For most of 2016, Deutsche Bank shares had been sliding fast. On Monday, they crashed, down more than 7%, after Angela Merkel refused to consider a bailout for the troubled lender. The bank's bonds have slumped, while it default risk spiked. As some have correctly put it "it all has a very 2008 feel to it."
As was leaked over the weekend, first by the FT, moments ago Pfizer, still stinging from its foiled mega-acquisition of Allergan earlier in the year, announced it would acquire prostate-cancer drug maker Medivation for $81.50, a 21% premium to the Friday closing price, in a $14 billion deal.
Today the debt-funded M&A scramble continued, when moments ago software giant Oracle announced it would acquire the "very first cloud company" NetSuite, a deal that some analysts thought was inevitable while panned by others. The transaction price of $109 represents a nearly 20% premium to yesterday's closing print, and is expected to be immediately accretive to Oracle.
There are just two drivers setting the pace for today's risk mood: the OPEC meeting in Vienna which started a few hours ago, and the ECB's announcement as well as Mario Draghi's press statement due out just one hour from now. Both are expected to not reveal any major surprises, with OPEC almost certainly unable to implement a production freeze while the ECB is expected to remain on hold and provide some more details on its corporate bond buying program, although there is some modest risk of upside surprise in either case.
With markets happy to put February in the history books because it marked the fourth consecutive monthly decline in global stocks, we move on to March 1st, which doubles down as 'Super Tuesday' in the US when Trump's presidential candidacy will almost certainly be sealed and a day in which stocks decided to join the super fun by super surging overnight on nothing but bad global macro and economic which however was promptly ignored and instead the focus was on ongoing central bank intervention and even more jawboning.
Deustche Bank stock is ripping 10% higher after confirming old news that it will undertake a modest debt buyback of $2 billion and €3 billion (not including the CoCos). Have no fear though as Wolfgang Schaeuble proclaimed Deutsche Bank is a "strong bank" that ios "resilient" and "well positioned."
While algos patiently await the only thing that matters for US stocks today which is Janet Yellen's testimony before Congress. expected to be released at 8:30 am (and previewed here), the rest of the world this morning is a hot mess of schizophrenic highs and lows.
In his rejection of an SEC settlement with Citigroup, Judge Jed Rakoff vowed to "see that the truth emerges." After presiding over the most high-profile insider trading cases since the crisis -- including Raj Rajaratnam and Rajit Gupta -- Judge Rakoff has come to symbolize the mantra that "nobody is above the law." In determining that Valeant and hedge fund manager Bill Ackman must face insider trading charges for their failed takeover of Allergan, U.S. District Judge David Carter may be the "new Rakoff."
Corporate executives offer three main reasons for share repurchases: 1. Buybacks are investments in our undervalued shares signaling our confidence in the company’s future; 2. Buybacks allow the company to offset the dilution of EPS when employee stock options are exercised or stock is granted to employees; or 3. The company is mature and has limited investment opportunities, therefore we are obligated to return unneeded cash to shareholders. The logic behind each of these explanations is in the vast majority of cases is flawed, to be kind, and deceptive to be blunt.
Since yesterday's fake AVP tender offer was nothing but a targeted attempt to force a short squeeze in one of the market's most shorted stocks, the best way to be positioned for future such criminal activity is to go long precisely the most shorted stocks, the names which in any other universe would be the first to crash, burn and file bankruptcy, but in this parallel centrally-planned universe may just be the biggest winners.