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11/07/22 Briefing




A deal that seemed destined to crumble has done just that after Elon Musk walked away from his $44 bln bid to acquire Twitter (TWTR 32.65, -4.16, -11.3%). When Musk first raised the issue of TWTR's fake accounts in mid-May and put the acquisition "temporarily on hold", it's now clear that he was setting the table to abandon the deal if a lower buy-out price couldn't be negotiated. Unwilling to budge, TWTR filed a lawsuit against Musk this past weekend to enforce the $54.20/share acquisition price, positioning the company for a lengthy and drawn-out court battle. TWTR is confident that it has the legal high ground, but this development is a worst-case scenario for the company in the short-to-intermediate term. It will take many months for the litigation to play out, putting TWTR's future in limbo and creating a massive distraction. Already shaken in the wake of Musk's buy-out bid, TWTR is also contending with very challenging macroeconomic conditions that prompted CEO Parag Agrawal to implement a hiring freeze and lay off 30% of the company's talent acquisition team. For his part, Musk continues to contend that TWTR is not furnishing him or his attorneys with all of the fake account data that's been requested. In a letter to the Securities and Exchange Commission (SEC), Musk's lawyers alleged that TWTR is in material breach of the merger agreement and that the company made false and misleading representations that Musk relied upon when entering that agreement. Specifically, Musk's attorneys say that the mDAU (monetizable daily active users) information that TWTR has provided suggest that TWTR is "dramatically understating the proportion of spam and false accounts represented in its mDAU count." The issue for Musk, though, is that he has long suspected that TWTR's fake user accounts represent far more than the 5% that it touts in its public filings -- but he agreed to a $44 bln acquisition, anyways. It will be difficult for him to argue that uncertainty regarding spam accounts is a new and financially material issue that arose after he made his bid. However, we tend to agree with the notion that this was never really about TWTR's fake accounts. Rather, the tumbling stock prices for TWTR and TSLA, combined with TWTR's recent souring business prospects, likely had Musk looking for an exit. By publicly scrutinizing TWTR's fake account numbers, Musk was seemingly trying to apply some pressure on the company to renegotiate the acquisition terms. With TWTR not biting, an ugly no-win situation is now brewing for shareholders.

Today's News Summary:

For a full rundown of today's market and after hours developments, see Live In Play

  • Earnings/Guidance (Full Earnings Calendar):

  • AZZ (AZZ) beats by $0.39, beats on revs; guides Q2 revs above estimate

  • Camtek (CAMT) sees Q2 revs guidance above consensus

  • Equitrans Midstream (ETRN) intends to revise its full-year 2022 deferred revenue guidance in connection with its second quarter 2022 earnings release

  • Fortuna Silver Mines (FSM) reports Q2 production of 96,712 gold equivalent ounces

  • GOL Linhas Aereas Inteligentes S.A. (GOL) sees Q2 earnings below consensus

  • Greenbrier (GBX) reports Q3 (May) results, beats on revs

  • Titan Machinery (TITN) to acquire Heartland Ag Systems and updates FY23 guidance to reflect partial year of accretion from the transaction

  • Zynex (ZYXI) reaffirms Q2 and FY22 revenue and adjusted EBITDA guidance

  • General News:

  • President Biden traveling to Saudi Arabia this week, according to the Wall Street Journal

  • Global minimum tax implementation delayed, according to the Wall Street Journal

  • Macau planned closure to curb outbreak weighing on casino / gaming names

  • United States: Fitch revises US outlook to stable from negative; affirms rating at 'AAA'

  • Kansas City Fed President Esther George (FOMC voting member) comments on monetary policy tightening and economy

  • NY Fed survey shows increase in short-term inflation expectations; home price expectations declined sharply, households' perceptions and expectations for current and future financial situations both deteriorated

  • United States Secretary of Commerce Raimondo discusses chip shortage on Bloomberg TV - says US Chips Act deal will get done

  • US government expected to extend Covid public-health emergency designation (set to expire July 15)

  • Citron Research's Andrew Left out negative on cryptocurrencies, according to Reuters

  • Aecom Tech (ACM) been selected by Orange County Public Schools in Florida to provide program management services in support of its capital facility program

  • Alexandria RE (ARE) Co-Chief Executive Officer of Alexandria Real Estate Equities Stephen A. Richardson tendered his resignation effective July 31, 2022

  • Alibaba (BABA) and Tencent fined over disclosure violations, according to Reuters

  • Altair Engineering (ALTR) and LG Electronics signed a MOU for product development

  • AMC Entertainment (AMC) says THOR: LOVE AND THUNDER helped company achieve "busiest weekend of 2022"

  • American Tower (AMT) announces that Stonepeak will acquire an ownership interest of about 29% in its U.S. data center business

  • Amphastar Pharmaceuticals (AMPH) enters into a contract research agreement with Nanjing Hanxin Pharma for RCBs

  • Arcutis Biotherapeutics (ARQT) announces that Health Canada has accepted for review the New Drug Submission for roflumilast cream 0.3% for the treatment of plaque psoriasis in adults and adolescents

  • Broadcom (AVGO) COO Charlie B. Kawwas, Ph.D. has been named President of the new Semiconductor Solutions Group overseeing co's broad semiconductor portfolio effective July 11

  • Bruker (BRKR) announced three new customer orders for GHz systems

  • Cadence Design (CDNS) to acquire Future Facilities, a provider of electronics cooling analysis and energy optimization solutions for data center design; terms of the transaction were not disclosed

  • Callaway Golf (ELY): Justice Dept. to investigate if PGA Tour engaged in anticompetitive behavior as it relates to LIV Golf circuit, according to WSJ

  • Co-Diagnostics (CODX) has shipped testing reagents for monkeypox virus currently exhibiting a multi-country outbreak to one of its international distributors

  • ConocoPhillips (COP) Skandinavia AS concluded the drilling of wildcat well 6306/3-2; well is dry with traces of petroleum in the upper part of the Rogn Formation

  • Deere (DE) loses patent case to AGCO (AGCO), according to Bloomberg

  • Desktop Metal (DM) expands global partnership with SolidCAM to four new countries in the Americas, Europe and Asia

  • EOG Resources (EOG) provides Q2 updates; EOG anticipates a net loss of $1,377 mln on the mark-to-market of its financial commodity derivative contracts

  • Frontier Group Holdings (ULCC): In filing company sends letter to Spirit Airlines (SAVE) mgmt; says still remains far from obtaining approval from SAVE related to pending transaction

  • Gilead Sciences (GILD): German Court rules that Gilead's Sofosbuvir infringes NuCana's (NCNA) '190 Patent

  • GlaxoSmithKline (GSK) has started shipping doses of its quadrivalent influenza vaccines to US healthcare providers and pharmacies for the 2022-23 season; expects to distribute over 50 mln doses of its influenza vaccine to the US market

  • Golden Ocean (GOGL) to construct three Kamsarmax vessels

  • Hologic (HOLX) now offering its Panther Fusion SARS-CoV-2/Flu A/B/RSV assay and its Novodiag RESP-4 molecular diagnostic test for sale in the European Union

  • IMAX (IMAX): Thor: Love and Thunder opens with $23 mln at IMAX screens

  • Immunocore (IMCR) announces dosing of first patient with ImmTAV bispecific for HIV

  • Insulet (PODD) entered into a settlement and license agreement with Roche (RHHBY) Diabetes Care

  • Ionis Pharma (IONS) licenses rare kidney disease treatment and will advance into Phase 3 clinical study

  • KBR (KBR) awarded a strategic contract to expand its health and human performance R&D support of the 711th Human Performance Wing, a unit of the Air Force Research Laboratory

  • Kohl's (KSS) launching new in-store and online experiences

  • L3Harris (LHX) ended discussions to buy Israeli spyware company NSO Group, according to reports

  • Las Vegas Sands (LVS) entered into a loan agreement with Sands China (SCHYY)

  • Lenovo (LNVGY): Worldwide PC shipments in Q2 down 15.3% yr/yr, according to IDC

  • LVMH's (LVMUY) Sephora to exit Russian market, according to Women's Wear Daily

  • MacroGenics (MGNX) Announces Closure of CP-MGA271-06 Study Evaluating Enoblituzumab plus Checkpoint Inhibition in Head and Neck Cancer

  • Marrone Bio Innovations (MBII) shareholders approve merger agreement with Bioceres Crop Solutions (BIOX); parties intend to close the transaction on July 12, 2022

  • Mullen Automotive (MULN) signs binding agreement with Amazon (AMZN) Delivery Service Partner DelPack Logictics for purchase of up to 600 Mullen Class 2 EV cargo vans

  • Netflix (NFLX) searching for candidates to lead ad-supported services, according to WSJ

  • NIO (NIO) provides update on response to short seller report

  • Novavax (NVAX): U.S. Government secures 3.2 mln doses of Novavax COVID-19 vaccine

  • Novo Nordisk A/S (NVO) reports phase 3 results of the explorer7 study showed a reduction in treated spontaneous and traumatic bleeds and mean annualised bleeding rate of 1.7 with concizumab

  • ONEOK (OKE): Fire, explosion at Oklahoma ONEOK natural gas facility prompted evacuations over the weekend, according to NBC News

  • Perrigo's (PRGO) HRA Pharma submitted its application to the FDA for the first-ever over-the-counter (OTC) birth control pill in the United States

  • Pliant Therapeutics (PLRX) Announces Positive Safety and Efficacy Data from Phase 2a INTEGRIS-IPF Clinical Trial of PLN-74809 in Patients with Idiopathic Pulmonary Fibrosis

  • Quipt Home Medical (QIPT) surpasses 200,000 active patients adding ~ $7 mln in annualized revenues, and anticipated $1.4 mln of adjusted EBITDA post integration

  • Rivian Automotive (RIVN) plans to cut about 5% of workforce - Bloomberg TV

  • Roche Hldg (RHHBY) reports new data from Phase III HAVEN 6 study reinforcing favorable safety and efficacy profile of Genentech's Hemlibra

  • Sachem Capital (SACH) increases quarterly dividend to $0.14 per share from $0.12 per share

  • Sanofi (SNY) reports Fitusiran prophylaxis reduced bleeds by 61% in people with hemophilia A or B, with or without inhibitors, compared to prior factor or bypassing agent prophylaxis

  • Starbucks (SBUX) halting sales of new chicken sandwich, according to the Wall Street Journal

  • Stereotaxis (STXS) announced the CE Mark submission for its MAGiC catheter

  • STMicroelectronics (STM) planning new chip foundry, according to Reuters

  • Suncor Energy (SU) CEO to step down immediately, appoints Kris Smith as Interim CEO

  • TaskUs (TASK) signed on Monday a Memorandum of Understanding with the Government of Tamil Nadu to pursue plans of setting up a Technology Center of Excellence for its shared services in Chennai

  • Tata Motors' (TTM) Jaguar Land Rover UK will offer home charging points from London-based manufacturer and supplier Andersen EV

  • Teva Pharma (TEVA): NY AG uncovers evidence that Teva Pharmaceuticals lied to evade accountability for opioid crisis in New York

  • Thermo Fisher (TMO): MAKO Medical Laboratories validated a PCR-based monkeypox-specific assay developed by Thermo Fisher Scientific

  • Thoughtworks (TWKS) selected by PCI Pharma Services for digital platform transformation

  • Timken (TKR) selected as exclusive provider of advanced precision drives for the Redstone Solar Thermal Power project in Northern Cape, South Africa

  • T-Mobile US (TMUS): EC accepts commitments from T-Mobile CZ, CETIN and O2 CZ on Czech network sharing

  • Uber (UBER) attempted to lobby politicians and broke laws in effort to expand globally, according to The Guardian

  • United Maritime Corporation (USEA) to purchase fleet of four tanker vessels for $79.5 mln

  • Vertex Pharma (VRTX) to acquire biotech firm ViaCyte for $320 mln in cash

  • Walt Disney (DIS): US TV rights for Champions League soccer expected to top $2 bln; UEFA will begin soliciting bids this week, according to Bloomberg

(see Upgrades/Downgrades calendarfor full list):

  • Upgrades:

  • APi Group (APG) upgraded to Buy from Neutral at BofA Securities; tgt $23

  • Axos Financial (AX) upgraded to Outperform from Mkt Perform at Keefe Bruyette; tgt raised to $56

  • Bank of America (BAC) upgraded to Buy from Hold at Societe Generale; tgt $37.50

  • Element Solutions (ESI) upgraded to Overweight from Equal Weight at Barclays; tgt lowered to $22

  • Downgrades:

  • ABB Ltd (ABB) downgraded to Neutral from Buy at Citigroup

  • Allegion (ALLE) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $110

  • AmerisourceBergen (ABC) downgraded to In-line from Outperform at Evercore ISI; tgt $150

  • Ametek (AME) downgraded to Neutral from Buy at BofA Securities; tgt lowered to $122

  • Becton Dickinson (BDX) downgraded to Sell from Neutral at Citigroup; tgt lowered to $235

  • Civitas Resources (CIVI) downgraded to Equal Weight from Overweight at Wells Fargo; tgt $67

  • CNX Resources (CNX) downgraded to Equal Weight from Overweight at Wells Fargo; tgt raised to $27

  • DigitalOcean (DOCN) downgraded to Underweight from Equal-Weight at Morgan Stanley; tgt $45

  • Duolingo (DUOL) downgraded to Sector Weight from Overweight at KeyBanc Capital Markets

  • Dutch Bros (BROS) downgraded to Neutral from Outperform at Robert W. Baird

  • Others:

  • Affirm (AFRM) initiated with a Neutral at Goldman; tgt $22

  • Blucora (BCOR) initiated with an Overweight at Cantor Fitzgerald; tgt $22

  • Boyd Gaming (BYD) initiated with a Buy at Loop Capital; tgt $86

Upcoming Events:

  • Econ data (The Week Ahead):

  • 6:00 ET: June NFIB Small Business Optimism Index (prior 93.1)

  • Earnings:

  • Monday (July 11)

  • Pre-Market: AZZ GBX

  • After-Hours: PEP PSMT

  • Tuesday (July 12)

  • Pre-Market:  ANGO

  • After-Hours:   None

  • Wednesday (July 13)

  • Pre-Market:  DAL FAST

  • After-Hours: WAFD

  • Thursday (July 14)

  • Pre-Market:  CTAS CAG ERIC FRC JPM MS TSM

  • After-Hours: AOUT

  • Friday (July 15)

  • Pre-Market:  BLK BK C PNC PGR STT USB UNH WFC

  • After-Hours: None

  • Full Earnings Calendar


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