Wednesday’s trading started out on a tepid foot, with most investors fearing Janet Yellen and the Fed would remain aggressive with this year’s plan to increase interest rates. Once Yellen told investors she and the FOMC were dialing back their rate-hike schedule for 2016, though, investors celebrated with a 0.56% gain for the market. The S&P 500 finished the session at 2027.22.
The rally didn’t include every single stock out there, however. Mallinckrodt PLC (NYSE:MNK), LinkedIn Corp (NYSE:LNKD) and Caesars Entertainment Corp (NASDAQ:CZR) couldn’t get on board the bullish train.
LinkedIn Corp (LNKD)
Already deep underwater thanks to two major setbacks in just the past year, LinkedIn renewed its woes today, with LNKD shares losing more than 5% of their value following a key downgrade.
Morgan Stanley did the deed today, lowering its opinion on LNKD from “overweight” to “equal-weight,” while lowering its target price on LinkedIn from $190 to $125.
Analyst Brian Nowak noted the downgrade:
“We have previously been bullish on LNKD’s platform monetization opportunity driven by: 1) multiple years of assumed strong Talent Solutions (TS) growth as more large enterprises and SMBs adopt the platform and 2) budding new monetization opportunities like B2B advertising, Lynda, and Sales Navigator. But 4Q:15 results, 2016 guidance, decelerating large enterprise customer growth, and recent management commentary on strategic investments make us believe we have overestimated LNKD’s ability to grow its platform and underestimated the investment needed to grow.”
LNKD is now down 51% year-to-date, and once again nearing new multi-year lows.
Mallinckrodt PLC (MNK)
For the second day in a row, specialty pharmaceutical company Mallinckrodt saw its shares lose a lot of ground, though today’s -6% tumble was less punishing than the 14% setback MNK suffered on Tuesday.
The reason for the weakness was the same in both cases.
Infamous (and vocal) short-seller Andrew Left, of Citron Research, put MNK in his sights yesterday, suggesting Mallinckrodt makes Valeant Pharmaceuticals Intl Inc (NYSE:VRX) “look like a bunch of choirboys” in terms of questionable business practices.
Fanning the bearish flames that have burned MNK shares over the past couple of days, the Center for Disease Control also posted new opioid prescription guidelines aimed at reducing abuse. Although guidelines aren’t outright requirements, the suggestions take dead aim at one of Mallinckrodt’s high-margin businesses.
Caesars Entertainment Corp (CZR)
Last but not least, just when it looked like Caesars Entertainment might have the bulk of its money battles behind it, a little more due diligence from a small army of examiners reveals the party isn’t over yet for CZR shareholders.
It’s a complicated story; here’s a simplified version.
Last year, before any official bankruptcy filing from Caesars Entertainment Operating Company materialized, Apollo Global Management and TPG Capital were keeping the struggling casino outfit afloat — fiscally — to buy time so they could take beneficial control over the company’s better assets, leaving it ill-equipped to service its own debt.
In other words, TPG Capital and Apollo Global Management acted unfairly to the company’s creditors and shareholders.
The end result?
Caesars Entertainment, along with the two private equity companies in question, may end up owing damages of up to $5.1 billion to compensate investors who lost more money from the back-door dealings.
CZR closed down more than 13% on Wednesday.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.