Billionaire Gerald Schwartz’s offer for Indigo ‘wholly inadequate,’ analyst says
Canadian billionaire Gerald Schwartz’s offer to take Indigo Books & Music Inc. private for about $62 million is “wholly inadequate,” according to the only Bay Street analyst who still covers the retailer.
The offer of $2.25 per share should be rejected as it ascribes “little to no value to the brand” or to the bookstore chain’s lease portfolio, Cormark Securities Inc. analyst David McFadgen said in a note Friday. The Toronto-based retailer is capable of boosting its Ebitda margin to at least five per cent and may finally be starting to improve its cost structure, he said.
“We remind investors that Mr. Schwartz was buying stock previously from November 2017 to March 2018 at prices ranging from $18-$20,” McFadgen said.
“Has the business deteriorated so much that it can never be turned around to warrant an offer of only $2.25 a share?”
Indigo should have about $1.11 of cash on hand per share in March, and combined with the firm’s balance sheet, Schwartz wouldn’t need to put up any money to take it private, McFadgen said in an email.
Indigo shares were up 48 per cent to $2.15 at 11:57 a.m. in Toronto, the biggest intraday gain in more than three years. Earlier they rose as high as $2.27, just above the offer.
Schwartz is the founder of Canadian investment firm Onex Corp. and a director at Indigo, and his spouse is Indigo Founder and chief executive Heather Reisman. The billionaire’s Trilogy Retail Holdings Inc. and Trilogy Investments LP currently own about 61 per cent of Indigo’s stock.
Indigo has been under pressure for years amid a challenging environment for retailers, and the shares fell further in mid-2023 when Reisman announced her retirement. She returned to the helm in September in an executive shakeup.
Market close: TSX posts small loss, U.S. markets rise to new heights
Canada’s main stock index posted a small loss led by weakness in energy stocks, while U.S. markets were lifted by tech stocks to another record high.
The S&P/TSX composite index closed down 34.12 points at 21,085.09.
In New York, the Dow Jones industrial average was up 134.58 points at 38,654.42. The S&P 500 index was up 52.42 points at 4,958.61,while the Nasdaq composite was up 267.31 points at 15,628.95.
The Canadian dollar traded for 74.33 cents U.S. compared with 74.60 cents U.S. on Thursday.
The March crude contract was down US$1.54 at US$72.28 per barrel and the March natural gas contract was up three cents at US$2.08 per mmBTU.
The April gold contract was down US$17.40 at US$2,053.70 an ounce and the March copper contract was down three cents at US$3.82 a pound.
The Canadian Press
Airlines call for roadmap to start production of sustainable aviation fuel
Airlines are calling on the federal government to roll out measures that will spark production of sustainable aviation fuel in Canada.
A pair of industry groups say incentives are needed to match new programs in the United States and cut down on airplane pollution, which accounts for about two per cent of carbon dioxide emissions globally, according to the International Energy Agency.
The Canadian Council for Sustainable Aviation Fuels and the National Airlines Council of Canada say the country’s long history of resource development, renewable energy and aircraft manufacturing should put it at the forefront of the push for greener skies.
However, Canada has yet to commercially produce a drop of sustainable jet fuel — typically derived from used cooking oils, animal fats or organic waste.
Airlines are asking Ottawa for tax credits on fuel-making facilities and the production process itself, among other measures.
Last year, the federal government pledged $350 million to support decarbonization of the aerospace sector, establishing a national network that backs research and development projects that range from alternative fuels to aircraft design.
The Canadian Press
Vancouver home sales rise as demand outpaces newly listed properties
The Real Estate Board of Greater Vancouver says home sales got off to a strong start in the first month of 2024 but the pace of newly listed properties did not keep up with demand.
The board says January home sales totalled 1,427, a 38.5 per cent increase from the same month last year, though it was still 20.2 per cent below the 10-year seasonal average of 1,788 for the month.
There were 3,788 new listings of detached, attached and apartment properties last month, a 14.5 per cent increase from January 2023, but new listings were 9.1 per cent below the 10-year seasonal average.
The composite benchmark home price in January for Metro Vancouver was $1,942,400, a 7.3 per cent increase from a year earlier and a 1.1 per cent decrease from December.
Andrew Lis, the board’s director of economics and data analytics, says the strong sales figures last month were somewhat surprising after a quiet December, adding that if sellers “don’t step off the sidelines soon, the competition among buyers could tilt the market back into sellers’ territory as the available inventory struggles to keep pace with demand.”
He says the board is forecasting a two to three per cent increase in home prices by the end of the year due to higher demand and too little inventory, but that could be an “overly conservative” estimate based on the January figures.
The Canadian Press
Midday markets: TSX down as Wall Street roars ahead
Canada’s main stock index was lower in early-afternoon trading, weighed down by losses in the base metal, telecommunications and utility sectors, while U.S. stock markets rose across the board.
The S&P/TSX composite index was down 0.42 per cent at 21,028.64.
In New York, the Dow Jones industrial average was up 0.06 per cent at 38,541.19. The S&P 500 index was up 01.07 per cent at 4,958.74, while the Nasdaq composite was up 1.64 per cent at 15,616.95.
The Canadian dollar traded for 74.30 cents US compared with 74.60 cents US on Thursday.
The March crude contract was down 1.99 per cent at US$72.35 per barrel and the March natural gas contract was up three cents at US$2.08 per mmBTU.
The April gold contract was down 0.93 per cent at US$2,051.90 an ounce and the March copper contract was down three cents at US$3.83 a pound.
— The Canadian Press
Business insolvencies rise almost 60% in December
Business insolvencies rose 57.2 per cent in December compared with a year earlier, according to the Office of the Superintendent of Bankruptcy.
For the entire year, business insolvencies were up 41.4 per cent compared with 2022, led by businesses in the accommodation and food services, retail trade, and construction sectors.
The Canadian Association of Insolvency and Restructuring Professionals says the surge shows companies are struggling with pandemic debt and higher interest rates.
The association says weaker consumer spending is also weighing on businesses, as shoppers also deal with higher costs and interest rates.
Consumer insolvencies also rose in December by 18.2 per cent compared with a year earlier, while they rose 23 per cent in 2023 from 2022.
Business insolvencies in the fourth quarter of 2023 were higher than their pre-pandemic level, while consumer insolvencies were somewhat lower in the fourth quarter than the same quarter in 2019.
— The Canadian Press
Meta’s $200 billion market cap surge biggest in stock-market history
Meta Platforms Inc. is poised to become Wall Street’s top comeback kid.
It was only a couple of years back the Facebook owner suffered the single biggest market value destruction in stock-market history. But the company has come a long way since then, on Thursday it dazzled shareholders with yet another impressive quarterly earnings report as the social media giant focuses on cutting back costs and shoring up billions in profits.
The stock rose as much as 21 per cent Friday, poised to add roughly US200 billion to its market capitalization. This would be the biggest single-session market value addition, eclipsing the US$190 billion gains made by Apple Inc. and Amazon.com Inc. in 2022.
Meta, which reduced headcount by 22 per cent in 2023, unveiled plans for a US$50 billion stock buyback, and announced its first quarterly dividend on Thursday, a sign to investors that it has money to spare and a reason for them to stick around.
While the company is making big costs cuts, it continues to spend aggressively on artificial intelligence advancements, namely in generative AI but also on the background technologies to help feed its social media products and power its ad targeting.
—With assistance from Tom Contiliano.
January auto sales jump nearly 15% on ‘pent-up demand’
DesRosiers Automotive Consultants says auto sales jumped 14.9 per cent in January compared with the year before.
Manufacturers reported an estimated 112,862 transactions for the month, up from 98,259 units in January 2023.
Andrew King, managing partner at DesRosiers, says January sales levels were also above the same month from 2019, as pent-up demand since the pandemic continued to overcome high interest rates and economic concerns.
He says inventories remain tight but the market “is moving back into a more normal environment in which demand (rather than just supply) plays a more central role in determining sales volumes.”
The gains in January marked 15 consecutive months of growth following 10.7 per cent year-over-year sales growth in December.
The seasonally adjusted, annual rate for January was 2.06 million, crossing over the two million mark for the first time since February 2020.
— The Canadian Press
Hot jobs report keeps Wall Street in check despite gains for tech giants
Worries about the downside of a too-hot job market are keeping Wall Street in check on Friday, drowning out some big gains for Big Tech stocks.
Leaps for Meta Platforms Inc. and Amazon.com Inc., which are two of the market’s most influential stocks, had the S&P 500 index 0.27 per cent higher in early trading. They also pushed the Nasdaq composite up 0.82 per cent. But the Dow Jones Industrial Average, which has less of an emphasis on tech, 0.31 per cent.
Stocks were feeling pressure from higher yields in the bond market, after a report showed U.S. employers hired many more workers last month than economists expected.
While the strength is a boon for workers and keeps the risk of a recession at bay, the worry is that it could keep upward pressure on inflation. That in turn would mean a longer wait for the United States Federal Reserve to begin cutting interest rates.
Hopes for such cuts, which can relax the pressure on the economy and boost investment prices, have been a major reason the U.S. stock market has surged to record heights. Fed Chair Jerome Powell said earlier this week that it’s unlikely cuts will begin as soon as traders had been hoping.
In Canada, the S&P/TSX composite index was down 0.43 per cent at 21,030.21.
— The Associated Press
U.S. jobs gains blow away estimates
U.S. employers added the most workers in a year and wages jumped in a surprise re-acceleration in the labour market that will likely delay any United States Federal Reserve interest-rate cuts.
Non-farm payrolls surged 353,000 last month following upward revisions to the prior two months, a Bureau of Labor Statistics report showed Friday. The unemployment rate held at 3.7 per cent. Wages accelerated from a month earlier, increasing by the most since March 2022.
Treasury yields surged and S&P 500 index futures pared gains while the dollar rose sharply. Swap contracts tied to Fed meeting dates further reduced the possibility of the U.S. central bank cutting rates as soon as March. Traders also trimmed the total cuts they see for all of 2024.
The blockbuster report highlights a labour market that’s been instrumental in powering consumer spending and keeping the economy on its expansion path. The data raise questions about the gradual downshift in the pace of hiring that had tempered wage growth and helped bring inflation down.
While Fed officials are hoping employment growth will remain strong enough to keep the economic expansion intact, they would like see more moderate pay gains as they await confirmation that inflation will keep slowing to their two per cent target.
“We’re not looking for a weaker labour market,” Fed chair Jerome Powell told reporters Wednesday after the central bank left interest rates unchanged at the highest level in two decades. “We’re looking for inflation to continue to come down as it has been coming down for the last six months.”
Fed officials are also paying close attention to how labour supply and demand dynamics are impacting wage gains. Average hourly earnings increased 0.6 per cent from December and 4.5 per cent from a year ago.
That figure was likely boosted by a decline in hours worked. The survey week for the January jobs report corresponded with a stretch of severe winter weather that roiled economic activity across a number of U.S. regions. It triggered freezing temperatures in Texas, heavy snow in the Midwest and flash flooding in the Northeast.
The number of employees who didn’t work because of bad weather was more than a half million, the most in almost three years.
Imperial Oil hikes dividend 20% despite profit dip
Imperial Oil Ltd. raised its quarterly dividend by 20 per cent as it reported a fourth-quarter profit of $1.37 billion, down from $1.73 billion a year earlier.
The company says shareholders will now receive a quarterly dividend payment of 60 cents per share, up from 50 cents per share.
The increased payment came as Imperial reported its fourth-quarter profit amounted to $2.47 per diluted share for the quarter ended Dec. 31, down from a profit of $2.86 per diluted share a year earlier as it faced lower commodity prices.
Revenue and other income totalled $13.11 billion, down from $14.45 billion in the last three months of 2022.
The company says upstream production in the quarter averaged 452,000 gross oil-equivalent barrels per day, up from 441,000 in the same period a year earlier.
Refinery throughput averaged 407,000 barrels per day compared with 433,000 barrels per day in the fourth quarter of 2022, while capacity utilization was 94 per cent compared with 101 per cent a year earlier.
— The Canadian Press
Meta, Amazon shares surge by $279 billion after cutbacks boost profit
Cutbacks at Meta Platforms Inc. and Amazon.com Inc. paid off in a big way, with both companies reporting better-than-expected earnings that sent stock prices soaring by a combined US$279 billion in premarket trading.
Earnings got a boost from tens of thousands of job cuts since 2022 and strong sales that beat analysts’ estimates during the holiday season. Meta, which reduced headcount by 22 per cent in 2023, unveiled plans for a US$50-billion stock buyback, and announced its first quarterly dividend on Feb. 1, a sign to investors that it has money to spare and a reason for them to stick around.
Amazon posted its best online sales growth since early in the pandemic, helped by quicker shipping times. The company — which initiated its biggest-ever round of corporate job cuts beginning in 2022 that affected about 35,000 people last year — has said more positions will be eliminated in its Prime Video, studios and Twitch livestreaming businesses.
“This new found cost discipline is paying off for investors as these companies were able to prune less productive businesses while still being able to invest some of those savings in the faster growing parts of their business,” said Gil Luria, managing director at D.A. Davidson & Co. “At the same time, these companies have been able to accelerate revenue growth, thus significantly increasing margins.”
The results sent Meta’s shares up as much as 17 per cent in premarket trading before New York exchanges opened. Amazon’s stock rose as much as seven per cent.
Read the full story here.
Stock markets before the opening bell
Stock futures are climbing this morning after robust earnings from tech giants last night. Meta Platforms Inc. soared 17 per cent in premarket trading and Amazon.com Inc. rallied 7.1 per cent after the tech behemoths smashed quarterly profit expectations.
Apple Inc. slipped after its earnings showed weakness in China.
Later this morning, investors will be watching the monthly United States jobs report for confirmation of further cooling in the labour market that might encourage policy easing by the U.S. Federal Reserve.
“Any move closer to four per cent could see markets changing bets on when Fed cuts could begin,” economists at Rand Merchant Bank in Johannesburg said in a note to clients.
Investors will continue to closely track developments around U.S. regional banks, as an index for the sector heads for its worst week since the fallout from the banking crisis last May. New York Community Bancorp has plunged 45 per cent since shocking investors Wednesday by reducing its dividend, posting a quarterly loss and ramping up loan-loss provisions for exposure to commercial real estate.
Canada’s TSX closed up almost 100 points yesterday, despite weakness in energy stocks.
— Bloomberg and The Canadian Press
What to watch today
- Americans get an update on their job market today. Economists forecast U.S. employers added 185,000 jobs in January.
- More earnings from oil majors are out today, with Imperial Oil Ltd., Exxon Mobil Corp. and Chevron Corp. all on deck.
Need a refresher on yesterday’s top headlines? Get caught up here.
Additional reporting by The Canadian Press, Associated Press and Bloomberg
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