Moody’s Downgrades Hong Kong

The announcement follows Moody’s downgrade of China’s rating to A1 from Aa3

The economic and financial linkages between Hong Kong and China are close and broad-based

hongkong

#Moody’s Investors Service has downgraded Hong Kong’s local currency and foreign currency issuer ratings to Aa2 from Aa1 and changed the outlook to stable from negative.

The announcement follows Moody’s downgrade of China’s rating to A1 from Aa3 and change in the outlook to stable from negative.

The downgrade in Hong Kong’s rating reflects Moody’s view that credit trends in China will continue to have a significant impact on Hong Kong’s credit profile due to close and tightening economic, financial and political linkages with the mainland.

Hong Kong’s local currency senior unsecured debt ratings are downgraded to Aa2 from Aa1.

The economic and financial linkages between Hong Kong and China are close and broad-based. Combined with political linkages, this means that any erosion in China’s credit profile, such as that reflected in the 24 May downgrade of China’s rating to A1 with a stable outlook, will ultimately affect Hong Kong’s credit profile and will be reflected in the Special Administrative Region’s rating.

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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.

FDA Approves Puma’s Breast Cancer Drug, Shares Jump

The #FDA said in briefing documents ahead of Wednesday’s advisory panel on #Puma Biotechnology’s breast cancer drug, “In conclusion, the totality of evidence demonstrating the magnitude of activity of neratinib to treat HER2 positive breast cancer across multiple clinical settings, plus the strong neoadjuvant data, provides robust scientific and clinical rationale for proceeding into the adjuvant setting with neratinib.

An unmet medical need exists during the ‘extended adjuvant period’ or the time after standard of care adjuvant therapy with other anti-HER2 therapy has been completed. Patients who have completed their 1 year of trastuzumab adjuvant therapy have no options for further anti-HER2 treatment and enter into a “watch and wait” period. In the interest of being able to turn this time into a period of active anti-HER2 therapy with the intent to provide further improvement in iDFS, neratinib was studied as extended adjuvant therapy in a multicenter randomized, double blind placebo controlled Phase 3 Study 3004 (N=2840) which demonstrated clinically meaningful and statistically significant improvement in iDFS with a manageable safety profile consistent with other approved agents within the class of TKIs targeting EGFR and HER2.

The sponsor believes the totality of the data support approval of #neratinib 240 mg po qd for 1 year in the extended adjuvant setting in order to provide physicians and patients with a new strategic therapeutic option to reduce the rate of recurrence of HER2 positive breast cancer.”

See our earlier blog regarding this stock.

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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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Facebook Sanctioned by France

facebookFrance’s National Commission on Informatics and Liberty #CNIL says in a statement, “Following FACEBOOK statement regarding the amendment of its privacy policy in 2015, the CNIL performed on site and online inspections, as well as a documentary audit, in order to verify that #FACEBOOK $FB was acting in compliance with the French Data Protection Act.

These actions are part of a European approach which involves five data protection authorities having also decided to carry out investigations — France, Belgium, the Netherlands, Spain and Hamburg — on FACEBOOK.

The investigations conducted by the CNIL have revealed several failures. In particular it has been observed that FACEBOOK proceeded to a massive compilation of personal data of Internet users in order to display targeted advertising. It has also been noticed that FACEBOOK collected data on browsing activity of internet users on third-party websites, via the “datr” cookie, without their knowledge…

As a result the Restricted Committee has decided to pronounce a public sanction of 150,000 euros against FACEBOOK INC and FACEBOOK IRELAND. Considering the significant number of users in France, the seriousness and the numbers of infringements, the publicity and amount and of this sanction are justified. The decision of the Restricted Committee follows the work carried out with the data protection authorities of Belgium, Hamburg, Spain and the Netherlands in a collaborative manner.”

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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.

Abercrombie & Fitch $ANF is for Sale

anfAfter #Abercrombie & Fitch $ANF confirmed that it had preliminary talks with several parties regarding a potential deal, RBC Capital analyst says there is less than a 25% chance of a deal occurring.

Among the hurdles are the large declines in the stocks of a number of companies that have bought retailers recently, Abercrombie & Fitch’s high overseas exposure, and its “still struggling adult brand,” according to the analyst. However, he says there is some strategic rationale for a deal between #AmericanEagle $AEO and Abercrombie & Fitch.

Such a transaction would give the combined company “landlord clout and real estate rationalization control; and “promotional and positioning control over three teen/young adult brands,” according to the analyst.

He thinks the combined company could generate EPS of about $1.50 by fiscal 2019, but warns that the deal would be dilutive to Abercrombie & Fitch in the nearer term and could erode value as other recent deals in the sector have done.

The analyst keeps an Underperform rating on Abercrombie & Fitch and an Outperform rating on American Eagle.

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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.

 

 

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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SEC fines Barclays $97M

barclaysThe #SEC announced an enforcement action requiring Barclays Capital to refund advisory fees or mutual fund sales charges to clients who were overcharged.

In a settlement of more than $97M, Barclays agreed to settle three sets of violations that resulted in clients being overbilled by nearly $50M, according to the SEC.

The SEC’s order finds that two Barclays $BCS advisory programs charged fees to more than 2,000 clients for due diligence and monitoring of certain third-party investment managers and investment strategies when in fact these services weren’t being performed as represented.

#Barclays also collected excess mutual fund sales charges or fees from 63 brokerage clients by recommending more expensive share classes when less expensive share classes were available. Another 22,138 accounts paid excess fees to Barclays due to miscalculations and billing errors by the firm.

Without admitting or denying the SEC’s findings, Barclays agreed to create a “Fair Fund” to refund advisory fees to harmed clients.

The Fair Fund will consist of $49.79M in disgorgement plus $13.75M in interest and a $30M penalty. Barclays will directly refund an additional $3.5M to advisory clients who invested in third-party investment managers and investment strategies that underperformed while going unmonitored.

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Peanuts and Strawberry Shortcake Sold for $345M

Peanuts#Iconix Brand $ICON has entered into a definitive agreement to sell its interest in the #Peanuts and #Strawberry Shortcake brands to #DHX Media for $345M in cash, subject to a customary working capital adjustment.

The company intends to use the net proceeds from this transaction plus additional cash on the balance sheet to pay down approximately $362M of debt.

This includes a mandatory payment of approximately $152M of the company’s Senior strawberrySecured Notes issued under its securitization facility, and the full extinguishment of the $210m outstanding balance of its Senior Secured Term Loan. Going forward, the entertainment segment will be reported as a discontinued operation.

The company expects the elimination of earnings from the entertainment segment to be offset by interest savings from the reduction of debt. The total acquisition cost of these brands was $246M. This transaction is expected to close by the end of Q2.

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Softbank to push T-Mobile and Sprint into a deal

sprint#SoftBank  $SFTBF is prepared to enter talks on potential mergers and acquisitions for wireless unit #Sprint $S , particularly keen on a potential deal with #T-Mobile $TMUS , Reuters reports, citing comments made by CEO Masayoshi Son at a news conference.

The company previously tried to acquire T-Mobile for Sprint but dropped talks following opposition from U.S. antitrust regulators. “Of all potential partners, T-Mobile is the one that would yield the most synergies, the most orthodox choice and we’d sincerely love to begin talks,” Son said, adding that the current U.S. adtmobileministration is more open to the possibility of a deal.

The company is also open to other possible deals if there were better offers.

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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.

Import Prices Jump in April

Ships gather off the ports of Los Angeles and Long Beach, California in an aerial imageU.S. April import prices rose 0.5% while export prices edged up 0.2%.

The 0.2% decline in March import prices was revised up to 0.1% (and February’s 0.4% gain was revised down to 0.3%). The 0.2% March export price increase was bumped down to 0.1%.

For import prices, petroleum climbed 1.6% from -0.4% (revised from -3.6%). Excluding petroleum, import prices were up 0.4% from 0.1% (revised from 0.2%).

Industrial supply prices increased 1.1%, while food and beverage prices rose 0.3%.

Import prices with Canada rose 0.6% from 0.7% (revised from -1.3%), and were down 0.1% with China versus the 0.2% March gain.

For exports, agricultural prices were up 0.3% following the prior 0.8% gain (revised from 0.9%). Excluding ag, export prices inched up 0.1%, the same as in March (revised from 0.2%).

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