After the Shanghai Composite logged an 8.5% loss in Monday’s trading of Chinese stocks, not much else mattered for U.S. markets. In retrospect, it’s a small miracle the domestic market didn’t close any lower than it did. The S&P 500 finished the day at 2,067.64, down 0.58%.
It was much worse for investors who happened to own Mylan NV (NASDAQ:MYL), GrubHub Inc. (NYSE:GRUB) or Twitter Inc. (NYSE:TWTR). These three names were among the worst of the worst performers on Monday.
Mylan (MYL)
The good news: The game of cat-and-mouse that biopharma drug company Mylan was playing with suitor Teva Pharmaceutical Industries Ltd (NYSE:TEVA) over the terms of any buyout is now over.
The bad news: The game ended because Teva Pharmaceutical ended its bid for MYL and instead struck a deal to acquire a much more receptive Allergan PLC (NYSE:AGN). Disappointed MYL shareholders sent MYL shares down more than 14%, recognizing that playing hard to get may have cost them the best offer they’re going to get for a long while.
With Teva Pharmaceutical withdrawing its bid, Mylan said it would continue with its efforts to acquire Perrigo Company (NYSE:PRGO). But, in that the bid for Perrigo was going to be a stock-heavy deal, the 14% plunge in the value of MYL on Monday now means Mylan will have to dilute its current float more than had been initially planned. Perrigo shareholders may be less interested in such a deal as a result.
GrubHub (GRUB)
Restaurant delivery outfit GrubHub saw its stock fall more than 8% on Monday after a downgrade from a key Wall Street name. Cowen & Co. lowered its rating on GRUB from an “outperform” to a “market perform,” and simultaneously lowered its price target on GRUB from $39 to $30.
Cowen analyst Kevin Kopelman observed:
“In GrubHub’s Manhattan stronghold, 40% of high volume customers (‘whales’) have begun shifting some orders to new competitors, some of whom only launched in the past few months. In the Bay Area, GrubHub captured just 20% of online share (Yelp leads), with new entrants experiencing hyper growth.”
Kopelman also added that Cowen is increasingly concerned GrubHub’s first mover advantage is deteriorating against a backdrop of different food delivery business models, saying:
“US food delivery startups have received unprecedented capital in 2015, raising $500M YTD to pursue investment-heavy models including building courier networks and developing proprietary, gourmet menus, allowing differentiated and superior user experience. Notable players include Postmates, DoorDash, and Caviar in restaurant delivery; Munchery, Sprig, and Maple in 1P food; and Blue Apron and Plated in ready- to-cook meal subscription.”
Twitter (TWTR)
With earnings due from the company after the close on Tuesday, investors are being forced to make tough decisions regarding their Twitter positions. Do they hold TWTR through what could be a vindicating earnings report, or do they dump TWTR before reporting catastrophic results? Most opted for the latter, logging a second straight day of significant losses.
Of course, the media may have helped to fuel the worry even more than China’s meltdown did.
Already in a shadow of doubt from Wall Street’s analysts, a USA Today commentary from John Shinal plainly opined that “Much of Twitter’s opportunity already has been lost.” It was just another sandbag piled on an already overburdened stock, pulling it more than 2% lower.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
