GSK’s bid to buy Sierra Oncology features on the top stories today. It appears that small cap companies are trading at a discount to larger peers, even as Morgan Stanley’s confidence in technology hardware wanes. China’s solar sector is hit by Covid-19 lockdowns and ARK founder Cathie Wood says private investors understand disruptive innovation better than retail.
Biotech buy for GSK.
GlaxoSmithKline [GSK] plans to buy California-based biopharmaceutical firm Sierra Oncology [SRRA] for $1.9bn, a press statement said. The target company is a late-stage researcher focused on targeted therapies for the treatment of rare forms of cancer. The acquisition reflects a price of $55 per share for Sierra, 39% higher than Tuesday’s close. Sierra shares were at $54.70 5pm GMT Wednesday. This is an all-cash deal, which is expected to close by August this year.
A cinema group buying a metals mining company doesn’t appear to make sense, but things don’t always have to in the world of meme stocks. Investor reaction to AMC's [AMC] latest purchase seems positive, even as the chief promises to make more such moves with the company’s cash because it has experience in turning stressed assets around. Analysts are now puzzling over whether retail investors will be sticking around for the company's new growth strategy.
Gains likely for small-caps.
Unlike their larger peers, a good set of earnings could spur small-cap company stocks because the sector is discounted after recent market gyrations, reports MarketWatch. The S&P 600 index is down 9% since the start of the year with an average price to earnings multiple of 12.9, about 33% lower than the S&P 500. Prior to the selloff that started in January, the S&P 600 was trading at 85% of the multiple awarded to the S&P 500, and has traded at largely the same multiple since the Covid-19 crisis began.
Shares of greeting cards and gift seller Moonpig [MOON] have seen upward momentum after strong sales in the December quarter as Covid-19 related lockdowns spurred Christmas card sales. The company has said that the momentum has continued through the first two months of 2022, raising hopes that the stock may be a good bet even after the stay-at-home euphoria ends.
Wood says private markets understand better.
On Tuesday, star stock picker Cathie Wood said that private markets understand the value of disruptive innovation better than public equity markets, reports MarketWatch. At the Exchange ETF Conference, she defended ARK’s seemingly sunken technology bets, as fundamentals of the companies in question have “not deteriorated”. During this “risk-off period”, the investment firm is concentrating portfolios with prominent companies and acquisition candidates, she added.
China regulation hits solar sector.
China’s strict Covid-19 restrictions have forced equipment makers to cut production and has led to shipping delays owing to poor staffing, reports Bloomberg. A survey conducted by the Shanghai Solar Energy Society showed that panel production and installations have both been compromised as a result of the most recent curbs. Wafer production was suspended in some factories near Shanghai, while local shipping of polysilicon, a key raw material for solar manufacturing, was compromised due to curbs in Xinjiang.
Morgan Stanley downgrades hardware stocks.
Investment advisor Morgan Stanley [MS] has lowered performance expectations for tech hardware and telecom stocks as corporate spending may slow down, reports MarketWatch. Hewlett Packard Enterprise [HPE], F5 [FFIV] and NetApp [NTAP] found themselves in the line of fire, as the bank lowered its rating of HP Enterprise to ‘underweight’ from ‘equal weight’ and its target price of $15 down from $17. The other two companies were rated ‘overweight’ earlier but are now at ‘equal weight’.