Plus, Nvidia is buying Arm Holdings in the biggest deal in the semiconductor industry ever, Gilead said it’s continuing to study new ways to use its remdesivir treatment for the coronavirus, and Delta said it is borrowing $6.5 billion backed by its frequent-flyer program.
Stocks were higher to start Monday with the Dow adding 350 points, or 1.3%. The S&P 500 gained 1.6%, while the Nasdaq traded 2.1% higher.
We have a winner. ByteDance confirmed that that it rejected Microsoft’s bid to buy TikTok’s U.S. operations, and has instead chosen Oracle to be TikTok’s U.S. technology partner. Treasury Secretary Steven Mnuchin said this morning that the U.S. government plans to review the deal this week, saying, “I will just say from our standpoint, we’ll need to make sure that the code is, one, secure, Americans’ data is secure, that the phones are secure and we’ll be looking to have discussions with Oracle over the next few days with our technical teams.” The deal between ByteDance and Oracle may look more like a corporate restructuring than an outright sale, and may include a stake in a newly configured American business. “If you say thi sis a hostile takeover, that may not be nice for both parties,” said Yik Chan Chin, a researcher of global media and communications policy at the Xi’an Jiaotong-Liverpool University in Suzhou. “But if you frame it as like a restructuring or spinoff,” that’s more acceptable to the two governments. The terms of the deal are still evolving.
That wasn’t it for Merger Monday. Nvidia has agreed to buy mobile phone chip designer Arm Holdings from SoftBank in a deal worth $40 billion. “This combination makes financial sense,” said Nvidia CEO Jensen Huang in a press call today, “and it’s a great deal for SoftBank and us.” The deal is the biggest acquisition in the history of the semiconductor industry and is a significant victory for SoftBank, which bought Arm Holdings in 2016 for $32 billion. Verizon said today that it would buy wireless services provider Tracfone in a $6.25 billion cash and stock deal. Tracfone is the largest prepaid mobile brand in the U.S., with approximately 21 million subscribers and more than 90,000 retail locations. And Gilead Sciences said that it will acquire Immunomedics in a $21 billion deal that will expand Gilead’s availability of cancer treatments. “This acquisition represents significant progress in Gilead’s work to build a strong and diverse oncology portfolio. 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, both as a monotherapy and in combination with other treatments,” said Gilead’s CEO Daniel O’Day in a statement. “We look forward to welcoming the talented Immunomedics team to Gilead so we can continue to advance this important new medicine for the benefit of patients with cancer worldwide.”
As coronavirus cases surpass 6.5 million in the U.S. and 29 million globally, Gilead CEO O’Day said the company is continuing to study new ways to use its coronavirus treatment remdesivir on patients, including potentially outside of hospitals. “We’re not finished with remdesivir,” O’Day said, adding that the company began trials in September to look at using IV remdesivir in outpatient settings, which may make it possible to “keep people out of the hospital in high-risk cases.” Eli Lilly said today that its rheumatoid arthritis drug Olumiant shortened the time taken to recover from COVID-19 in hospitalized patients when taken in combination with Gilead’s remdesivir. On the vaccine front, researchers are beginning the first study of whether two of the U.K.’s experimental COVID-19 vaccines can be inhaled. The study will compare vaccine candidates from Imperial College London and the University of Oxford delivered by inhalation through the mouth. “We have evidence that delivering influenza vaccines via a nasal spray can protect people against flu as well as help to reduce the transmission of the disease,” said Dr. Chris Chiu, leader of the study from the Department of Infectious Disease, in a statement. “We are keen to explore if this may also be the case for SARS-CoV-2 and whether delivering COVID-19 vaccines to the respiratory tract is safe and produces an effective immune response.”
Nikola shares are up nearly 5% this morning after the electric vehicle start-up released another, more detailed response to a negative report from short seller Hindenburg Research from last week. “Nikola believes that the Hindenburg report, and the opportunistic timing of its publication shortly after announcement of Nikola’s partnership with General Motors Co. and the resulting positive share price reaction, was designed to provide a false impression to investors and to negatively manipulate the market in order to financially benefit short sellers, including Hindenburg itself,” the company said in a statement. While the company said there were “dozens” of inaccurate allegations in the Hindenburg report, it didn’t dispute one of Hindenburg’s largest claims: that it staged a video showing a truck that appeared to be functional but wasn’t, as well as claims that the truck was fully functional. Regarding the video, Nikola said it “never stated its truck was driving under its own propulsion in the video, although the truck was designed to do just that.” Nikola said investors at the time knew the capabilities of the prototype vehicle, calling the 3-year-old video “irrelevant except for the fact that the short seller is trying to use it for its main thesis.”
And Delta Air Lines shares are up after the airline said today that it will borrow $6.5 billion backed by its frequent-flyer program to shore up its liquidity during the coronavirus crisis. Delta plans to sell senior secured notes and enter into a new term loan, both backed by its SkyMiles program, which will lend the net proceeds of the bond offering to Delta. Despite a slight uptick this summer, air travel demand has hovered at around 30% of last year’s levels, forcing airlines to trim capacity. Delta said today that it expects its capacity to be down 60% in September compared with the same month last year, with harder-hit international flying down 80% and domestic off 50%.
Stocks We’re Watching
Crocs Inc (NASDAQ: CROX): Crocs shares are up nearly 3% this morning after the company issued upbeat Q3 revenue guidance amid strong demand. “Crocs products have several characteristics that are really working today: comfort, casual looks, the ability to be used outside, personalization through their Jibbitz [shoe charms], and low price points,” said Mike Buck, a manager of the Driehaus Small Cap Growth fund. “Their shoes are a good value that resonates when times are tougher. It all adds up to a business that will outperform the footwear market as a whole.”