Here’s our look at some of the investment stories that investors in the US are focused on right now. The benchmark S&P 500 index was off by 1% over the past five trading sessions, but still up by 8.08% over the month. It seems as if there is some level of optimism creeping back into the US market.
Bed Bath & Beyond
This was the short term meme trade of the month, up from about $4.85 at the end of July, stock on BBBY broke 26 bucks in the middle of August, but has since fallen like a rock.
There has been a drastic change in retail sentiment around Bed Bath & Beyond following news that activist investor Ryan Cohen has filed for a proposed sale of his stake in the struggling home goods retailer. CFD broker Capital.com’s own data also shows a shift in the mindset of meme stock traders who now appear to be less inclined to support failing companies at any cost.
Unlike the frenzy of the past— with the likes of GME and AMC— BBBY traders seem more inclined to follow institutional wisdom than to blindly battle for companies with poor fundamentals. Could this be a turning point for meme stock traders? Perhaps traders have learnt from the past frenzies that while short term gains can be impressive, sentiment in short squeezes can reverse just as quickly, so this time around they may be being more cautious.
The APE split
Closely followed cinema stock AMC Entertainment Holdings has initiated a special dividend strategy, called the APE split. It is attracting plenty of attention from investors; shareholders will receive one preferred equity unity (to trade under the ticker NYSE:APE) for each AMC share they own. APE is scheduled to begin trading in New York today.
There have been mixed views on APE: AMC stock soared initially on the news, up by more than 30%, but has since dropped. Influential Twitter commentator The Last Bear has, however, come out in favour of the move.
🚨🚨 $APE is for Accretion 🚨🚨
1. The $AMC / APE split is a financial and strategic no-brainer. AMC shareholders should welcome it. 🧵
— TheLastBearStanding (@T_L_B_S_) August 12, 2022
The APE issue looks to be an attempt to get around market rules which prohibit AMC from issuing more shares itself to buy back an increasingly expensive pile of debt. Management has been pretty up front with shareholders on this: the APE listing helps it to tap appetite among the company’s massive US and international retail shareholder base, which is easier, it seems, than going back to its existing bond holders for a restructure of finance. Let’s see how APE behaves this week.
Target Corp
US big box retailer Target Corp posted some less than impressive second quarter numbers, with profits down over 90%. This follows a shocker of a Q1 report which also saw profits drop, by 40%. While Target was seen as a winner in terms of changes in shopping habits during the pandemic, it seems as if shoppers are changing their ways once again.
But Wall Street analysts are bullish on Target stock, as they see the company being able to profit from falling fuel prices in the US, plus cleaning up its act in terms of inventory. Target is seen a doing a good job of holding onto its customers, and analysts have cautioned investors, telling them the company cannot be expected to match its immediate post-pandemic growth figures, especially with a looming recession.
Target stock is up over 5% still on the 30 day picture, but a long way off the $200 it was trading at six months ago. Pro investors seem to like its prospects. One to watch more closely.
Birkenstock IPO?
Investor interest is picking up over the potential for an IPO of L Catterton, the LVMH-backed private equity fund which holds a range of interesting luxury brands, including sandals maker Birkenstock. L Catterton is known to have retained some Wall Street banks to test the waters for an IPO.
The global IPO market is looking a little soft right now, but this one might attract a lot of investor attention if it can be priced correctly. Investors have had their fingers burned in 2020-21 with some incredibly over-priced offerings on Wall Street, but more realistically priced IPOs have paid off.
Founded in 1989, L Catterton has made more than 250 investments into the consumer brands sector. It has approximately $30bn in assets under management and recently finalised a deal to sell portfolio company OWNDAYS to Lenskart. While we don’t yet have details on what the IPO will look like (e.g. L Catterton could IPO Birkenstock on its own), it could be very significant if it comes off. Anyone with more information is encouraged to drop us a line!
