Loeb pushes for Sony spinoff. Daniel Loeb, whose Third Point Capital has a 6.5% stake in Sony (SNE) worth some $1.1B, is pushing for a spinoff of the company's entertainment business including the film studio responsible for James Bond blockbuster "Skyfall" and the music label which houses big name artists such as Taylor Swift. Andrew Ross Sorkin says Loeb flew to Tokyo last weekend and hand-delivered a letter to CEO Kazuo Hirai praising the company's turnaround initiatives but calling for greater focus. In order to "ensure the success" of a potential spinoff, Third Point would be willing to put up $2B to backstop an IPO of around 15-20% of the entertainment arm, the letter said. Other corporate assets Loeb thinks could be ripe for a split include the company's insurance division.
U.S. oil boom fuels non-OPEC supply growth. Thanks to U.S. shale oil, demand for OPEC crude will remain largely unchanged over the next five years, the IEA said in its semi-annual report. "Output growth from North America dominates the medium-term growth profile," as U.S. liquids production should increase by 2.8M barrels per day by 2018, accounting for half of non-OPEC growth during the period. Total U.S. output five years from now should reach 11.9M barrels per day, or around 20% of the projected total of 59.3M barrels per day of non-OPEC supply.
Top Stock News
Verizon Wireless's parents get $7B dividend. Verizon Wireless said it will make a fresh $7B cash distribution to owners Verizon (VZ) and Vodafone (VOD) - VZ will get $3.85B, and VOD $3.15B. A $10B distribution was made in 2011, and an $8.5B distribution last November. CEO Lowell McAdam appeared to hint earlier this month that VOD might not get a distribution this year, as Verizon Wireless focuses on paying down debt. Now, "it just does not appear that withholding Verizon Wireless cash … is likely to be part of the negotiation" between VZ and VOD for the latter's stake in the wireless venture, Evercore's Jonathan Schildkraut said.
Tesla extends rally. For those still keeping score, Tesla (TSLA) added another 14.38% to last week's post-earnings bonanza Monday, bringing the three-day total percentage change to +57%. Amusingly, the rally didn't let up AH either, as the stock tacked on an additional 2.51% hitting $90 just before 8 p.m. Call it a short squeeze, a mania, or a solid bet on the future of the automobile industry, but don't forget to call the shares richly valued at more than 80 times FY14 EPS estimates.
Suitors bid for Optimer. Optimer Pharmaceuticals (OPTR) — which had fallen dramatically since last Thursday's earnings report — got a much needed boost Monday afternoon, rising 14% as sources said AstraZeneca (AZN), Cubist Pharmaceuticals (CBST), and Astellas Pharma (OTC:ALPMY) are among the first round bidders for the antibiotic manufacturer. Around three months ago, OPTR said it was working with Centerview Partners and JPMorgan to explore strategic options, including a potential sale, but some analysts were concerned that weaker-than-anticipated sales of the antibiotic Dificid might hurt the value proposition for potential buyers.
Take-Two swings to Q4 profit. Take-Two (TTWO) said it earned $0.38 per share in FQ4 and $0.36 per share for FY13 (both on a non-GAAP basis) on revenue of $303.1M and $1.222B respectively, compared to a net loss of $0.60 per share for Q4 2012 and a net loss of $0.71 per share for FY12. Management called the results "strong" and although the company sees a net loss for Q1, it guided for FY14 EPS of $2.05-$2.30 on revenue of $1.75B-$1.85B (consensus is $2.26 per share on $1.78B in sales) and said it expects to be profitable in FY15 and beyond. The shares rose 5.73% AH.
Airbus deliveries drive profit growth at EADS. EADS (OTC:EADSF) said Q1 net profit nearly doubled to €241M as deliveries by Airbus (144 versus 131 in Q1 2012) were strong during the period driving 16% revenue growth from commercial aircraft sales. Management also said it is confident that the company's 787 Dreamliner competitor, the A350, will make its first flight this summer. For the full year, the company sees "moderate" revenue growth and an operating profit of €3.5B.
BHP shareholders may get more cash. New CEO Andrew Mackenzie said BHP Biliton (BHP) — which will sell $5B in non-core assets and cut costs by $1B this year in an effort to refocus capital allocation — may return "even more" cash to shareholders as capital expenditures are projected to fall by as much as $7B over the next two years. "I stress if our investment criteria cannot be met in any one project, product, or geography we will redirect the capital elsewhere, or we will not invest," Mackenzie told a Barcelona audience Tuesday, suggesting prudent management of resources could result in increased cash payouts for stockholders.
Sharp reports largest loss in 100-year history. Sharp (OTC:SHCAY) said Tuesday it will replace its president and chairman effective June 25. The news came after Japan's largest LCD display maker reported a record (and wider-than-expected) net loss of ¥545.35B for FY13, the largest loss in the firm's 100-year history. The company faces a tough road ahead with ¥330M in bond redemptions looming over the next two years and 10 times as many liabilities as cash. Nevertheless, management says it sees a net profit of ¥5B in FY14, providing at least some hope that there is indeed a light at the end of the tunnel.
Top Economic & Other News
German investor confidence subdued. ZEW said its index of investor and analyst expectations crept up to 36.4 this month from 36.3 in April, missing economists' forecast of 40. The below-consensus reading was largely attributed to a generalized sense of anxiety regarding the economic situation in the eurozone as a whole, underscored by the ECB's recent rate cut. "The problem is that [Germany] seems to be the only big EU economy growing," said a senior economist at Citigroup, quoted by Bloomberg.
Spain's 12-month borrowing costs hit 3-year low. Spain sold €3.034B of 12-month T-bills at an average yield of just 0.994% Tuesday, the lowest rate in more than three years as borrowing costs continue to fall on investors' apparently unshakable faith in the ECB's willingness to backstop Spanish and Italian sovereign debt. Yields on comparable notes hit 5% last June. Meanwhile, core inflation in Spain fell to 1.9% in April, below economists' projections and the lowest level in eight months, as the country's economy continues to stumble.
Nomura's retail assets explode. Thanks largely to Prime Minister Shinzo Abe and BOJ Governor Haruhiko Kuroda, Nomura's (NMR) retail client assets hit a record $889B last month, a goal CEO Koji Nagai hadn't expected to hit for another two years. NMR saw an influx of some $64B in assets under management during April, the largest increase since record keeping began at the bank, as investors piled into stocks on the heels of Japan's extraordinary monetary policy initiatives.
ECB, Germany at odds over plan for failed banks. Once again at odds over the timing and scope of reform in the crisis-plagued eurozone, are Germany and the ECB as Joerg Asmussen said Tuesday that the EU should finalize plans for a centralized resolution fund for failed financial institutions "by the summer of next year." Such a vehicle would theoretically be financed by "a levy on the banking industry." True to form, German Finance Minister Wolfgang Schäuble said such a venture should not be undertaken without changes to existing treaties.
In Asia, Japan -0.16% to 14758. Hong Kong -0.26% to 22930. China -1.11% to 2217. India +0.16% to 19722.
In Europe, at midday, London -0.15%. Paris -0.53%. Frankfurt -0.26%.
Futures at 7:00: Dow -0.25%. S&P -0.25%. Nasdaq -0.23%. Crude -0.51% to $94.68. Gold -0.5% to $1427.00.
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