The ARS market has thrust its poisoned tentacles in another direction. After raising interest costs for issuers and wiping out the formerly "safe" cash holdings of individual investors, the Wall Street Journal reports that frozen ARS accounts have hit tech companies as well.
Specifically, the Journal lists $855.7 million worth of ARS holding on the books of these five tech companies, listed as follows:
These companies and others will probably need to write down the value of these securities unless the ARS market unfreezes. If there is an industry that's unscathed by this problem, I'd like to know. But for those who've invested in companies whose cash is frozen in these ARS accounts, there are many restless nights ahead.
Once thought to be extremely safe, action rate securities have proved difficult to sell in this credit crisis. Tech companies are big holders of them and are taking charges left and right, including MetroPCS Communications Inc (NYSE: PCS), Palm Inc (NASDAQ: PALM) and Earthlink Inc (NASDAQ: ELNK), according to the Wall Street Journal.
NYSE Euronext Inc (NYSE: NYX) will look to increase its stakes in India's National Stock Exchange and the country's Multi Commodity Exchange, the Business Standard reported, once foreign ownership rules are eased. NYSE Euronext also intends to partner with the two Indian exchanges in order to help them develop their business.
WEB SITES:
Business Week reported that Brian Marckx of Zacks Investment Research said Bristol Myers Squibb Company (NYSE: BMY) may be an attractive takeover candidate for a larger pharma such as Pfizer Inc (NYSE: PFE) or France's Sanofi-Aventis SA (NYSE: SNY), both of which have been partners with Bristol on some of its products.
Banks that include Merrill Lynch & Co Inc (NYSE: MER) and The Bear Stearns Companies Inc (NYSE: BSC) are reportedly in talks to help bail out struggling bond insurer ACA Capital Holdings, which lost $1B in the most recent quarter, according to two people briefed on the situation and reported by the New York Times; ACA Capital has guaranteed $26B in mortgage securities.
Executives at Tribune Company (NYSE: TRB) were faced with last-minute questioning from bankers that were reluctant to fund the final portion of the $8.2B deal to take the company private, according to sources close to the company, the Chicago Tribune reported.
WEB SITES:
Barron's Online's "Inside Scoop" reported that analysts are not convinced that the deal with Citadel is enough to save E*Trade Financial Corporation (NASDAQ: ETFC), as it does not eliminate E*Trade's $12.4B second-lien mortgage exposure, and the company could potentially face further customer attrition, which many think will continue to pressure the shares.
Last week, MetroPCS Communications (NYSE: PCS) ended its $4 billion merger deal for Leap Wireless (NASDAQ: LEAP), which thought the deal wasn't good enough. Both companies provide wireless services to those that the major carriers -- like Verizon (NYSE: VZ) and AT&T (NYSE: T) -- tend to avoid (such as low-income customers).
Well, LEAP shareholders may be regretting things. On the company's latest news bomb, the stock has plunged 34% to $38.33. In fact, since late July, the stock is down a stunning 61%.
First of all, LEAP said it will have to restate financial results for 2004, 2005, 2006 and the first half of 2007. The items include service revenues, operating expenses and so on. The amount is about $20 million or so.
Not so big, huh? Maybe not. After all, the company could be in default on its $890 million of debt.
Oh, and the company garnered only 36,500 subscribers in Q3 (the goal was 40,000). And, it looks like Q4 growth will be meager too.
All in all, it's hard to find anything good here. Then again, Leap's space is full of buyout activity so I wouldn't be surprised if we eventually hear some more buyout buzz on the company, especially in light of the big cut in the valuation.
MOST NOTEWORTHY: Teva Pharma, Novavax, Corinthian Colleges, Fair Isaac and Tenneco were today's noteworthy upgrades:
Friedman Billings upgraded Teva Pharmaceutical (NASDAQ: TEVA) to Outperform from Market Perform following Teva's better-than-expected Q3 report and guidance.
Oppenheimer upgraded shares of Novavax (NASDAQ: NVAX) to Buy from Neutral based on positive expectations for Ph I/IIa pandemic influenza data, the start of clinical trials for seasonal influenza, and expected announcement of a vaccine product candidate in Q4.
Corinthian Colleges (NASDAQ: COCO) was upgraded to Buy from Neutral at Merrill following its better-than-expected Q1 report and guidance.
Citigroup upgraded of Fair Isaac (NYSE: FIC) to Buy from Hold shares to reflect the company's strong Q4 results and improved outlook.
Tenneco (NYSE: TEN) was raised to Outperform from Market Perform at Wachovia based on valuation and revenue opportunities in commercial truck market.
OTHER UPGRADES:
Energizer Holdings (NYSE: ENR) was upgraded at Bear Stearns to Peer Perform from Underperform.
MOST NOTEWORTHY: Suntech Power (STP), MetroPCS (PCS), Micron Tech (MU) and Charles River Labs (CRL) were today's noteworthy initiations:
JP Morgan initiated shares of Suntech Power Holdings (NYSE: STP) with a Neutral rating, citing valuation. The firm prefers the stock to peers given the company's larger scale, solid supplier relationships and exposure to new technologies.
William Blair believes Charles River Labs (NYSE: CRL) is the best pure-play investment in preclinical development given its dominant franchise in animal disease models, and started shares with an Outperform rating.
OTHER INITIATIONS:
Gabelli initiated shares of Tenaris SA (NYSE: TS) with a Buy rating and $68 target.
RBC Capital started shares of Time Warner Cable (NYSE: TWC) with a Sector Perform rating and $39 target.
CDC Corporation (NASDAQ: CHINA) was started at ThinkEquity with a Buy rating and $11 target.
Suntrust started shares of Owens Corning (NYSE: OC) with a Neutral rating.
MOST NOTEWORTHY: Chico's FAS (CHS), MetroPCS (PCS), Federated Investors (FII) and Tibco (TIBX) were today's noteworthy initiations:
Roth Capital believes Chico's FAS (NYSE: CHS) growth will be back on track given the changes within the merchandise organization and recent infrastructure investments, and initiated shares with a Buy rating and $24 target.
Pacific Crest believes MetroPCS's (NYSE: PCS) low-cost business model creates opportunities and that its large market focus should drive outperformance, and initiated shares with an Outperform rating.
JMP Securities believes near-term upside in Federated Investors (NYSE: FII) could be seen with hurricane season and resumed coverage of Federated Investors with an Overweight rating and $178 target.
Pacific Crest believes 2007 is a transition year for Tibco (NASDAQ: TIBX) and started shares with a Sector Perform rating...
OTHER INITIATIONS:
BWS Financial initiated Rentrak (NASDAQ: RENT) with a Buy rating and $20 target.
HSBC started Lukoil (OTC: LUKOY) with an Overweight rating.
Pacific Crest started shares of On Semiconductor (NASDAQ: ONNN) with an Outperform rating and $16 target.
BMO Capital initiated Ares Capital (NASDAQ: ARCC) with an Outperform rating and $18 target.
Cavium Networks was initiated with a Strong Buy rating and $25 target at JMP Securities. The firm's checks indicate significant momentum for Cavium's products and cites good visibility. Cavium was also initiated with a Market Weight rating at Thomas Weisel, which finds shares fairly-valued at current levels, with a Buy rating and $25 target at Needham, with an Equal Weight rating and $22 target at Lehman Brothers, with an Equal Weight rating at Morgan Stanley and with a Buy rating and $26 target at Deutsche Bank, which expects over 50% revenue growth from 2006-2009 due to the growth in the company's network processor product line.
TravelCenters of America was initiated with a Buy rating and $54 target at Ferris Baker Watts and with a Buy rating and $70 target at BWS Financial, as the firm is positive on TA's earnings power and valuation.
Citigroup initiated shares of MetroPCS with a Buy rating and $40 target. The firm believes the company's coupled with deepening penetration in its core markets should produce revenue and FCF growth that exceeds the maturing industry average.
Janco initiated shares of Foundry Networks Inc (NASDAQ: FDRY) with a Buy rating and $19.50 target, as the firm believes the company's new products put it in a position to gain market share.
CIBC World Markets initiated shares of Accuray Incorporated (NASDAQ: ARAY) with a Sector Underperformer rating and $19 target.
MOST NOTEWORTHY: Bluefly, Inc (BFLY), Leap Wireless International, Inc (LEAP), Kona Grill, Inc (KONA), MetroPCS Communications, Inc (PCS) and Beacon Roofing Supply (BECN) were today's more noteworthy initiations:
Merriman believes FY07 is a transitional year for Bluefly (NASDAQ: BFLY), starting the company with a Neutral rating, and finds the stock fairly valued at current levels.
Robert W. Baird expects growth at Leap Wireless International (NASDAQ: LEAP) to be fueled by upcoming market launches, starting shares with an Outperform rating.
Thomas Weisel is positive on Kona Grill's (NASDAQ: KONA) expansion, same-store sales growth, ramping unit volumes and corporate G&A leverage, starting shares with an Outperform rating.
Robert W. Baird expects MetroPCS Communications (NYSE: PCS) growth to be fueled by upcoming market launches and initiated shares with an Outperform rating and $14 target.
Needham believes shares of Beacon Roofing Supply (NASDAQ: BECN) have overreacted to the weak residential new construction market, which represents only 20% of business, and started shares with a Buy rating and $22 target...
MOST NOTEWORTHY: Ballard Power Systems Inc (BLDP), GSI Technology, Inc (GSIT), eTelecare Global Solutions (ETEL) and JA Solar Holdings Co, Ltd (JASO) were the most noteworthy initiations in today's modest-sized list:
Lazard started Ballard Power (NASDAQ: BLDP) with a Hold rating based on valuation.
GSI Technology (NASDAQ: GIST) is gaining shares at key customers while ramp-up of its next-generation product should act as a strong catalyst to revenue starting in 2H07; Baird started shares with an Outperform rating.
Baird also initiated eTelecare Global (NASDAQ: ETEL) with an Outperform rating citing consistent above-industry growth rates.
American Technology initiated JA Solar Holdings Co (NASDAQ: JASO) with a Buy rating, pointing to the company's long-term customer agreements and solid silicon position...
Wall Street's equity market shifts into overdrive this week, with a full schedule, including 3 IPOs and 12 Secondaries.
Those deals tentatively scheduled to price include:
IPOs:
Thursday
MetroPCS Communications (PCS), a 50M-share IPO for this wireless services company. Bear Stearns, Bank of America and Merrill Lynch are the lead managers. Filing range: $19.00-$21.00
Simcare Pharmaceuticals (SCR), a 15.625M-share IPO for this generic pharmaceutical company. Goldman Sachs is the lead manager. Filing range: $12.50-$14.50.
Superior Offshore (DEEP), an 8.66M-share IPO for this subsea construction company. Merrill Lynch and JP Morgan are the lead managers. Filing range: $14.00-$16.00.
Secondaries:
Midweek
Rainmaker Systems, Inc. (NASDAQ: RMKR), a 4.166M-share Secondary for this customer relations services company. Needham is the lead manager.
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