Feed aggregator

Error Rate Audit

Wall Street Journal MoneyBeat - 2 hours 32 min ago

Grains of salt should spill when investors read a company’s unaudited results. Singapore’s top auditing body, the Accounting and Corporate Regulatory Authority, has attempted to answer how much salt. A study it commissioned found that for 257 listed companies last year, auditors proposed 3,222 sets of adjustments to their books worth 33.9 billion Singapore dollars (US$27.15 billion), or 12% of the market cap of the companies involved.

There were quite a few bad apples in the barrel, with 33 companies collectively contributing almost three-quarters of the adjustments. The key differentiator seems to be working with Chinese currency. Chinese yuan accounts represented 60% of the proposed adjustments, worth S$20 billion. A study commissioned by a regulator with two Big Four auditors on its board espousing the value of auditing might also be taken with a grain of salt – especially by company CFOs. Management accepted only two-thirds of the adjustments recommended by auditors.

Categories: Transactions

Heineken to Sell Packaging Operations in Mexico to Crown Holdings

New York Times DealBook - 2 hours 59 min ago
The deal values the can-making unit Empaque at about $1.23 billion and would make Crown the second-largest beverage can producer in North America.
Categories: Transactions

India Outpacing China’s Oil Demand

Wall Street Journal MoneyBeat - 4 hours 13 min ago
India’s diesel demand has risen sharply in the last few months because of power shortages and delayed monsoon rains. Here, an assistant refuels a boat with diesel in Pondicherry, India, on Saturday, July 19, 2014.
Bloomberg News

India’s oil demand has grown faster than China’s so far this year, highlighting slowing energy demand in the world’s most populous country and fueling expectations that India may pick up the slack over the medium-to-long term. The pace of India’s demand also reflects optimism about India’s economic growth under Prime Minister Narendra Modi. 

In absolute terms China is Asia’s largest oil consumer, having burned 10.76 million barrels a day of oil and accounting for 12.1% of global oil consumption in 2013, according to BP PLC. The second-largest oil consumer in Asia is Japan, though its oil consumption has been declining as its economy has matured. 

India ranks third at 3.7 million barrels a day and accounted for about 4.2% of global oil consumption in 2013. 

India’s oil demand has shown steady growth through July at an average of 3%, or 101,000 barrels a day. China’s oil demand has declined at an average of 0.6%, or 62,000 barrel a day, in the same period, Barclays PLC analyst Miswin Mahesh said. 

Indian oil demand growth has “organic, domestic, economic activity-linked factors still driving it,” he said. Mr. Mahesh expects the south Asian country’s oil demand to accelerate to 210,000 barrels a day next year, spurred by healthy construction activity, government-financed industrial projects and strong growth in car purchases. 

China’s oil-demand growth, on the other hand, remains uncertain, with a large portion of its imports this year going into strategic stockpiling instead of consumption. Its oil demand fell into negative territory in July and its oil imports declined for the first time this year.

“This surprise drop in crude imports further supported our view that [China's] full-year oil demand could be weaker than current market expectations,” Thomas C. Hilboldt, head of Asia Pacific oil research at HSBC Holdings PLC said last week. 

The disparity of the demand drivers in India and China is also telling. 

The bulk of oil demand in both countries is for diesel, the most widely consumed liquid fuel in Asia. China’s diesel consumption has shown a sharp decline because of its industrial slowdown, while India’s diesel demand rose sharply in the last few months because of power shortages and delayed monsoon rains. 

Despite this, the extent to which Indian energy demand can compensate for China’s decline remains doubtful. 

Markets are looking for the next emerging-market economy to take over as China moves into its post-industrial phase. Yet India has a fundamentally different economic structure and growth model, Janet Kong, head of market analysis at BP Singapore’s trading division pointed out last week. 

“It’s very much a service-oriented economy…not relying on a lot of infrastructure investments or manufacturing,” she said. 

The manufacturing sector in India has underperformed for many years, contributing to about 15% of gross domestic product and 12% of employment, compared with 25% or more of GDP in countries like China, Malaysia, Thailand and Vietnam, according to the Asian Development Bank’s 2014 report. Meanwhile, China is transitioning from an industrial economy dependent on exports to focus more on domestic consumption.


Categories: Transactions

Morning MoneyBeat Europe: Bulls Lack Cues as New Week Starts

Wall Street Journal MoneyBeat - 5 hours 18 min ago

Good Morning Europe

There are plenty of good reasons for investors to leave stock markets alone as a new week gets under way, and, sure, enough, that is what the forecasters expect with modest falls about the most they’re tipping before the bell Monday.

The U.S. will be out for the labor day break, and, despite a strong August for Wall Street, continued conflict in Ukraine will probably keep the lid firmly on European equity.

The European Central Bank’s looming monetary policy meeting, on Thursday, might also keep investors away until the see what Mario Draghi and Co. have in store.  Most forecasters seem to consider ‘full blown’ quantitative easing to be some way off, despite inflation’s weakness, although whether another ‘steady as she goes’ act from the ECB chief -consummate performer though he might be- will be enough for the bulls remains to be seen.

The day’s economic data, in the shape of final manufacturing Purchasing Managers Indexes from around Europe, aren’t expected to offer much solace.

Market Snapshot: U.S. stocks (Friday close) DJIA up 0.1%, Nasdaq up 0.5%, S&P up 0.3%. Nikkei now up 0.3%. September FTSE and S&P futures both flat. Brent crude up one cent at $103.20. Gold up 30 cents at $1287.70. EUR/USD now at $1.3126. USD/JPY at ¥104.19. Ten-year T-note yields 2.34%, Bund 0.89% and Gilt 2.34%.

Watch For:  Manufacturing PMI data from around Europe.

What you may have missed from MoneyBeat:

Europe’s Week Ahead: ECB Lies in Wait: The European Central Bank gets back to work after the summer next week with inflation in the euro zone now down to 0.3%. That may not prove enough for them to bring in new policy measures: But it and investors will watch the latest economic data form Germany closely too.

The Good News In Europe’s Inflation Story: A substantial part of the fall in inflation comes from dropping energy prices. Falling energy prices in effect act as a windfall to households, which leaves them with more money to spend on discretionary goods. What’s more, the fact that the euro zone is a large importer of energy, the net effect should be positive for the region.

Forex Funds Post Profits In July, Bucking This Year’s Trend: Investment funds betting on currency moves are finally registering some profits.

Energy Journal: Oil Key to Scotland’s Fate: There are just three weeks to go before Scotland votes on whether to become independent from the rest of the U.K. And so the debate over its oil industry there is heating up.

Overnight action: 

Ukraine Loses Ground to Separatists: Government forces lost more ground to Russian-backed separatists in heavy fighting in eastern Ukraine a day after European leaders threatened to impose more sanctions on Moscow.

U.S. Strikes Help Break Siege in Iraq: Airstrikes helped break a two-month siege by Sunni militants on a Shiite town on Sunday, in apparent coordination with ground attacks by Shiite militias, local civilian fighters and Kurdish troops.

Beijing Abandons Pragmatism: Deng Xiaoping understood Hong Kong’s distrust of Communism and let the city keep its British-style courts and administration. Today’s Chinese leadership shows far less inclination for such pragmatism.

Feel free to forward this email to colleagues and friends and include this link so they can sign up to receive it for free too. You are receiving Morning MoneyBeat Europe. You can also sign up for U.S. and Asian editions here.

Categories: Transactions

Barclays to Sell Retail and Corporate Bank Units to CaixaBank of Spain

New York Times DealBook - Sun, 08/31/2014 - 21:18
The sale represents the latest development in the British bank’s plan to streamline itself by selling non-core businesses.
Categories: Transactions

Start-Ups Accrue Funding in Case of Leaner Times

New York Times DealBook - Sun, 08/31/2014 - 20:13
Some entrepreneurs say worries about a possible downturn are partly why they are stocking up on financing, essentially taking out insurance on the risk of harder days ahead.
Categories: Transactions

Morning MoneyBeat Asia: The Gains of August

Wall Street Journal MoneyBeat - Sun, 08/31/2014 - 18:27
Agence France-Presse/Getty Images

Market Snap: At the New York close on Friday, for the month: S&P 500 up 3.8% at 2003.37. DJIA up 3.2% at 17098.45. Nasdaq Comp up 4.8% at 4580.27. Treasury yields declined; 10-year at 2.347%. Nymex crude oil down 2.25% at $95.96. Gold up 0.35% at $1,285.80/ounce.

Click here to receive this morning newsletter via email

How We Got Here: It was a strong month for U.S. stocks. Considering what a quagmire August can be and where the indexes were a month or so ago, that’s saying something.

Markets started dropping in late July, and slid into early August. Given that August has been the worst month for the Dow and S&P 500 since 1987, it was reasonable to think that this might be long-awaited 10% correction. Only, it wasn’t. The market turned on a dime on Aug. 7, and kept rising into Friday; the Dow was up 12 of the past 16 sessions. The S&P closed the month at 2003, a fresh record.

Where do we go from here? Well, the Ukraine/Russia crisis is eating into economies both in Russia and Europe; Islamic State is a serious problem for western powers; and there’s mounting evidence that Abenomics is not doing its promised job. But then again, the Fed is still running with rock-bottom interest rates, and Mario Draghi is jawboning European bonds to multi-century lows.

Coming Up: Auto makers, including Japan’s Toyota Motor, Honda Motor and Nissan Motor, will report their sales results for August this week. The companies suffered from a rise in Japan’s consumption tax in April, which caused at least a short-term slide in sales. They are also bringing in hybrid technologies and introducing models designed to cater to Chinese tastes. Analysts and investors will be watching for signs that those actions are bearing fruit.

From The Wall Street Journal

Yuan’s Fall Hurts Chinese Profits: Chinese companies are reporting profit hits from the weaker yuan, after borrowing billions of dollars from the U.S., Hong Kong and elsewhere abroad.

Beijing Abandons Pragmatism:
China’s World: Deng Xiaoping understood Hong Kong’s distrust of Communism and let the city keep its British-style courts and administration. Today’s Chinese leadership shows far less inclination for such pragmatism.

Alibaba Plans IPO Launch Week: What will likely be the world’s largest initial public offering in years appears to be just over a week away. Chinese e-commerce company Alibaba plans to launch its U.S. initial public offering, which could raise more than $20 billion, early in the week of Sept. 8.

Hong Kong Exchange Considers Rule Change After Losing Alibaba IPO: Hong Kong’s stock exchange is exploring a rule change after its refusal to budge on the issue of equal voting rights for shareholders cost it the initial public offering of Alibaba Group Holding Ltd.

NTT Makes New Overseas Push:
More than a decade after a disastrous foray abroad, Japan’s biggest telecom group, NTT, is trying to grow overseas again.

Bad Loans Soar at China Banks: China’s biggest state-owned banks reported a surge in soured and castoff loans in the first half of the year.

Tax Rise Puts Abenomics at Risk: Prime Minister Shinzo Abe’s decision to raise taxes is taking a toll, hurting household spending and putting his “Abenomics” revival plan at risk.

India Expects Economy to Strengthen:
India’s finance minister expects the country’s economic growth will accelerate as inflation moderates and government measures aimed at making it easier for companies to do business take effect.

From MoneyBeat

Be Aware of Companies Bearing Gifts: Money talks, but investors don’t always get to decide what it says. Sometimes investors can’t even hear it. When public companies give cash to candidates for office, lobbies or political action committees, the money comes out of shareholders’ pockets. But companies aren’t required to disclose to investors how much they give or where it goes.

U.S. Dollar Will Achieve Parity With Euro by 2017, Says Goldman: The euro is on its way to parity with the dollar by the end of 2017, say analysts at Goldman Sachs Group Inc.

Hal Finney and Bitcoin’s Earliest Days: When Satoshi Nakamoto released bitcoin in January 2009, it was noticed by only a few people, and of those people, even fewer grasped its significance. One of them was Hal Finney, who died on Thursday from complications related to ALS.

Carl Icahn’s Spellbinding eBay Returns: A chart recently filed with the Securities and Exchange Commission by Icahn Enterprises showed a 76% return on the stock of eBay during the period in which an Icahn designee served on the online auction company’s board.

Categories: Transactions

2014 Amendments Affecting Delaware Alternative Entities and the Contractual Statute of Limitations

Editor's Note: The following post comes to us from Scott E. Waxman, founding partner in the Delaware office of K&L Gates LLP, and is based on a K&L Gates alert authored by Mr. Waxman, Eric N. Feldman, Nicholas I. Froio, Andrew Skouvakis, and Zachary L. Sager. This post is part of the Delaware law series, which is cosponsored by the Forum and Corporation Service Company; links to other posts in the series are available here.

On August 1, 2014, amendments to Delaware’s alternative business entity statutes, [1] as well as the statute of limitations applicable to Delaware contracts, [2] became effective. These amendments (the “2014 Amendments”) represent a continuing effort by Delaware to create a flexible statutory framework for alternative business organizations and transactions involving business entities generally. This post briefly summarizes the more significant 2014 Amendments.

Click here to read the complete post...

Categories: Governance

Top Bitcoin Proponent to Plead Guilty to Federal Charge

New York Times DealBook - Sat, 08/30/2014 - 15:40
Charles Shrem, a leading backer of Bitcoin, is to plead to one federal count of aiding and abetting an unlicensed money transmitting business.
Categories: Transactions

The SEC Whistleblower Program Year in Review

Editor's Note: The following post comes to us from Jordan A. Thomas, partner at Labaton Sucharow LLP and former assistant director at the Securities and Exchange Commission, and is based on a Labaton Sucharow publication by Mr. Thomas and Vanessa De Simone.

Four years ago this month, with the country still reeling from financial crisis, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act–the most sweeping financial reform effort since the Great Depression. The goal of Dodd-Frank was as ambitious as its scope; as President Barack Obama remarked, the legislation would “restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed.”

Click here to read the complete post...

Categories: Governance

Alibaba to Begin Investor Roadshow on Week of Sept. 8

New York Times DealBook - Sat, 08/30/2014 - 00:17
Under the latest timetable, Alibaba will hope to price its stock sale toward the later half of the week of Sept. 15, this person added.
Categories: Transactions

U.S. Dollar Will Achieve Parity With Euro by 2017, Says Goldman

Wall Street Journal MoneyBeat - Fri, 08/29/2014 - 16:46
Getty Images

The euro is on its way to parity with the dollar by the end of 2017, say analysts at Goldman Sachs Group Inc.

The currency has dropped 5.75% since hitting a 2014 high in March, closing on Friday at 1.3133. Goldman says that decline is the beginning of a long drive lower. Higher U.S. interest rates versus those in the euro zone will cause investors to move money out of Europe and into higher-yielding markets, writes Goldman’s currency research group.

In six months, Goldman predicts the euro will drop to $1.25. In 12 months, it will be at $1.20. The single currency should hit $1.15 by the end of 2015, and $1.05 one year later. By 2017, the euro will hit parity for the first time since 2002, the year it entered circulation as a physical currency.

“Because we believe the dynamics of the euro have fundamentally changed and because we expect cyclical outperformance of the U.S., a prolonged period of euro undervaluation can be expected,” the Goldman analysts write.

On the dollar side of the equation, the Federal Reserve is likely to raise interest rates in 2015, pushing up yields on Treasurys and widening the existing gap between 10-year debt in Germany and Spain, which yield 0.894% and 2.227%, respectively. The U.S. 10-year note yields 2.334%.

Higher U.S. rates make the dollar more alluring to investors, as it increases returns on assets denominated in the currency. With yields on sovereign debt in the euro bloc so low, euro-zone investors are looking elsewhere for yield. Their search should trump foreign flows into the euro area, according to Goldman, as yields on debt for peripheral euro-zone members have already fallen significantly.

Though Treasurys currently yield more than much euro-zone debt, the dollar has only recently begun to make gains against other major currencies. Moves higher against the yen and the British pound, for example, only really started about a month ago.

“We think the dollar still has room to catch up with the two-year rate differential, which is currently the most dollar-supportive since mid-2009,” Goldman analysts write.

Meanwhile, the European Central Bank stands ready to enact further measures to battle low inflation and stimulate growth. ECB President Mario Draghi has tried to talk down the euro on numerous occasions, even saying at the August policy meeting news conference that “fundamentals for a weaker exchange rate are today much better than they were two or three months ago.”

At the Jackson Hole, Wyo., symposium for central bankers one week ago, Mr. Draghi lowered the inflation outlook for the euro zone and said more easing measures from the central bank were necessary. The central bank meets next week to set policy.

Investors are already heavily bearish on the common currency; the value of net bets against the euro for the week of Aug. 19 totaled $23.1 billion, according to the Commodity Futures Trading Commission, the highest since June 2012, during the euro crisis.

Categories: Transactions

S.E.C. Commissioner Rebukes His Colleagues

New York Times DealBook - Fri, 08/29/2014 - 16:00
Luis A. Aguilar issued a surprising dissent that sharply criticized an enforcement action against two senior executives of an information technology company and questioned the agency's aggressiveness.
Categories: Transactions

Hal Finney and Bitcoin’s Earliest Days

Wall Street Journal MoneyBeat - Fri, 08/29/2014 - 15:58

When Satoshi Nakamoto released bitcoin in January 2009, few people took notice, and of those people, even fewer grasped its significance. One that did was Hal Finney.

Mr. Finney, then 53, was an engineer and developer working at a tech company called PGP Corp. in Silicon Valley, which focused on encryption systems. He designed things like an anonymous remailer, an email system that used cryptography techniques to encrypt messages. Mr. Finney was also a member of the cypherpunks, a community of libertarian and even anarchist-leaning techies that formed in the 1990s and were focused on utilizing cryptography to thwart encroaching attacking on personal privacy.

Mr. Finney died on Thursday at age 58 from complications related to amyotrophic lateral sclerosis (ALS), also known as Lou Gehrig’s disease, after a nearly five-year fight. He was diagnosed in August 2009.

In the spring of 2014, Mr. Finney answered questions from the Wall Street Journal, at a time when he was still able to communicate via email. Even then, it took great time and effort for him to write out his answers, using specially designed software. Over the ensuing months, he lost even that capability.

Reflecting on his time working with Nakamoto, Mr. Finney said they never spoke directly, and said he does not know Nakamoto’s true identity, although at the time he assumed he was talking to a young Japanese-American male. The two communicated via email (Nakamoto’s email was, naturally, encrypted), and Mr. Finney saved those emails, some of which he shared with the Journal. You can read them here. They open a small window into the first days of the digital currency, and provide a slight bit of light on Nakamoto himself.

The cypherpunks had been focused on digital, anonymous money for years and had build several early systems, all to no avail. Mr. Finney himself had developed a version of e-money in 2004. So when bitcoin first came around in October 2008, most members were dubious. Mr. Finney was an outlier.

“Cryptographers have seen too many grand schemes by clueless noobs,” Mr. Finney wrote in a 2013 post on the Bitcoin Forum. “They tend to have a knee jerk reaction. I was more positive.”

Mr. Finney replied to Nakamoto’s Jan. 9, 2009, announcement that he had launched bitcoin, and for the next two weeks he worked with the founder to debug the system and get it running properly. Mr. Finney became a key contributor, the first person to work with Nakamoto, to run the bitcoin software, and the first to receive a transfer of bitcoin.

The conversations between the men are wholly dedicated to setting up the bitcoin network, and are very technical in nature. In that sense, they don’t shed a tremendous amount of light on Nakamoto. But they do give some measure of the man, and they do open a window into bitcoin’s earliest days.

Mr. Finney downloaded version 0.1.0 – and it crashed, which surprised Nakamoto who’d been testing the system himself and hadn’t had any crashes. But he managed to reproduce the bug, and the faulty code that caused it. “It was absolutely the last piece of code to go in,” he wrote.  “I’m really dismayed to have this botch up the release after all that stress testing.” It’s one of the few displays of emotion from him in the emails.

They went back forth, through version 0.1.2, and 0.1.3. There were more crashes, more debugging, more rewriting and retooling of the code over and over again.

“It was getting so there were so many zombie nodes, I was having a hard time getting a reply to any of my messages,” Nakamoto wrote to Mr. Finney in one email, while he was simply trying to establish reliable connections between two different users of the system, the other being Mr. Finney.

Mr. Finney from time to time was himself pegged as Satoshi Nakamoto, a claim he denied. He also said he didn’t know Nakamoto’s true identity. He never asked Nakamoto to identify himself. Mr. Finney told the Journal in the spring that he does believe it is possible to discover Nakamoto’s real identity, albeit he didn’t have any thoughts himself about who he may be. Mr. Finney also said that he was surprised by bitcoin’s rapid growth, but that he thought it could eventually live up to the hype.

Categories: Transactions

Train Reading: Technology Is Not Destroying Our Humanity (Probably)

Wall Street Journal MoneyBeat - Fri, 08/29/2014 - 15:23

News, analysis and some curiosities to ease your commute. 

The new world order, as the old one evaporates – Henry Kissinger, via WSJ

Succinct summation of the week’s events – The Big Picture

Help, my brand’s name is now a terrorist organization – Digiday

This is just unnecessary: Manhattan’s new – upscale – Denny’s – WSJ’s Metropolis blog

A musical interlude: Crystal Gayle; Don’t It Make My Brown Eyes BlueYouTube

Technology probably isn’t destroying our humanity – Language Log

Even mistakes can be wonderful – The Financial Philosopher

One of the greatest bull markets in history – Crossing Wall Street

Categories: Transactions

Podcast: Taking Stock of S&P 2000

Wall Street Journal MoneyBeat - Fri, 08/29/2014 - 14:31

A big, round number, or so much more than that?

Paul Vigna

In the latest installment of MoneyBeat Week, or Friday podcast, the crew takes stock of the market’s latest milestone and what it means for the rest of the year.

With the S&P 500 crossing above 2000 this week, the Fed’s easy-money policies, rising corporate profits and an improving economy have been the major catalysts driving the latest leg of the rally.

The S&P 500 has risen 8% this year and is now up 195% since the March 2009 bottom, the fourth-biggest bull market in terms of magnitude and duration since 1928.

The big questions now: What’s next and where will stocks finish the year?

For all that and more, grab a set of headphones and take a listen to MoneyBeat Week. Or catch us on iTunes along with other Journal podcasts in the WSJ What’s News section.

Categories: Transactions

Carl Icahn’s Spellbinding eBay Returns

Wall Street Journal MoneyBeat - Fri, 08/29/2014 - 13:21
Carl Icahn, billionaire investor and chairman of Icahn Enterprises Holdings LP, stands outside of the Nasdaq MarketSite in New York, U.S.
Bloomberg News

Carl Icahn is not, in fact, a wizard.

A chart recently filed with the Securities and Exchange Commission by Icahn Enterprises showed a 76% return on the stock of eBay during the period prior to June 30, 2013 in which an Icahn designee served on the online auction company’s board.

That is all the more impressive because that period lasted only 13 days, from June 17 to June 30 of this year, during which the stock climbed just 2.16%. So how did Mr. Icahn produce a 76% return?

By casting a spell called “annualizing.” That is, he multiplied the actual returns by 35, as if the gains of that short period extended across an entire year. Using Mr. Icahn’s math, the Nasdaq Composite index had an annualized gain of 70.7% during those 13 days.

The point of Mr. Icahn’s filing is to defend activist investing. His chart shows that if you average all the annualized gains and losses while his designee sat on a corporate board from Jan. 1, 2009 through June 30, 2014, the total return would be 27%.

That seems a little less magical, however, when you consider that the annualized gain of the Nasdaq composite over the period was 32%.

Categories: Transactions

Google Drones Are On Their Way – Some Day

Wall Street Journal MoneyBeat - Fri, 08/29/2014 - 13:20

One of these days, legions of unmanned drones buzzing a couple hundred feet above the backyards and swimming pool and concrete jungles of America may be a common sight. One of these days, having a drone deliver a bar of soap will be more convenient than driving to your corner grocery. But not for a number of years.

Google is the latest big-name company to run a test of its own drone system, with the idea being that it’s a cheaper and more efficient way to deliver goods than currently exists. Mass adoption is years away and will involve legal and logistical hurdles, but the savings to the economy will be worth it, said Brendan Schulman of the law firm Kramer Levin, who works in the firm’s unmanned aircraft systems practice.

Categories: Transactions

Square Feeling Squeezed From All Sides

New York Times DealBook - Fri, 08/29/2014 - 13:01
Increasing competition and the need to diversify into other businesses are putting pressure on the payments company, Robert Cyran writes for Reuters Breakingviews.
Categories: Transactions

Why RadioShack Shares Keep Rallying

Wall Street Journal MoneyBeat - Fri, 08/29/2014 - 12:11

The week before Labor Day is typically a quiet period on Wall Street. That is unless you’re RadioShack Corp., the beleaguered electronics retailer turned day-trader darling.

Shares of RadioShack more than doubled this week and trading volume skyrocketed after a report suggested RadioShack could be in line for a cash infusion. Short sellers betting on the company’s immediate demise bailed on positions. Day traders piled in and out, rolling the dice hoping to make a quick profit on RadioShack.

Shares rose all five days and jumped as high as $1.77 on Friday. The stock, which closed a week ago at 68 cents, climbed to its highest level since April.

On Thursday more than 50 million shares changed hands, the single highest one-day amount for RadioShack at least since November 1984, according to FactSet. By 12:30 p.m. Eastern Time on Friday, RadioShack traded six times its average daily volume.

“You have a lot of retail guys looking at a low-priced stock like this and thinking ‘why not take a flier,’” said Sahak Manuelian, managing director at Los Angeles brokerage Wedbush Securities Inc.. “People love being all over a cheap stock that has momentum building upon itself.”

setSandboxHeight = function(id, height) { if ( height > 5000 ) return; document.getElementById("ifrm_" + id).height = height+ "px"; }

A report earlier in the week said hedge fund Standard General could help give RadioShack a rescue-financing package. Standard General, which owns roughly 10% of RadioShack, is the same fund that recently gave the troubled retailer American Apparel Inc. a lifeline. A rescue package could help the company pay down debt and ultimately close some underperforming stores, a decision that needs creditor approval.

Standard General has held talks with RadioShack about ways to finance some or all of the company’s debt, including the loan package provided by its term lenders, according to a person familiar with the matter. Several RadioShack bondholders this month also formed an ad hoc group to approach the company and discuss its options but haven’t committed to a plan, according to another person familiar with the matter.

Four investment funds have snapped up most of RadioShack’s unsecured bonds over the past few months, according to two people familiar with the matter: Standard General, BlueCrest Capital Management, SMH Capital Advisors and GSO Capital Partners, a unit of Blackstone LP.

RadioShack’s recent move is a stark contrast for a stock stuck in a deep downtrend. Analysts have mostly written off the company’s stock, with one slapping a $0 price target on it in June and saying there was “no recovery in sight.” The New York Stock Exchange last month warned RadioShack of a potential delisting after the stock traded below $1 for 30 straight days.

Still, investors have pounced on the chance to make a quick profit. Activity in the options market was elevated throughout the week. RadioShack’s implied volatility, a measure of investor expectations for future stock swings and a key component of an option’s price, jumped on Thursday to its highest level in at least two years, according to data from Livevol Pro.

And it’s not just this week that options traders have piled into RadioShack. Open interest, reflecting the number of active options contracts, surged to 834,990 contracts Thursday from 175,186 on Dec. 31, according to Trade Alert.

“This has become a day-trader’s playground and I think that’s going to continue,” said Sean Moran, a 27-year-old day trader living in San Diego, California. He said the stock came on his radar once it fell below $1 and for the past four weeks he has traded RadioShack options. “RadioShack has definitely fallen out of favor and most think they’re dead and forgotten, but that’s usually the time to buy,” he said.

Market participants have also attributed RadioShack’s big rally to investors who had bet against the stock but then reversed those positions in droves, otherwise known as a “short squeeze.”

Short sellers borrow shares to sell them with the hope of buying them back at a lower price and pocketing the difference.

As of Friday, about 16.7% of available RadioShack shares were on loan to traders looking to short the company, according to market data firm Markit. That figure was up from a recent low of 10.5% in early July, suggesting an increasing number of investors had been betting against the stock prior to this week’s rally.

“You have a lot of shorts who were betting the company was going to go bankrupt and are now bailing out right, left and sideways,” said James Angel, a finance professor at Georgetown University.


The company has a long road ahead. Even amid the recent rally, the stock is still stuck in a yearslong downtrend. It reached a low of 55 cents earlier this month. By comparison, the stock traded above $20 as recently as late 2010 and peaked near $80 in 1999.

Without a cash infusion, RadioShack could face a cash crunch sometime next year, according to Moody’s Investors Service, which warned last month that RadioShack may not have the time or cash for a turnaround. As of May 3, the company had $61 million in the bank, down from $180 million at the end of 2013.

The company said in June that it had enough cash to last at least through the middle of next year, an estimate contingent on an immediate improvement in sales and margins.

Even if RadioShack were to get a rescue package, analysts warn that more cash won’t necessarily solve the company’s long-term problems. RadioShack “needs much more than just a refinance in order to correct the overhanging issue of ongoing fundamental weakness,” said B. Riley’s Scott Tighman, the analyst with a $0 price target on RadioShack.

Even so, day traders have pounced all over RadioShack, hoping for the best.

“I see 50,000 idiots throwing money at this thing and I’m just trying to grab some of it out their pockets,” said Thad Kaylor, a 45-year-old day trader from Springfield, Illinois. Mr. Kaylor said he traded in and out of RadioShack on Thursday and Friday.

“I know RadioShack, I know they’re struggling and I know what’s going on in the brick-and-mortar industry, but I’m trading on emotion and out of greed thinking it is going to keep going up and up,” he said. “I know it’s a gamble.”

–Saumya Vaishampayan contributed to this report.

Categories: Transactions


Subscribe to The Harvard Law School Contracts Wiki aggregator