There have been two bombings in Russia, just over a month before the Winter Olympics, which has many talking -- both from a news perspective and a financial perspective. We think this will have little effect on the markets moving forward, however if this is the start of more violence to come, then world financial markets may have something to worry about. Based on what we have read online and what the news organizations in the US are reporting this morning, it appears that the Winter Olympics will be quite safe and that Putin has already moved about 40,000 security forces to deal with safety issues.
Our focus this morning has shifted from the terrorist attacks to what the hedge fund names are doing this morning and a deal which fell apart.
Chart of the Day:
Japan's Nikkei finished the year on a high note, and with the Japanese yen continuing to show weakness as the Japanese Central Bank provides easy money it appears the rally could continue into 2014. Investors should be careful however as the market will want to see continued improvement in the Japanese economy to justify the bond buying.
We have no economic news today or tomorrow, but will have unemployment claims data when the market reopens on January 2nd after the New Year.
Asian markets finished mostly higher today:
- All Ordinaries -- up 0.61%
- Shanghai Composite -- down 0.18%
- Nikkei 225 -- up 0.69%
- NZSE 50 -- UNCH
- Seoul Composite -- up 0.45%
In Europe, markets are trading lower this morning:
- CAC 40 -- down 0.18%
- DAX -- down 0.22%
- FTSE 100 -- down 0.36%
- OSE -- down 0.10%
Hedge Funds and Smart Money Active
There are a lot of names involved in stories today centering around hedge funds and other buyers which we think are important. First up is Apple (AAPL), which has urged shareholders to vote against the proposal by Carl Icahn. Thatch would indicate that shareholders want the company to repurchase $50 billion in Apple stock. We say want because the proposal is simply up for a vote and would not require Apple to actually go through with the purchase, although an overwhelming vote could potentially force the company to move forward with the plan which management has not gotten behind. We doubt that Apple shareholders give the proposal over 35% support, but believe that Mr. Icahn will be back with a fresh proposal in the $10-20 billion range in the near future.
Investors in Crocs (CROX) are cheering this morning after the company agreed to sell convertible preferred shares to an investment fund affiliated with Blackstone (BX) for $200 million. The preferred shares will pay Blackstone a 6% cash dividend, provide two seats on Crocs' board of directors and make Blackstone a 13% holder of Crocs shares. The preferred shares are convertible to common at $14.50/share. As part of the deal, Crocs has announced that they will increase their stock repurchase program by $200 million which will result in the company retiring 30% of its shares in total. The company's current President and CEO, John McCarvel will retire on April 30, 2014 and vacate his board seat.
The deal has been falling apart for months now, but Continental finally put investors out of their misery by calling the merger off.
Source: Yahoo Finance
In news that should not be all that surprising to readers, the deal for Continental Tire & Rubber (CTB) has fallen through. Continental Tire announced that their Indian suitor, Apollo Tyres, Ltd., was continuing to have difficulty in obtaining financing and due to this Continental was terminating the $2.5 billion deal. There was a $112.5 million breakup fee, but Continental Tire did not say anything about this. CNBC has no news as to whether the fee will be paid but The New York Times is reporting that because the deal was terminated by Continental that the $112.5 million fee would not be paid by Apollo. Continental may very well pursue the fee, but investors' focus has to be turning back to the auction process and whether there are any more suitors still looking at the company.
Even with Continental's recent weakness, Goodyear Tire & Rubber (GT) has continued to trade well and sport a strong stock price. The company's shares attracted attention after the Continental deal announcement and today still trade near 52-week highs.