Thursday's Headlines: GameStop Announces 4-to-1 Stock Split
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Nautilus (NLS) 9.3%
Evolent Health (EVH) 4.5%
Bumble (BMBL) 3.6%
Lemonade (LMND) 2.8%
Casey's (CASY) 2.8%
Moving Down ⬇️
Baozun (BZUN) -8.1%
nCino (NCNO) -7.7%
Upstart Holdings (UPST) -6.7%
Farfetch (FTCH) -5.8%
DraftKings (DKNG) -4.6%
Here are the stories that you need to know ahead of market-open today, Thursday, the 7th of July.
GameStop Announces 4-to-1 Stock Split 🎮
Shares of GameStop are up close to 12% in pre-market trading today after its board approved a 4-to-1 stock split.
This means that anyone who is a GameStop investor by the market close on July 18th will automatically get three additional shares for each share they own. However, as with all stock splits, it’s important to remember that the nominal value of the shares is also split.
So, if we were to take GameStop’s closing price of $117.43 per share last night, a 4-to-1 stock split would mean that an investor with a single share of GameStop will now have four shares, but each will be worth about $29.35.
During a stock split, the underlying value of the company never changes, but it makes the company look more affordable to small investors. This can boost demand and drive up the stock price for a short time following the split.
This is particularly relevant for a company like GameStop, who has attracted a large following of retail investors since its infamous short squeeze in early 2021. With its stock down more than 20% since the start of the year, it’s possible that management sees a stock split like this as an easy way to boost the share price, which will now look more affordable.
Merck closes in on deal for cancer biotech 🤝
Merck & Co. is in advanced talks to acquire Seagen Inc. according to a report in the Wall Street Journal. A deal, which could be worth roughly $40 billion, could be finalized in the next few weeks.
Seagen is a pioneer in a new class of cancer therapies called ADCs — antibody drug conjugates — which attack tumors with toxins while avoiding healthy cells. The therapies are seen as a huge step forward in the treatment of cancer, maximizing the benefits while minimizing the harmful side effects associated with traditional methods.
Seagen’s Adcetris, a cancer medicine used to treat adults with certain lymphomas, brought in $1.4 billion last year, while Padcev, a drug for cancers of the bladder, has also seen rising sales. It is believed the companies are discussing a price of above $200 per share, with Merck keen to make the announcement before their quarterly earnings report on July 28.
Seagen’s stock closed at $175.13 last night. A deal at $200 per share would represent a 14.2% premium to the current share price, however, the stock has risen dramatically since rumors of the acquisition first emerged earlier this month. It is expected that any deal would face regulatory scrutiny.
Merck is looking to diversify its lineup of cancer therapies, which is currently led by Keytrude, an immunotherapy that had $17.2 billion in sales last year. Patents on Keytruda are set to expire in 2028, at which point it is expected to make up around 40% of the company’s revenue. Merck was reportedly interested in acquiring Immunomedics, makers of the ADC Trodelvy, in 2020, but lost out to Gilead Sciences, who paid $21 billion for the company.
The news comes at a time when much M&A activity has been put on hold due to market turmoil and the rising cost of borrowing. Last week, Kohl’s terminated its proposed sale to Franchise Group, while Walgreens Boots Alliance has abandoned plans to sell UK pharmacy Boots, with no parties making a substantial offer.
Rivian Ramps up Production 🚚
Electric vehicle maker Rivian was up 10% yesterday after it announced it had delivered 4,467 trucks in its second quarter. This was nearly four times that of the previous period. Investors were also buoyed by management, who stated it expects to hit its annual production target of 25,000 units after production jumped 72% in Q2.
Now while this sounds rosy, we must remember that back in March, the company slashed this annual production target in half from 50,000 units. While its Illinois-based factory has the capacity to produce 150,000 vehicles a year — the company plans to expand this to 200,000 by 2023 — Rivian has been dogged by supply-chain issues since its November IPO, and the stock has suffered.
Having gone public to much fanfare and an eye-watering valuation, Rivian’s short tenure as a public company has seen it shed almost 80% of its value. Disappointing production figures, as well as severe valuation compression as the hype cycle quickly subsided, have left early investors holding the bag.
Rivian currently produces three different types of electric vehicles: the R1S sport utility vehicle, the R1T pickup truck, and perhaps of greatest interest to investors, the EDV-700 delivery van designed for Amazon, which owns 18% of the company. With a large backlog of orders, plans to open a new production facility in Atlanta, as well as producing a new, smaller delivery van, Rivian is bursting with potential. However, it is clearly having some serious teething problems as it faces the realities of life as a public company. Yesterday’s good news may hopefully act as a catalyst for good things to come.