Wall Street Breakfast

Author: bmotrader   |   Latest post: Fri, 22 Jan 2021, 9:32 AM


Wall Street Breakfast: Facebook Boycott And Chesapeake Bankruptcy

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Organizers of the "Stop Hate for Profit" campaign against Facebook (NASDAQ:FB) are preparing to take the battle global, as well as emboldening regulators in Europe to take a harder stance on the social media giant. Since the campaign launched on June 17, more than 160 companies, including Coca-Cola (NYSE:KO), Starbucks (NASDAQ:SBUX), Unilever (UN, UL) and Verizon (NYSE:VZ), have pledged to stop buying Facebook ads for the month of July, and some have gone even further. While CEO Mark Zuckerberg laid out some policy changes on Friday, the boycott publicity sent Facebook's stock down 8%, wiping out $56B in market capitalization. What does the campaign want from Facebook? Solutions include a separate moderation process to help users who are targeted by racism, more transparency on how many incidents of hate speech are reported and to stop generating ad revenue from harmful content. FB -2.6% premarket.

Chesapeake Energy files for bankruptcy

The U.S. shale industry pioneer, long rumored to be seeking a bankruptcy filing, has formally commenced the process after filing for Chapter 11 proceedings. What happened? Chesapeake Energy (NYSE:CHK) amassed a huge land position that came with a lot of debt and commitments to drill, as well as long-term contracts with pipeline companies that turned into liabilities. The firm has $925M in debtor-in-possession financing to get through the bankruptcy process, while creditors will likely expect it to emerge as a much smaller entity. According to analysts, more than 200 shale companies may file for bankruptcy over the next two years if oil and gas prices stay around current levels.

Struggling for direction

Following a brutal selloff on Friday, U.S. stock index futures seesawed overnight as investors digested the latest coronavirus infection rates and what it will mean for the economy. At the time of writing, Dow futures are up 128 points, the S&P 500 is ahead by 0.4%, while contracts tied to the Nasdaq are dipping into the red due to troubles at Facebook (FB). Over the weekend, coronavirus cases worldwide passed 10M, with more than 500K deaths (2.5M infections were confirmed in the U.S. and more than 125K deaths were from COVID-19). On Sunday, Health and Human Services Secretary Alex Azar also warned that the "window was closing" for the U.S. "to take action and get the coronavirus pandemic under control."

737 MAX recertification

Boeing (NYSE:BA) and the FAA today will begin a three-day certification test campaign for the 737 MAX, which has been grounded for nearly 15 months. "Likely weeks later, after the data is analyzed and training protocols are firmed up, FAA Administrator Steve Dickson will board the same plane to make his assessments," Reuters reports. "If all goes well, the FAA would then need to approve new pilot training procedures, among other reviews, and would not likely approve the plane’s ungrounding until September." Based on those projections, the jet would be on a path to resume U.S. service before year-end, though the process has been plagued by delays for more than a year. BA +3% premarket.

Future of travel

Historic changes may be coming to the travel sector as the coronavirus pandemic reverberates to all areas of the industry. Airbus (OTCPK:EADSY) is assuming a 40% drop in production over the next two years as it draws up rapid restructuring plans to deal with the upcoming slump. "I will go on the record to say that travel will never, ever go back to the way it was pre-COVID. It just won't," Airbnb (AIRB) CEO Brian Chesky told Axios. "There are sometimes months when decades of transformation happen." He predicts that vacationers will stay closer to home in the near future, largely limiting their travel to places within driving distance, though "people will, one day, get back on planes."

Fed reveals corporate bond purchases

The central bank has purchased the bonds of 794 different companies, with the paper of Apple (NASDAQ:AAPL), Verizon (VZ), AT&T (NYSE:T), and the U.S. divisions of Toyota (NYSE:TM), Volkswagen (OTCPK:VWAGY), and Daimler (OTCPK:DDAIF) making up 10% of the amount spent. The plan is to buy $250B of debt already issued, and $500B in newly issued bonds. Fed officials have said the goal of the buying is to maintain liquidity in the market for corporate debt, so that issuers are able to access capital despite the economic downturn created by the COVID-19 pandemic.

Modernizing bank data collection

The FDIC is kicking off a competition among 20 data and technology firms to develop a new reporting prototype from the more than 3,200 community banks the agency oversees. "What we would like to do is frankly make the [quarterly] call reports obsolete, and not because we wouldn't have the data but because we would have better data and we would have more timely data," Chairman Jelena McWilliams said in a WSJ interview. The coronavirus pandemic has demonstrated how bank reporting can be out of date. For example, the FDIC wasn't able to brief the public on the first-quarter health of the industry until earlier this month, and that briefing didn't include data past March.

Brand names and logos

"The L'Oréal Group (OTCPK:LRLCY) has decided to remove the words white/whitening, fair/fairness, light/lightening from all its skin evening products," the cosmetics company said in a statement on Saturday. The announcement follows a decision by Unilever (UL, UN) on Thursday to rename their India-marketed "Fair and Lovely" skin-lightening cream for the same reason. Johnson & Johnson (NYSE:JNJ) made a similar decision earlier this month, saying it would stop selling skin-lightening products under its Clean & Clear and Neutrogena brands.

All in the family

Cosmetics maker Coty (NYSE:COTY) has agreed to buy a 20% stake in Kim Kardashian West's make-up brand KKW for $200M, according to the FT, though details on sales and profits were not disclosed. The deal values the three-year-old company at $1B, slightly less than the $1.2B valuation Coty put on Kim's younger sister Kylie Jenner's business when it bought a 51% cent stake last year. Meanwhile, shares of Gap (NYSE:GPS) soared nearly 20% on Friday after the retailer announced a 10-year deal with the Yeezy fashion brand of Kanye West, who is married to Kim Kardashian.

End of record apparel deal

Under Armour (NYSE:UAA) is discontinuing its partnership with UCLA - a 15-year, $280M contract announced in 2016 that was billed as the biggest apparel deal in the history of American collegiate sports. The company had agreed to design and supply shoes, gear and uniforms for all 25 of the university's men's and women's varsity athletic teams, replacing the university's deal with Adidas (OTCQX:ADDYY). "We have been paying for marketing benefits that we have not received for an extended time period," Under Armour said in a statement, while UCLA said it was "exploring all our options to resist Under Armour's actions."

Today's Markets

In Asia, Japan -2.3%. Hong Kong -1%. China -0.6%. India -0.6%.
In Europe, at midday, London +0.1%. Paris flat. Frankfurt +0.2%.
Futures at 6:20, Dow +0.5%. S&P +0.4%. Nasdaq -0.2%. Crude +0.2% to $38.56. Gold +0.2% to $1783.90. Bitcoin +0.4% to $9104.
Ten-year Treasury Yield flat at 0.65%

Today's Economic Calendar

10:00 Pending Home Sales
10:30 Dallas Fed Manufacturing Survey
3:00 PM Fed's Williams Speech


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