Despite the bullish finish to last week, the buyers didn’t pick up where they left off last week when trading resumed today. Hesitant to clear a key technical resistance level, the S&P 500 peeled back to a close of 2066.13, down 0.32% for the session.
And for Alaska Air Group, Inc. (NYSE:ALK), Brocade Communications Systems, Inc. (NASDAQ:BRCD) and Petroleo Brasileiro SA Petrobras (ADR) (NYSE:PBR) it was even worse. These three names led today’s bearish charge.
Here’s what investors need to know.
Alaska Air Group, Inc. (ALK)
On the surface, it looks like a good strategic move. Buying a competitor increases scale, and greater scale means wider profit margins. Alaska Air Group shareholders know things aren’t that simple, however, and made it clear they weren’t happy with the price the company paid to acquire Virgin America Inc (NASDAQ:VA) by sending ALK shares down nearly 4% on Monday.
All told, Alaska Air is paying $57 per share of VA — a total of a little more than $2 billion — to buy the rival airline in its entirety. That price, however, is 47% higher than Friday’s closing price for Virgin America shares, and more than 80% above the stock’s price when rumors of the buyout first surfaced.
Despite the lofty price paid for VA, some observers say the deal makes Alaska Air Group a potent airline in all the right ways and in all the right places.
Brocade Communications Systems, Inc. (BRCD)
Alaska Air Group wasn’t the only name to make an expensive, ill-advised acquisition on Monday. Brocade Communications Systems announced a deal of its own, sending BRCD shares down more than 13% lower.
The target was networking technology outfit Ruckus Wireless Inc (NYSE:RKUS). Brocade paid $14.43 per share of RKUS — mostly cash — which was a hefty 44% stronger than Friday’s closing price for Ruckus, setting BRCD up for a tumble. All told, Ruckus Wireless generated $373.4 million worth of revenue over the course of the past twelve months, and only turned $4.7 million of that into net income.
Petroleo Brasileiro SA Petrobras (ADR) (PBR)
Last but not least, just when it looked as if things were looking up for beleaguered Brazilian oil company Petroleo Brasileiro SA Petrobras — better known as just Petrobras — something comes along and pulls the rug out from underneath PBR shares … again.
Today’s prod for a pullback of nearly 10% from PBR? As rough as things have been for Brazil’s economy of late, they’re apt to get worse before they get better. Rather than “only” shrinking 3.66% this year, economists believe the Latin American country’s economy will now slump 3.73% in 2016. Underscoring the impact that such an economic headwind might bolster for Petrobras, the country’s currency was also upended on Monday.
PBR wasn’t the only Brazilian commodity stock to get hit especially hard today. Vale SA (ADR) (NYSE:VALE) was also in the red, to the tune of roughly 6%.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.
