and merchants, Postmates and Uber Eats will together offer more tools and technology to connect with a bigger consumer base.

Following the closing of the transaction, Uber intends to keep the consumer-facing Postmates app running separately.

Uber currently estimates that it will issue approximately 84M shares of common stock for 100% of the fully diluted equity of Postmates.

The boards of directors of both companies have approved the transaction, and stockholders representing a majority of Postmates’ outstanding shares have committed to support the transaction.

The transaction is subject to the approval of Postmates stockholders, regulatory approval and other customary closing conditions and is expected to close in Q1 2021.

Uber consolidates its market position by buying Postmates

Like other travel- and transportation-related businesses, Uber’s ride-hailing segment has been negatively impacted by the COVID-19 pandemic, due to shelter-in-place orders throughout the United States.

On-demand delivery, however, has grown, with people relying on services like Uber Eats to get food without leaving their homes. According to its last earnings report, Uber’s ride-hailing gross bookings dropped, but its food delivery service saw gross sales growth of 54% during its first fiscal quarter.

UBER closed at $30.68.

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DOJ issues guideline for online content

DOJ issues recommendations for Section 230 reform

The Department of Justice has released a set of reform proposals to update the outdated immunity for online platforms under Section 230 of the Communications Decency Act of 1996.

Responding to bipartisan concerns about the scope of 230 immunity, the department identified a set of concrete reform proposals to provide stronger incentives for online platforms to address illicit material on their services while continuing to foster innovation and free speech.

The department’s review of Section 230 over the last ten months arose in the context of its broader review of market-leading online platforms and their practices, which were announced in July 2019.

The department held a large public workshop and expert roundtable in February 2020, as well as dozens of listening sessions with industry, thought leaders, and policy makers, to gain a better understanding of the uses and problems surrounding Section 230.

The first category of recommendations is aimed at incentivizing platforms to address the growing amount of illicit content online, while preserving the core of Section 230’s immunity for defamation claims.

These reforms include a carve-out for bad actors who purposefully facilitate or solicit content that violates federal criminal law or are willfully blind to criminal content on their own services.

Additionally, the department recommends a case-specific carve out where a platform has actual knowledge that content violated federal criminal law and does not act on it within a reasonable time, or where a platform was provided with a court judgment that the content is unlawful, and does not take appropriate action.

A second category of proposed reforms is intended to clarify the text and revive the original purpose of the statute in order to promote free and open discourse online and encourage greater transparency between platforms and users.

One of these recommended reforms is to provide a statutory definition of “good faith” to clarify its original purpose.

The new statutory definition would limit immunity for content moderation decisions to those done in accordance with plain and particular terms of service and consistent with public representations. These measures would encourage platforms to be more transparent and accountable to their users.

The third category of recommendations would increase the ability of the government to protect citizens from unlawful conduct, by making it clear that Section 230 does not apply to civil enforcement actions brought by the federal government.

A fourth category of reform is to make clear that federal antitrust claims are not, and were never intended to be, covered by Section 230 immunity.

Over time, the avenues for engaging in both online commerce and speech have concentrated in the hands of a few key players.

It makes little sense to enable large online platforms (particularly dominant ones) to invoke Section 230 immunity in antitrust cases, where liability is based on harm to competition, not on third-party speech.

The action follows President Trump’s executive order seeking to weaken broad immunity enjoyed by Facebook (FB), Twitter (TWTR) and Google (GOOGL).

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California Resources on the verge of bankruptcy!

The oil driller is preparing near-term bankruptcy filing, WSJ reports

California Resources Corporation (CRC) operates as an oil and natural gas exploration and production company in the State of California.

The company sells crude oil, natural gas, and natural gas liquids to marketers, California refineries, and other purchasers that have access to transportation and storage facilities. It holds interests in approximately 2.2 million net acres of mineral acreage. As of December 31, 2019, the company had net proved reserves of 644 million barrels of oil equivalent.

Interest Payment

California Resources skipped an interest payment to lenders and could file for bankruptcy as soon as next week, The Wall Street Journal’s Alexander Gladstone reports, citing people familiar with the matter.

The company said in an 8-K filing that it entered into forbearance agreements most of its lenders, who have agreed not to exercise “remedies” under the credit agreements. 

The oil driller said Monday it has entered into an agreement with a majority of its senior lenders to wait until Sunday before they can declare a default, the author notes.

2-Year price chart for CRC

The company has suffered from a sharp selloff in crude oil futures prices to start this year, as a result of the drop in demand from the COVID-19 pandemic and the price war between Saudia Arabia and Russia.

CRC is up 67 cents to $2.68.

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Boeing fires 6,770 U.S. workers

Boeing starts involuntary layoffs with 6,770 U.S. workers losing jobs

Boeing (BA) President and CEO Dave Calhoun issued a letter to employees today providing an update on workforce actions, which stated in part, “Following the reduction-in-force announcement we made last month, we have concluded our voluntary layoff program.

And now we have come to the unfortunate moment of having to start involuntary layoffs. We’re notifying the first 6,770 of our U.S. team members this week that they will be affected.

Boeing beings involuntary layoffs

We will provide all the support we can to those of you impacted by the ILOs – including severance pay, COBRA health care coverage for U.S. employees and career transition services.

Covid19 related layoffs are adding up

Our international locations also are working through workforce reductions that will be communicated locally on their own timelines in accordance with local laws and benefit terms.

Boeing plans to cut 10% of it’s workforce

The COVID-19 pandemic’s devastating impact on the airline industry means a deep cut in the number of commercial jets and services our customers will need over the next few years, which in turn means fewer jobs on our lines and in our offices.

We have done our very best to project the needs of our commercial airline customers over the next several years as they begin their path to recovery. I wish there were some other way.”

Green Shoots

In another announcement, Dave Calhoun stated “We are seeing some green shoots. Some of our customers are reporting that reservations are outpacing cancellations on their flights for the first time since the pandemic started. Some countries and U.S. states are starting cautiously to open their economies again.

And some parts of our business, most notably on the defense side, will continue hiring to meet customer commitments and fill critical skill positions.

Boeing CEO Dave Calhoun

The Defense, Space & Security and defense services teams have achieved a number of milestones recently, including the successful return to orbit of the reusable and autonomous X-37B Orbital Test Vehicle.

We’re moving forward with our plan to restart 737 MAX production in Renton, Washington, as our return-to-service efforts continue.

And our Global Services team is changing its organization to ensure it is lean and focused on the post-COVID needs of its customers. But these signs of eventual recovery do not mean the global health and economic crisis is over. Our industry will come back, but it will take some years to return to what it was just two months ago.”

Company executives said last month that Boeing planned to cut about 10% of its global workforce this year as it reduces jetliner production, and union officials say the initial wave of layoffs was focused on Boeing’s Seattle-area commercial airplanes operation.

BA last traded at $146.47, up 1.2%.

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Inovio Shares Jump on COVID-19 Data

Inovio’s COVID-19 vaccine INO-4800 generates antibodies and immune responses

Inovio (INO) announced the publication of the preclinical study data for IN0-4800, its COVID-19 DNA vaccine, demonstrating “robust” neutralizing antibody and T cell immune responses against coronavirus SARS-CoV-2.

Inovio reports promising data, Stockwinners

The study was published in the peer-reviewed journal Nature Communications by INOVIO scientists and collaborators from The Wistar Institute, the University of Texas, Public Health England, Fudan University, and Advaccine. Kate Broderick, Inovio’s Senior VP of R&D and Team Lead for COVID-19 vaccine development, said, “These positive preclinical results from our COVID-19 DNA vaccine not only highlight the potency of our DNA medicines platform, but also build on our previously reported positive Phase 1/2a data from our vaccine against the coronavirus that causes MERS, which demonstrated near-100% seroconversion and neutralization from a similarly designed vaccine INO-4700.

Inovio hopes its work would lead to a vaccine, Stockwinners

The potent neutralizing antibody and T cell immune responses generated in multiple animal models are supportive of our currently on-going INO-4800 clinical trials.

” The studies demonstrated that vaccination with INO-4800 generated “robust” binding and neutralizing antibody as well as T cell responses in mice and guinea pigs.

The authors demonstrated virus neutralizing activity using three separate neutralization assays testing the vaccine’s ability to generate antibodies which can block virus infection.

Study authors also detected these antibodies in the lungs of the vaccinated animals which could be important in providing protection from SARS-CoV-2.

In addition, high levels of Spike-specific T cell responses were observed with INO-4800 vaccination, which could be important in mediating protection from the virus infection.

A Phase 2/3 efficacy trial is planned to start in July/August pending regulatory approval.

PIPER Comments:

Piper Sandler analyst Christopher Raymond noted that Inovio shares are up by a double digit percentage on the Nature Communications publication of preclinical data on the company’s CoV-19 DNA vaccine INO-4800, but he said “this isn’t new news.” The market currently has a “buy-first-ask-questions-later mentality on all things COVID,” but most of the data in this paper has been available since the pre-print in early March, said Raymond.

Additionally, while an ability to generate T-cell responses and functional neutralizing antibodies in mice and guinea pigs is important, the preclinical picture remains incomplete without non-human primate data and viral challenge data, which is needed to fully understand the potential, the analyst tells investors. Raymond, who thinks it is more prudent to reserve judgment until initial human data slated for the end of June is available, keeps a Neutral rating on Inovio shares.

INO closed at $14.50, last traded at $17.00

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Tesla sues Fremont and Alameda county

Tesla to move HQ and future plants to Texas and Nevada

Tesla (TSLA) said that, “Contrary to the Governor’s recent guidance and support from the City of Fremont, Alameda County is insisting we should not resume operations.

This is not for lack of trying or transparency since we have met with and collaborated on our restart plans with the Alameda County Health Care Services Agency.

Unfortunately, the County Public Health Officer who is making these decisions has not returned our calls or emails. […] the County’s position left us no choice but to take legal action to ensure that Tesla and its employees can get back to work.

Tesla’s only U.S. manufacturing plant is located in California

We filed a lawsuit on May 9 asking the court to invalidate the County Orders, to the extent the County claims they prevent Tesla from resuming operations.

Tesla’s Alameda County Plant, Stockwinners

Meanwhile, CEO Elon Musk said in a series of tweets that, “Tesla is filing a lawsuit against Alameda County immediately. The unelected & ignorant “Interim Health Officer” of Alameda is acting contrary to the Governor, the President, our Constitutional freedoms & just plain common sense! […] Frankly, this is the final straw.

Musk plans to move Tesla out of California

Tesla will now move its HQ and future programs to Texas/Nevada immediately.

If we even retain Fremont manufacturing activity at all, it will be dependent on how Tesla is treated in the future. Tesla is the last carmaker left in CA.

In March, Musk clashed with California officials over whether his company had to halt production in Fremont – home to Tesla’s only U.S. vehicle factory.

A county official on Friday said that its health department has had many discussions with Tesla and recommended it wait at least another week to monitor infection rates and discuss safe ways to resume production.

TSLA closed at $819.42.

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Retail bankruptcy filings are coming

J. Crew files for bankruptcy; Madewell to remain part of J.Crew

J.Crew Group announced it has reached an agreement with its lenders holding approximately 71% of its Term Loan and approximately 78% of its IPCo Notes, as well as with its financial sponsors, under which the Company will restructure its debt and deleverage its balance sheet, positioning J.Crew and Madewell for long-term success.

Madewell to remain part of the J.Crew Company, Stockwinners

Under the terms of the Transaction Support Agreement, the Company’s lenders will convert approximately $1.65 billion of the Company’s debt into equity.

To facilitate the restructuring contemplated by the TSA, the parent company of J.Crew Group, Inc., Chinos Holdings, Inc. and certain affiliates, have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Eastern District of Virginia.

The Company has secured commitments for a debtor-in-possession financing facility of $400 million and committed exit financing provided by existing lenders Anchorage Capital Group, L.L.C., GSO Capital Partners and Davidson Kempner Capital Management LP, among others.

Subject to Court approval, the DIP financing, combined with the Company’s projected cash flows, is expected to support its operations during the restructuring process.

As part of the TSA, Madewell will remain part of J.Crew Group, Inc.

Libby Wadle will continue in her role as CEO of Madewell.

J.Crew files for Chapter 11 bankruptcy protection, Stockwinners

“This agreement with our lenders represents a critical milestone in the ongoing process to transform our business with the goal of driving long-term, sustainable growth for J.Crew and further enhancing Madewell’s growth momentum,” said Jan Singer, CEO, J.Crew Group.

Neiman Marcus is expected to file for bankruptcy protection too

“Throughout this process, we will continue to provide our customers with the exceptional merchandise and service they expect from us, and we will continue all day-to-day operations, albeit under these extraordinary COVID-19-related circumstances.

Pier 1 Imports filed for bankruptcy protection

As we look to reopen our stores as quickly and safely as possible, this comprehensive financial restructuring should enable our business and brands to thrive for years to come.”

GNC is also expected to file for bankruptcy protection

The Company has filed a series of customary “first day” motions with the Bankruptcy Court seeking to maintain its operations during the restructuring process to help facilitate a smooth transition into Chapter 11.

JCP is inline for bankruptcy filing protection following weak sales

Note that in 2011, TPG Capital LP and Leonard Green & Partners LP privatized J.Crew in a $3 billion leveraged buyout.

Recent bankrupt retailers include Forever 21 and Pier 1 Imports.

Forever 21 filed for bankruptcy protection recently

Other retailers that may file for bankruptcy in the near future include: Neiman Marcus, JCP, GNC, and AEO. Note that Gaps (GPS) has been suffering from soft retail sales. Lands’ End (LE) is also suffering from soft sales.

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Legg Mason sold for $6.5B including debt assumption

Franklin Templeton to acquire Legg Mason for $50.00 per share in cash

Franklin Resources (BEN) announced that it has entered into a definitive agreement to acquire Legg Mason (LM) for $50.00 per share of common stock in an all-cash transaction.

The company will also assume approximately $2B of Legg Mason’s outstanding debt.

Franklin Templeton buys Legg Mason for $4.5B, Stockwinners

The acquisition of Legg Mason and its multiple investment affiliates, which collectively manage over $806 billion in assets as of January 31, will establish Franklin Templeton as one of the world’s largest independent, specialized global investment managers with a combined $1.5 trillion in assets under management, or AUM, across one of the broadest ranges of high-quality investment teams in the industry.

Legg Mason sold for $4.5B cash and $2B debt assumptions, Stockwinners

The combined footprint of the organization will significantly deepen Franklin Templeton’s presence in key geographies and create an expansive investment platform that is well balanced between institutional and retail client AUM.

In addition, the combined platform creates a strong separately managed account business. Trian Fund Management, L.P. and funds managed by it, which collectively own approximately 4 million shares or 4.5% of the outstanding stock of Legg Mason, have entered into a voting agreement in support of the transaction.

With this acquisition, Franklin Templeton will preserve the autonomy of Legg Mason’s affiliates, ensuring that their investment philosophies, processes and brands remain unchanged.

As with any acquisition, the pending integration of Legg Mason’s parent company into Franklin Templeton’s, including the global distribution operations at the parent company level, will take time and only commence after careful and deliberate consideration.

Following the closing of the transaction, Jenny Johnson will continue to serve as president and CEO, and Greg Johnson will continue to serve as executive chairman of the Board of Franklin Resources, Inc.

There will be no changes to the senior management teams of Legg Mason’s investment affiliates.

Global headquarters will remain in San Mateo, CA and the combined firm will operate as Franklin Templeton.

The all-cash consideration of $4.5 billion will be funded from the Company’s existing balance sheet cash.

Franklin Templeton will also assume approximately $2 billion in Legg Mason’s outstanding debt.

Upon closing of the transaction, Franklin Templeton expects to maintain a robust balance sheet and considerable financial flexibility with pro forma gross debt of approximately $2.7 billion with remaining cash and investments of approximately $5.3 billion.

This transaction is designed to preserve the Company’s financial strength and stability with modest leverage, significant liquidity and strong cash flow to provide ongoing flexibility to invest in further growth and innovation.

This transaction is expected to generate upper twenties percentage GAAP EPS accretion in Fiscal 2021 (based on street consensus earnings estimates for each company), excluding one-time charges, non-recurring and acquisition related expenses.

While cost synergies have not been a strategic driver of the transaction, there are opportunities to realize efficiencies through parent company rationalization and global distribution optimization.

These are expected to result in approximately $200 million in annual cost savings, net of significant growth investments Franklin Templeton expects to make in the combined business and in addition to Legg Mason’s previously announced cost savings.

The majority of these savings are expected to be realized within a year, following the close of the transaction, with the remaining synergies being realized over the next one to two years.

The transaction has been unanimously approved by the boards of Franklin Resources, Inc. and Legg Mason, Inc.

This transaction is subject to customary closing conditions, including receipt of applicable regulatory approvals and approval by Legg Mason’s shareholders, and is expected to close no later than the third calendar quarter of 2020.

LM closed at $40.72. BEN closed at $24.36.

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Tesla shares lower as sales slowdown

Tesla registrations nearly halved in California in Q4

Tesla’s (TSLA) overall vehicle registrations nearly halved in California during the fourth quarter, according to a Dominion Cross-Sell report, which collates data from state motor vehicle records, Reuters reports.

https://stockwinners.com/blog/
Tesla shares lower as sales slow down, Stockwinners

The report showed registrations in California plunged 46.5% to 13,584 in the quarter ended December 2019, from 25,402 in the same period a year earlier.

Model 3 registrations, which accounted for about three-fourth of the total, halved to 10,694.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Car of the Year, Stockwinners

The massive drop comes as tax credit for Tesla buyers ended in 2019. It had fallen to $3,750 at the start of the year and had halved to $1,875 in July.

An existing $7,500 U.S. tax credit for electric vehicles (EVs), which allows taxpayers to deduct a part of the cost of buying an electric car, phases out over 15 months once an automaker hits 200,000 cumulative EV sales, which Tesla hit in July 2018.

Morgan Stanley

Morgan Stanley analyst Adam Jonas downgraded Tesla to Underweight from Equal Weight with a price target of $360, up from $250.

The analyst sees an unfavorable risk/reward at current valuation levels following the stock’s recent rally.

Tesla gets a boost from Bud. See Stockwinners.com
Tesla is expected to rollout is big rig soon, Stockwinners

Further, he believes risks to Tesla’s long-term Chinese business may not be fully appreciated by the market.

Four factors have driven Tesla’s share price up 105% over the last four months, namely stronger than expected global demand for its vehicles, China announcements that show the company’s expansion into the world’s largest electric vehicle market, supportive incentive developments and positive sentiment around its product expansion, Jonas tells investors in a research note.

The analyst, while admitting near-term momentum and sentiment around the stock is very strong, questions the “sustainability of the momentum.” Jonas increased his expectations for Tesla’s core auto business while decreasing his expectations for the mobility business, resulting in the price target raise to $360.

TSLA is down 2.75% to $504.

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Xperi and TiVo to merge

Xperi and TiVo to merge in all-stock deal worth $3B

Xperi (XPER) and TiVo (TIVO) announced they entered into a definitive agreement to combine in an all-stock transaction, representing approximately $3B of combined enterprise value.

The transaction creates a leading consumer and entertainment technology business and one of the industry’s largest intellectual property, or IP, licensing platforms with a diverse portfolio of entertainment and semiconductor intellectual property.

The merger agreement provides for a 0.455 fixed exchange ratio, which implies a 15% premium to TiVo’s shareholders based on each of Xperi’s and TiVo’s 90-day volume-weighted average share prices.

Tivo and Xperi to merge, Stockwinners

At close, Xperi shareholders will own approximately 46.5% of the combined business, and TiVo shareholders will own approximately 53.5%.

Under the terms of the merger agreement, the shares of TiVo and Xperi stockholders will be converted into the shares of the new parent company based on a fixed exchange ratio of 0.455 Xperi share per existing TiVo share. Upon completion of the merger, Xperi stockholders will own approximately 46.5% and TiVo stockholders will own approximately 53.5% of the new parent company on a fully diluted basis.

In connection with the transaction each company’s debt will be refinanced on a combined basis.

Tivo and Xperi to merge, Stockwinners

To meet this objective, the companies have secured $1.1B of committed financing from Bank of America and Royal Bank of Canada.

Following the completion of the transaction, Xperi’s CCEO, Jon Kirchner, will serve as CEO of the new parent company and Xperi’s CFO, Robert Andersen, will serve as CFO.

TiVo’s CEO, David Shull, will continue as a strategic advisor to ensure a successful integration.

The board of the new parent company will consist of seven directors, including Xperi CEO Jon Kirchner, in addition to three directors appointed by Xperi and three directors appointed by TiVo.

The Chair of the Board will be selected by the independent directors of the board.

The new parent company will assume the Xperi name but will continue to provide entertainment services under the TiVo brand, alongside Xperi’s premium DTS, HD Radio, and IMAX Enhanced brands.

The company will be headquartered in San Jose, California.

This transaction has been approved by the boards of both companies and is expected to close during Q2 of 2020, subject to regulatory approvals, the approval by the shareholders of each company, and other customary closing conditions.

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SmileDirectClub shares tumble on new California law

SmileDirectClub says nothing in AB1519 requires ceasing or modify operations

SmileDirectClub (SDC) issued a statement on California Assembly Bill 1519, stating in part:

“We are pleased with the Governor’s signing statement for AB1519.

New California law sends shares lower, Stockwinners

While the authorizing nature of AB1519 made it difficult to veto the bill, the Governor clearly indicated that he expects all stakeholders to come to together to find a better way to create policy around teledentistry.

While this bill does not preclude SmileDirectClub’s continued operations in California, it will create unnecessary hurdles and costs to Californians that need care but struggle to afford it. The undebated, clinically unsupported, and ill-advised policy changes that are included in this bill – a bill that was intended to reauthorize the Dental Board of California until last-minute policy additions were added – have created arbitrary barriers to technological innovation…Simply put, this bill represents the dental lobby’s thinly-veiled attempt to protect traditional dentistry at the expense of Californians, and Governor Newsom made the correct choice in issuing his strongly-worded rebuke of the tactics and policy that this bill represents.

California law may require a dentist at every SDC shop, Stockwinners

Nothing in AB1519 requires SmileDirectClub to cease or modify its operations, and nothing regarding teledentistry in this legislation can take effect until the Board has given all stakeholders the opportunity to submit public comment and debate the merits of any proposed rules with clinically-based data – as the Governor has requested in his signing statement. To that effect, SmileDirectClub will be reaching out to our partners in the field to coordinate efforts so that a positive outcome for the industry – and for the California consumers – can be reached…To be clear, SmileDirectClub will continue to legally operate in California, we will be an active participant in the administration-directed public debates surrounding teledentistry, and we will continue to provide affordable orthodontic care to thousands of smiling Californians.

Moving forward, SmileDirectClub welcomes transparent policy debates that include all stakeholders.”

Heavy lobbying by both sides made AB-1519 national news, Stockwinners

UBS Comments

UBS analyst Kevin Caliendo noted that California Governor Gavin Newsom signed bill AB-1519 over the weekend and the law is expected to go into effect on January 1, 2020.

He thinks that SmileDirectClub may need to place dentists inside its shops due to the new law, though it is less clear if the bill will mean that patients will need to get x-rays as well as iTero scans, which may eventually be determined in court.

The analyst, who noted that SmileDirect is scheduled to report Q3 results on November 12, noted that he has received questions on if the company might pre-announce, but he has “no insight or precedent into whether the company will opt to do that or not.” Caliendo has a Buy rating and $24 price target on SmileDirectClub shares.

SDC shares are down 9% to $10.12 in Monday’s trading.

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Enterprise Spending Drought

Forescout pummeled, Cisco falls amid weakening enterprise spending view

Shares of publicly-traded companies in the network security space are trading lower after Forescout Technologies (FSCT) announced preliminary results for its third quarter.

Forescout slashed its view on sales and profit for the quarter, as sales are seen getting pushed out to future quarters amid a weakening in the global macroeconomic environment.

Forescout shares tumble on weak demand, Stockwinners

EXPECTATIONS FALL

Forescout now sees total Q3 revenue of $90.6M-$91.6M as compared to its prior view of $98.8M-$101.8M. Non-GAAP operating loss for Q3 is expected to be in the range of $1.6M-$1.4M, compared to the company’s prior guidance range for an operating profit of $2.6M-$3.6M.

Forescout CEO Michael DeCesare said, “Q3 results were impacted by extended approval cycles which pushed several deals out of the third quarter.

This was most pronounced in EMEA against the backdrop of a challenging macro-economic environment. These deals were not lost to competitors and we are working to get them over the finish line.” JPMorgan analyst Sterling Auty downgraded ForeScout to Neutral from Overweight after the company announcement.

Auty cut his price target for ForeScout shares to $35 from $54. He also called this the “first notable negative preannouncement” in the software sector and thinks investors will be watching carefully to see if there are further issues that will cause multiples in the space to contract further.

ENTERPRISE SPENDING DROUGHT

Adding to the negativity in the Enterprise space was a Cisco Systems (CSCO) downgrade from Goldman Sachs.

Goldman Sachs downgrades Cisco Systems, Stockwinners

Goldman Sachs analyst Rod Hall downgraded Cisco Systems to Neutral from Buy with a price target of $48, down from $56.

Large enterprise spending will continue to weaken and telecom spending activity will remain depressed in the near term, Hall stated.

The analyst noted that Goldman’s Enterprise Activity Index deteriorated in September, while his latest reseller survey was also incrementally negative on enterprise spending trends. PRICE ACTION: Shares of Forescout are down over 35.5% to $25.26 while Cisco is down over 2%.

OTHER STOCKS TO WATCH

Other companies to watch in the enterprise and security space include A10 Networks (ATEN), Check Point (CHKP), CyberArk (CYBR), Cyren (CYRN), and Fortinet (FTNT).

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Sarepta reports positive results for muscular dystrophy Type 2E treatment

Sarepta announces results from gene therapy trial for beta sarcoglycanopathy

Sarepta Therapeutics (SPRT) announced the nine-month functional results from three Limb-girdle muscular dystrophy Type 2E ,LGMD2E, clinical trial participants who received SRP-9003. SRP-9003 is an investigational gene therapy intended to transduce skeletal and cardiac muscle with a gene that codes for the full-length, native beta-sarcoglycan protein, the lack of which is the sole cause of LGMD2E.

Sarepta drops after U.K. trial halt,
Sarepta rises on muscular dystrophy data, Stockwinners

In Cohort 1 of the SRP-9003 study, three participants ages 4-13 were treated with an infusion of SRP-9003 at a dose of 5x1013vg/kg.

Improvements in functional outcomes were observed at day 270 for all three participants.

“We have now observed consistent functional improvements, in addition to high levels of expression of the missing protein of interest and strong results in related biomarkers, in both of our first cohorts for Duchenne muscular dystrophy and LGMD2E. We intend to test one higher dose of SRP-9003 in LGMD2E participants, select our clinical dose and then advance our SRP-9003 program, along with our other five LGMD programs, as rapidly as possible,” said Doug Ingram, Sarepta’s president and chief executive officer.

“With the results of our first LGMD2E cohort, Sarepta continues to build its gene therapy engine, an enduring model created to design, develop and bring to the medical and patient community transformative therapies for those living with, and too often dying from, rare genetic disease.”

No new safety signals were observed and the safety profile seen to date supports the ability to dose escalate in the next cohort of the study. As previously disclosed, two participants in the study had elevated liver enzymes, one of which was designated a serious adverse event (SAE), as the participant had associated transient increase in bilirubin. Both events occurred when the participants were tapered off oral steroids and, in both instances, elevated liver enzymes returned to baseline and symptoms resolved following supplemental steroid treatment.

SPRT is up $5.52 to $86.86.

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Aptiv, Hyundai Motor to form autonomous driving joint venture

Aptiv, Hyundai Motor to form autonomous driving JV

Aptiv (APTV) and Hyundai Motor Group (HYMTF) announced that they will be forming an autonomous driving joint venture.

This partnership brings together one of the industry’s most innovative vehicle technology providers and one of the world’s largest vehicle manufacturers.

Aptiva scores a victory by forming JV with Hyundai, Stockwinners

The joint venture will advance the design, development and commercialization of SAE Level 4 and 5 autonomous technologies, furthering the partners’ leadership position in the global autonomous driving ecosystem.

The joint venture will begin testing fully driverless systems in 2020 and have a production-ready autonomous driving platform available for robotaxi providers, fleet operators, and automotive manufacturers in 2022.

As part of the agreement, Hyundai Motor Group and Aptiv will each have a 50 percent ownership stake in the joint venture, valued at a total of $4B.

Hyundai forms autonomous driving joint venture, Stockwinners

Aptiv will contribute its autonomous driving technology, intellectual property, and approximately 700 employees focused on the development of scalable autonomous driving solutions.

Hyundai Motor Group affiliates – Hyundai Motor, Kia Motors and Hyundai Mobis – will collectively contribute $1.6B in cash at closing and $0.4B in vehicle engineering services, R&D resources, and access to intellectual property.

The partnership reinforces the companies’ shared vision of making mobility more safe, green, connected, and accessible by advancing the development and commercialization of the highest-performing and safest autonomous vehicles.

Shares of Aptiva are up 1.6% to $88.50.

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