Market movers: Stocks that saw action on Monday - and why

14 Sep 2020, 13:39 by David Leeder

A roundup of some of the North American equities making moves in both directions today

On the rise

Canada’s NEO Lithium Corp. (NLC-X) soared over 31 per cent after announcing China’s CATL will buy more than 10 million common shares to become the company’s third-largest shareholder, the latest in a string of investments by Chinese companies into South American lithium projects.

The deal, announced on Monday, comes as demand for the electric vehicle battery metal is expected to triple over the next five years as automakers shift their focus away from internal combustion engines to EVs.

Contemporary Amperex Technology Co Ltd (CATL), which supplies lithium iron phosphate batteries to Tesla Inc, will pay $8.5-million for its stake in Toronto-based Neo Lithium, the companies said on Monday.

CATL will also gain one seat on Neo Lithium’s board and sit on the company’s technical committee, where it will help Neo draft a feasibility study for its Tres Quebradas Lithium project in Argentina’s northern Catamarca province.

The deal with CATL was at a 45 percent premium to Neo Lithium’s Friday closing stock price. To abrogate CATL’s concerns about the premium, several Neo Lithium executives agreed to buy roughly 483,000 shares at the same price.

“We justified the valuation with our own pockets,” Waldo Perez, Neo Lithium’s chief executive, told Reuters.

Shares of Oracle Corp. (ORCL-N) surged 4.3 per cent after it said on Monday it would team up with China’s ByteDance to keep TikTok operating in the United States, beating Microsoft Corp in a deal structured as a partnership rather than an outright sale.

ByteDance, TikTok’s Beijing-based owner, had been in talks to divest the U.S. business of its hugely popular short-video app to Oracle or Microsoft after U.S. President Donald Trump ordered the sale last month and said he might otherwise shut it down.

While TikTok is best known for dancing videos that go viral among teenagers, U.S. officials are concerned user information could be passed to China’s Communist Party government. TikTok, which has as many as 100 million U.S. users, has said it would never share such data with Chinese authorities.

Sale negotiations were upended when China updated its export control rules last month, giving it a say over the transfer of TikTok’s algorithm to a foreign buyer. Reuters reported last week that China would rather see TikTok shut down in the United States than allow a forced sale.

Oracle said it was part of a proposal submitted by ByteDance to the U.S. Treasury Department over the weekend in which Oracle would serve as TikTok’s “trusted technology provider.”

Under ByteDance’s latest proposal, Oracle would assume management of TikTok’s U.S. user data, sources told Reuters on Sunday. Oracle is also negotiating taking a stake in TikTok’s U.S. operations, the sources added. The TikTok user data is currently stored in Alphabet Inc’s cloud, with a backup in Singapore.

Some of ByteDance’s top investors, including General Atlantic and Sequoia, will also be given minority stakes in those operations, one of the sources said.

Nvidia Corp. (NVDA-Q) added 5.7 per cent on plans to buy UK-based chip designer Arm from Japan’s SoftBank Group Corp for as much as US$40-billion, in a deal set to reshape the global semiconductor landscape.

The sale puts a vital supplier to Apple Inc and others across the industry under the control of a single player and faces likely pushback from regulators and rivals to Nvidia, the biggest U.S. chip company by market capitalization.

Within hours of the announcement, critics questioned how Arm would maintain its open approach under U.S. ownership and at a time of friction with China.

For Softbank, the sale marks an early exit from Arm, just four years after the technology group’s US$32-billion acquisition. Chief Executive Masayoshi Son has lionised the potential of Arm but is slashing his stakes in major assets to raise cash.

The move comes as SoftBank executives, frustrated at the group’s share performance, have held early stage talks about taking the Japanese technology group private, a source told Reuters. Those talks could gain momentum following the Arm sale. SoftBank’s shares soared 10 per cent in Tokyo.

Nvidia will pay SoftBank US$21.5-billion in shares and US$12-billion in cash, including US$2-billion on signing. The deal will see SoftBank and its US$100-billion Vision Fund, which has a 25-per-cent stake in Arm, take a stake in Nvidia of between 6.7 per cent and 8.1 per cent.

Delta Air Lines (DAL-N) increased 3.5 per cent in the wake of saying on Monday it is seeking to raise US$6.5-billion through new bonds and loans backed by its SkyMiles loyalty program, further bolstering liquidity to weather a drastic downturn in travel demand due to the COVID-19 pandemic.

The airline said it would use the loyalty program as collateral to secure the new loans and issuance, as it continues to burn through about US$27-million in cash each day.

U.S. airlines have cut costs and raised debt to survive what they call an unprecedented industry crisis. The situation is not expected to improve until there is a meaningful recovery in demand.

With its latest financing deal, Delta will not pursue a US$4.6-billion federal loan available under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, officials said, even as it continues to lobby for a second round of federal payroll grants.

Atlanta-based Delta is among U.S. airlines to have tapped funds under a US$25-billion made available primarily in grants under the CARES Act to cover employees' payroll through September, but not a separate US$25-billion package in secured loans.

Las Vegas-based Scientific Games Corp. (SGMS-Q) said on Monday that a group of investors including Caledonia Investments would take a 34.9-per-cent stake in the company in a deal that would shake up the board of the gambling products firm.

Shares of the company, which makes electronic gaming machines and server-based lottery and gaming systems, rose nearly 40 per cent.

The Australian investment firm and other investors will acquire the stake from billionaire Ronald Perelman’s firm MacAndrews & Forbes Inc at US$28 per share, which implies a premium of 47.6 per cent to stock’s last close on Friday.

The company said the reconstituted board will mainly comprise of independent directors and also include three new directors.

Pfizer Inc. (PFE-N) rose 2.6 per cent after the drugmaker and German biotech firm BioNTech SE proposed expansion of their Phase 3 pivotal COVID-19 vaccine trial to about 44,000 participants.

The initial target figure for the trial was up to 30,000 participants, which the companies said they expect to reach by next week.

The proposed expansion would also allow the companies to enroll people as young as 16 and people with chronic, stable HIV, hepatitis C and hepatitis B, they added.

Gilead Sciences Inc. (GILD-Q) sat up 1.1 per cent after announcing will acquire biopharmaceutical company Immunomedics Inc. (IMMU-Q) for US$21-billion, a move that will strengthen its cancer portfolio by gaining access to a promising drug.

Immunomedics soared almost 99 per cent.

The deal provides Gilead access to Immunomedics' breast cancer treatment drug, Trodelvy, which was granted an accelerated FDA approval in April.

Gilead said it would issue a tender offer to buy all the outstanding shares of Immunomedics for US$88 per share, representing a premium of about 108 per cent over their last closing price of US$42.25 on Sept 11.

“This acquisition represents significant progress in Gilead’s work to build a strong and diverse oncology portfolio,” Gilead Chief Executive Officer Daniel O’Day said in a statement. “Trodelvy is an approved, transformational medicine for a form of cancer that is particularly challenging to treat. We will now continue to explore its potential to treat many other types of cancer,”

Immunomedics is also on track to file for regulatory approval for Trodelvy in Europe in the first half of 2021, according to the statement.

The offer will be funded with US$15-billion in cash on hand, and through US$6-billion in newly issued debt, according to the drugmaker.

The transaction is expected to close in the fourth quarter of 2020, the companies said.

The acquisition of Immunomedics is the latest of the several Gilead inked this year with the aim of expanding its oncology portfolio.

It bought a 49.9-per-cent stake in cancer drug developer Pionyr Immunotherapeutics in June for US$275-million, just months after paying US$4.9-billion for Forty Seven Inc, maker of an experimental treatment that targets blood cancer.

Eli Lilly and Co. (LLY-N) was 0.6 per cent higher after it said on Monday its rheumatoid arthritis drug baricitinib shortened the time taken to recover from COVID-19 in hospitalized patients when taken in combination with Gilead Sciences Inc’s antiviral remdesivir.

Lilly said the drug, which is branded as Olumiant, in combination remdesivir showed a roughly one-day reduction in median recovery time versus patients treated with remdesivir alone.

Based on the results from the trial, which tested more than 1,000 patients, Lilly said it plans to discuss the potential for an emergency use authorization (EUA) with the U.S. Food and Drug Administration.

Remdesivir is at the forefront of the fight against COVID-19 after the drug was granted an EUA in May after trial data showed the antiviral drug helped shorten hospital recovery time.

The drug, which has been licensed by Lilly from Incyte Corp , could potentially help suppress a potentially lethal immune response to COVID-19 called “cytokine storm”.

Nikola Corp. (NKLA-Q) was up 10.7 per cent after announcing it will work with vehicle equipment maker CNH Industrial to build prototypes of the EV maker’s Tre semi-truck, days after a scathing report from short-seller Hindenburg alleged the company of ‘fraud’.

CNH said it aims to start testing the semi-trucks later this year, and hopes to launch the vehicles commercially by the fourth quarter of 2021.

Hindenburg had shorted the stock last week and said it had gathered enough evidence to show Nikola founder Trevor Milton made false statements about possessing proprietary technology to form partnerships with large automakers.

Hindenburg had also alleged that a seemingly functional truck, Nikola One, was “simply filmed rolling down a big hill” in 2017. Nikola said on Monday it never stated the truck was driving “under its own propulsion” and investors at that time were aware of its technical capabilities.

Nikola, which had accused Hindenburg of manipulating the stock to benefit short-sellers, said it approached the U.S. Securities and Exchange Commission on the matter.was up 4.3 per cent as it fought back against a short-seller’s scathing report accusing the electric truck maker of being a “fraud”.

Last week, automaker General Motors Co took an 11% stake in Nikola and said the two companies will join forces to build electric pickup trucks and fuel cell commercial trucks to take on Tesla Inc.

Draftkings Inc. (DKNG-Q) and Caesars Entertainment Inc. (CZR-Q) jumped 17.3 per cent and 10.5 per cent, respectively, after announcing separate multi-year agreements with ESPN.

Both deals include co-exclusive link integrations across ESPN digital platforms connecting fans to sportsbooks from Caesars Entertainment’s sports betting partner, William Hill, and DraftKings.

As part of the agreements, ESPN expands its relationships with both Caesars, as the exclusive odds provider and co-exclusive sportsbook link-out provider, and DraftKings, as the exclusive daily fantasy sports provider and co-exclusive sportsbook link-out provider.

Merck & Co Inc. (MRK-N) was up 0.4 per cent said on Monday it would buy US$1-billion worth of equity stake in Seattle Genetics Inc.'s (SGEN-Q) common stock.

Seattle Genetics rose 14.7 per cent.

The companies added they would co-develop and sell Seattle Genetics’s cancer therapy, ladiratuzumab vedotin.

The collaboration will assess ladiratuzumab vedotin in combination with Merck’s blockbuster drug Keytruda in types of breast cancer and other solid tumors, the companies said in a joint statement.

Seattle Genetics, a cancer-focused drug developer, will receive an upfront payment of US$600-million under the agreement, while Merck will invest the US$1-billion to buy 5 million shares of Seattle Genetics for US$200 per share, a premium of 33.4 per cent to Seattle’s last close.

With files from staff and wires