Morning Reads
- Xi’s $1 Trillion ‘Project of the Century’ Faces Uncertain Future
- Risk-Advisory Firms Decide Hong Kong Isn’t Worth It
- China Got a Big Contract. Nepal Got Debt and a Pricey Airport
- US to Tighten Curbs on China’s Access to Advanced Chip Tech
- As Global Debt Worries Mount, Is Another Crisis Brewing?
- Janet Yellen Says Higher Interest Rates May Persist in US
- Home Sales on Track for Slowest Year Since Housing Bust
- Surge in Health-Insurance Costs Pose Next Challenge for Finance Chiefs
- The Goldman Banker on a Crucial Mission to Help Juice Its Stock
- Florida’s Battered Orange Growers Are Cashing In on a Housing Boom
- How a Fertilizer Shortage Is Spreading Desperate Hunger
- Oil Prices Fluctuate as Concerns Mount Over Middle East Tensions
- IMF, World Bank ‘Impotent’ on Israel-Gaza War Shock as Reforms Edge Forward
- Warning of ‘Grave’ Errors, Powerful Donors Push Universities on Hamas
- Harvard Cozies Up to #MentalHealth TikTok
- Netflix Deepens Videogame Push, Ripping Page From Its Hollywood Script
- Ad-Free Versions of Facebook and Instagram Have One Audience in Mind: Regulators
- Brands Are Handing Out Freebies at Walmart as Online Ads Lose Appeal
- Taylor Swift’s ‘Eras’ Is Easily the Biggest Concert Film Opening Ever
- Rite Aid Files for Bankruptcy, Will Close More Stores
- Altice Employees Raised Red Flags Years Before Corruption Probe
- U.S. Clamps Down on Russian Oil Sales With New Sanctions
- The Oil Price Has a Safety Valve. Gas Doesn’t
- China on Brink of Deflation Again Reveals Still-Weak Rebound
- Investors Bet Thriftier Chinese Shoppers Are Here to Stay
- Across U.S., Chinese Bitcoin Mines Draw National Security Scrutiny
- Inflation Slowdown Remains Bumpy, September Consumer Price Data Shows
- The Latest Tool to Refinance Short-Term Debt: Double-Dip Financing
- JPMorgan Notches Another Net Interest Income Record, Lifts Guidance
- Wells Fargo Raises Interest Income Forecast as Third-Quarter Profit Beats Estimates
- BlackRock Clients Pull $13 Billion From Long-Term Funds
- Dreams of Big Bond Gains Backfire With $10 Billion ETF Loss
- Sam Bankman-Fried’s Lawyers Fail To Shake Ellison’s Account About FTX Crimes
- Microsoft-Activision’s $69 Billion Pact, Biggest Gaming Deal, Cleared by UK
- Retailers’ Seasonal Hiring Plans Signal a Cooling Labor Market
- Detroit’s Electric Reckoning Has Arrived
- Why Being an Auto Worker Isn’t as Lucrative as It Used to Be, in Charts
- Detroit Carmakers Paid $1 Billion to CEOs as Auto Wages Slumped
- South Korea Had High Hopes for 5G. What Happened?
- Verizon Turns to Inside Fixer to Pull Mobile Giant Out of Downward Spiral
- Your Face May Soon Be Your Ticket. Not Everyone Is Smiling
- Green Energy Builders Sought Billions More in Subsidies. New York Said No.
Open Interest Changes
PREMIUM
Prepper
Popular drugstore chain Rite Aid (RAD) has filed for Chapter 11 bankruptcy protection, buckling under its more than $3B debt load and opioid-related liabilities. Rite Aid, which has been shuttering stores across the U.S., also received a commitment for $3.45B in new funds from certain lenders. Meanwhile, the pharmacy chain will sell its Elixir Solutions business to MedImpact Healthcare, a pharmacy benefits company.
Bigger picture: Rite Aid joins other drugmakers that have declared bankruptcy due to opioid litigation, such as Mallinckrodt (OTC:MNKTQ), Endo (OTC:ENDPQ), and Purdue Pharma. Drug distributors AmerisourceBergen, Cardinal Health (CAH), and McKesson (MCK) and pharma giants Johnson & Johnson (JNJ) and Teva (TEVA) have all agreed to pay billions of dollars to settle their opioid-related liabilities. As for Rite Aid, the Department of Justice earlier this year alleged that the company deliberately filled unlawful prescriptions for opioid painkillers, including fentanyl and oxycodone.
Note that Rite Aid's bankruptcy filing also comes at a time when consumer confidence has been weakening in the backdrop of sticky inflation. In a July analysis, ratings agency Moody's said defaults among retail and apparel would likely rise as profits continue to be dented by elevated costs, higher markdowns and muted consumer spending. Moody's said home goods, apparel retailers and smaller companies were especially at risk, even mentioning Rite Aid specifically.
SA commentary: SA Quant has warned that Rite Aid is at high risk of performing badly, given its decelerating momentum and inferior profitability. Back in July, SA analyst WYCO Researcher said Rite Aid's management was not doing enough to keep it out of bankruptcy court. "The biggest hurdle is negotiating the specific amount of an opioid settlement," they warned. For an alternative pharmacy chain pick, Christopher Robb is buying Walgreens Boots Alliance (WBA) going into earnings on account of its high dividend and "dirt cheap" valuation levels. "Walgreens stock is a high-risk, high-reward contrarian play for long-term dividend compounders," he said. (29 comments)
Offer withdrawn
Albemarle (ALB) has withdrawn its non-binding offer for Australian lithium miner Liontown Resources (OTCPK:LINRF), citing "growing complexities" with the proposed transaction as a factor in its decision. "Moving forward with the acquisition, at this time, is not in Albemarle's best interests," said its CEO Kent Masters. The decision comes after Albemarle was given four weeks to look over its books following a fresh takeover bid valuing it at around $4.2B, which was extended by an additional week. Although a lithium bull, SA analyst Ben Short has flagged some of the headwinds facing Albemarle, including contract issues and operational weaknesses. (19 comments)
Investor activism
Starboard Value has been building a stake in News Corp. (NWSA, NWS), and it seems the activist hedge fund may push for strategic and governance changes at the media giant. While details of the stock purchase were not disclosed, Starboard's Jeff Smith is set to present investment ideas at two conferences this week. Starboard began building a stake in News Corp. before Rupert Murdoch said he would step down as chairman. Note that News Corp.'s revenue has been stagnant over the past several quarters. SA analyst Edgar Torres H believes News Corp. stock is overvalued, with its class A shares (NWSA) up nearly 19% in the last six months, while its class B shares (NWS) climbed 22%.
Rigged bet
Billionaire activist investor Carl Icahn claims that his short bet against malls may be manipulated against him. Icahn has had a short position against commercial mortgage-backed securities through the use of credit default swaps, or CDS, for the last four years. While the mall bet paid off during the COVID-19 lockdown and Icahn made about $900M in 2020, it hasn't been working of late. Last year, Icahn Enterprises' (IEP) CDS positions took a $742M paper loss, and its short credit positions have also been dropped. Icahn suggested that the recent market manipulation relates to Crossgates, a mall outside of Albany, New York. (71 comments)
Today's Markets
In Asia, Japan -2%. Hong Kong -1%. China -0.5%. India -0.2%.
In Europe, at midday, London +0.4%. Paris +0.2%. Frankfurt +0.1%.
Futures at 7:00, Dow +0.4%. S&P +0.3%. Nasdaq flat. Crude +0.1% to $87.75. Gold -0.6% at $1,929.20. Bitcoin +3.3% to $27,771.
Ten-year Treasury Yield +7 bps to 4.70%.
Today's Economic Calendar
8:30 Empire State Mfg Survey
10:30 Fed's Harker: Economic Outlook
4:30 PM Fed's Harker: Economic Outlook
Companies reporting earnings today »
What else is happening...
The mounting, potential impact of weight loss drugs on consumer stocks.
Sony (SONY) eyes potential purchase of Disney's (DIS) India business.
Unions vote to restart strikes at Chevron's (CVX) LNG sites in Australia.
Qataris scrap bid for Manchester United (MANU); Ratcliffe is sole bidder.
China central bank boosts liquidity support; keeps policy rate unchanged.
Eli Lilly (LLY) reports full phase 3 trial data for weight loss drug Mounjaro.
Honeywell (HON) sees strong demand for business jets over next decade.
BioNTech (BNTX) dips on warning of €900M write-off related to COVID shot.
As Nvidia (NVDA) speeds up its cadence, it could mean bad news for rivals.
UBS: 'Softish' landing in the U.S. economy will push stocks higher next year.