1) After two friendly attempts to merge with HP, Xerox is launching a hostile takeover bid. Xerox will nominate eleven new directors to replace all of HP board members, thus leaving Xerox in control of the company. HP claims that Xerox’s proposal significantly undervalues HP and creates risk for the HP shareholders, while Xerox claims combining the similar companies will create significant cost savings.
2) The number of claims for unemployment benefits for mid January rose slightly, but layoffs remain near a fifty year low. There are no signs of the strongest U.S. labor market in decades deteriorating. The number of people actually collecting unemployment benefits has fallen by a small amount. The U.S. economy is still growing but at a slower rate.
3) Fair Isaac Corp. announced changes on their scoring of consumer credit, the making of their FICO score. Soon, they will start scoring consumers with rising debt levels and those who fall behind on loan payments with lower scores. The changes will create a bigger gap between consumers considered good and bad credit risks. Also, scores are considering bank account balances and utilities payments. The new FICO changes reflect a shift in U.S. lenders’ confidence in the economy.
4) Stock market closings for – 23 JAN 20:
Dow 29,160.09 down 26.18 Nasdaq 9,402.48 up 18.71 S&P 500 3,325.54 up 3.79
1) HP’s board has rejected Xerox’s $33 billion dollar takeover bid, for the same reason as Xerox’s previous offer, that the proposal significantly undervalues HP. Xerox first moved to acquire HP in November, but was rejected because HP stock holders would lose much of their value in the company. HP is a 2015 spinoff of giant Hewlett-Packard who has a market value of $300 billion dollars that dwarfs Xerox’s value of 7.7 billion dollars.
2) Mack Trucks, the manufacturer of large commercial trucks, announced plans to layoff 305 employees, which is about 13% of their payroll. After two years of high volumes of production, marked demand has dropped so the company must adapt to the lower demand. There are expectations of the truck market in America being down 30% this next year.
3) The American consumer continues to shun the traditional big department stores. Despite the monster holiday shopping season, America’s biggest department stores still lost money. This is a trend that has been in progress for several years as typified by Sears’ decline. Department stores such as JCPenny, Kohl’s and Macy’s continue to decline with dropping sales and store closings. Consumers are now going to big box stores and the internet commerce to save money, signaling a fundamental change in American consumerism.
4) Stock market closings for – 9 SEP 20:
Dow 28,956.90 up 211.81 Nasdaq 9,203.43 up 74.18 S&P 500 3,274.70 up 21.65
1) The bond trading has gone from zero to $88 billion dollars in two years because of technology enabled portfolio trading that brings the same speed to the bond market as for stock traders. Bond trading used to take hours of pen and paper work, but now the same thing only requires seconds to do electronically. Most trades are between $100 million and $200 million dollars. The rate of change in the bond market these last few years has been stunning.
2) The struggling company WeWorks announced it plans to lay off at least 4,000 people, roughly one third of its 12,500 work force, a part of its five year plan for recovery from near bankruptcy. But some analyst WeWorks financial troubles come form its failed IPO (Initial Public Offering) in September which left the company with massive losses of $1.25 billion dollars.
3) The board of directors for HP has unanimously rejected the take over bid from Xerox, which they considers significantly undervalues HP and therefore isn’t in the best interest of its shareholders. The board also had concerns about the impact of outsize debt which could devalue the merged company. News has sent stocks for both companies down. HP does recognize the potential benefits of consolidation and therefore remains open to exploring future mergers. Both companies are in the process of cost cutting programs with HP laying off up to 9,000 workers.
4) Stock market closings for – 18 NOV 19:
Dow 28,036.22 up 31.33 Nasdaq 8,549.94 up 9.11 S&P 500 3,122.03 up 1.57
1) Bill Gates, the Microsoft co-founder, says he’s happy to pay his share of taxes, but expressed consternation over Elizabeth Warren’s proposals to tax America’s wealthy. He considers the presidential hopeful is not very open minded to consider his concerns. Warren’s wealth tax proposal is 2% annual levy on household wealth above $50 million dollars with an additional 1% tax on wealth above $1 billion dollars. She estimates this would cover 75,000 tax payers raising $2.6 to $2.75 trillion dollars over a ten years.
2) Stores are starting their Black Friday sales earlier this year, in part because the holiday shopping season is six days shorter. Retailer Target will begin online Black Friday sale on Thanksgiving morning, with stores opening their doors at 5 p.m. and remaining open through 1 a.m. the next day. On Black Friday, their stores open at 7 a.m.. Other retailers such as Walmart started their holiday shopping season last October.
3) Xerox is offering HP a takeover bid of $22 per share. The bid consists of 77% cash and 23% stock which would be $17 in cash and 0.137 Xerox shares for each HP share. If accepted, the deal would generate about $2 billion dollars in cost synergies with HP stock holders owning 48% of the company. HP has announced job cuts between 7,000 and 9,000 by the end of fiscal 2022. HP is worth $29 billion dollars and is more than three times the size of Xerox in terms of market cap.
4) Stock market closings for – 7 NOV 19:
Dow 27,674.80 up 182.24 Nasdaq 8,434.52 up 23.89 S&P 500 3,085.18 up 8.40