Top US stocks to watch: Zoom, J&J and PSTH

Zoom buys Five9, J&J looks for way to handle its talc liabilities, PSTH hunts for a new opportunity as Universal Music deal is tweaked, AutoNation delivers record results, Facebook defends its role in getting Americans vaccinated, and Robinhood targets a $35 billion valuation.

USA (1)

Zoom

Zoom Video Communications announced today it has agreed to buy Five9 in an all-stock transaction worth $14.7 billion.

Five9 operates a cloud contact centre platform that companies use to streamline and improve their customer service across multiple channels. The service will compliment Zoom’s phone offering. Zoom is issuing 0.5533 shares for each Five9 share held, implying a value of $200.28 per Five9 share based on Zoom’s closing share price on Friday.

‘Zoom is built on a core belief that robust and reliable communications technology enables interactions that build greater empathy and trust, and we believe that holds particularly true for customer engagement. Enterprises communicate with their customers primarily through the contact center, and we believe this acquisition creates a leading customer engagement platform that will help redefine how companies of all sizes connect with their customers,’ said chief executive and founder Eric Yuan.

Johnson & Johnson

J&J is thought to be considering spinning-off the liabilities from its baby powder litigations into a new business which plans to seek bankruptcy protection, according to reports from Reuters.

Citing seven unnamed sources, Reuters said J&J has floated the idea to pursue a bankruptcy plan and warned this could lead to lower payouts for any cases that aren’t settled beforehand. However, no final decision has been made. The litigation concerns claims that its baby powder and other talc products previously contained asbestos and other cancer-causing ingredients.

It is thought the courts would not be able to prevent J&J from offloading its liabilities into a new entity, but that it could be challenged afterwards. Other ideas are also being considered, according to the report.

Pershing Square Tontine Holdings

The deal that is set to see blank-cheque company PSTH acquire a 10% in Universal Music Group has been adjusted after regulators and investors questioned the use of a SPAC to complete the deal.

PSTH is the biggest SPAC to have ever been launched after raising $4 billion, which was to be used to help buy a 10% stake in the world’s largest music label once it had been floated in Europe by its current owner Vivendi. However, it has now been revealed that Pershing Square, the main hedge fund that launched PSTH, will be completing the deal rather than the SPAC. PSTH shares have fallen 18% since announcing the original deal in June.

PSTH said it had ‘underestimated the reaction that some of our shareholders would have to the transaction's complexity and structure’. PSTH will now have to complete another deal within 18 months as a result. It said any new deal would be ‘structured as a conventional SPAC deal’.

AutoNation

AutoNation said it delivered record revenue and earnings in the second quarter of 2021, prompting it to up the size of its share buyback programme by $1 billion.

Revenue rose 54% year-on-year to $7.0 billion and reported EPS increased 52% to $4.83. Although both benefited from weak comparatives from the year before when the pandemic bit, revenue was still 33% higher than pre-pandemic levels.

Same-store sales of new vehicles jumped 42% while used vehicle sales were up 37%. ‘Demand continues to outpace supply for new vehicles. We expect this to continue into 2022 due to consumers' preference for personal transportation coupled with lower interest rates,’ said chief executive Mike Jackson.

Cal-Maine Foods

The largest egg producer in the US, Cal-Maine Foods, reported lower revenue and was pushed into the red during the fourth quarter, but said it managed to escape losses over the full year.

Cal-Maine Foods said net sales in the fourth quarter fell to $349.8 million from $453.3 million the year before, with a net loss of $4.2 million compared to a $60.5 million profit the year before. EPS of 9 cents for the quarter was markedly better than the 18-cent loss expected by analysts.

For the full year, revenue dipped to $1.34 billion from $1.35 billion while net income fell to $2.1 million from $18.4 million.

Walmart

Flipkart, the Indian ecommerce firm majority-owned by Walmart, has argued it should not be treated the same as Amazon as it continues to rail against an antitrust probe being launched by officials.

Amazon and Flipkart have both been trying to escape an investigation by the Competition Commission of India, which accuses them of using complex business structures to get around the law and gain an advantage over other local firms.

A final submission made by Flipkart seen by Reuters argues that regulators have confused the facts between Amazon and Flipkart and that it shouldn’t be lumped together with Amazon. The Indian court is expected to accept or reject the appeals over the coming days.

Facebook

Facebook has strongly denied claims from the Biden administration that its social media platform is damaging the country’s vaccination programme.

Facebook said the White House ‘has chosen to blame a handful of American social media companies’ after missing its vaccination targets and amid rising coronavirus cases, but said data shows vaccine acceptance among users has actually increased, implying Facebook has actually boosted the number of people getting jabbed. It says around 85% of US users now accept vaccines compared to just 70% in January.

‘The data shows that 85% of Facebook users in the US have been or want to be vaccinated against COVID-19. President Biden’s goal was for 70% of Americans to be vaccinated by July 4. Facebook is not the reason this goal was missed,’ Rosen said.

Autodesk

Autodesk has ended talks with Australian outfit Altium after its AUD5.05 billion takeover offer was rejected, according to an email seen by Reuters.

The news builds on reports that surfaced over the weekend claiming that talks had ceased. ‘We are not commenting on matters with Altium but can confirm that acquisition discussions have ceased at this time’, a spokesperson said in an email. The report suggests Autodesk raised its offer to AUD40 per share from AUD38.50 before ending talks.

Autodesk had hoped to combine with Altium to add its electronics design software with its own engineering and manufacturing software programmes in order to offer a wider suite of products to customers.

Tesla

Tesla on Saturday launched a new subscription service that allows customers to get its advanced driver assistance software for a monthly fee rather than pay the costly upfront option.

Customers can gain access to the ‘Full Self-Driving capability’ for $199 per month, providing more flexibility compared to the $10,000 upfront cost. Importantly, Tesla reiterated that the current software does not allow fully-autonomous driving and that customers need to remain attentive and in control of the vehicle.

Tesla is hoping the subscription service can deliver some recurring revenue for the business and encourage users that opted against the software at first to consider it again. However, it has also warned that the launch could weigh on cash in the short-term. Notably, Tesla was hoping to launch fully autonomous cars in 2020 but said earlier this year it could struggle to achieve it by the end of 2021.

Robinhood

Trading platform Robinhood revealed it is hoping to secure a valuation of up to $35 billion in a new filing today, reigniting the prospects of a blockbuster IPO.

Robinhood has been touted to launch an IPO for some time but were cast into doubt after coming under the spotlight for its role in the meme stock trading frenzy earlier this year. The filing revealed Robinhood is aiming to offer up to 55 million shares to raise over $2.3 billion, with around 2.6 million additional shares being sold on behalf of investors.

Shares are expected to priced at $38 to $42 per share.

Duolingo

Language-learning app Duolingo said it is targeting a valuation of up to $3.4 billion when it launches its initial public offering, a considerable uplift from the $2.4 billion valuation secured during its last funding round last November.

The company said it will issue around 5.1 million shares at between $85 and $95 each. That would raise around $495 million for the business if priced at the top end of that range considering around 1.4 million shares will be sold by existing investors.

The company was founded in 2011 and its app has been downloaded over 500 million times, making it one of the top-grossing education apps on both Apple and Google app stores.

Ermenegildo Zegna

Italian luxury outfit Ermenegildo Zegna has announced plans to go public on the NYSE by combining with SPAC InvestIndustrial Acquisition Corp in a deal that will value the firm at around $3.2 billion.

Importantly, the Zegna family will retain around a 62% stake in the company after the deal is completed, giving them ultimate control over other shareholders.

The company was founded in 1910 and has grown from a textiles and menswear business into a leading provider of luxury goods. Zegna is its flagship brand but was complimented by the acquisition of American brand Thom Browne back in 2018.

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