Already overbought and ripe for some profit taking, a disappointing consumer confidence reading for the month of May easily nudged the vulnerable market a little lower on Tuesday. The S&P 500 ended the session at 2096.95, down 0.10%.
It could have been a worse start to the new trading week though, and for shareholders of Banco Bradesco SA (ADR) (NYSE:BBD), Coca-Cola Enterprises Inc (NYSE:CCE) and Great Plains Energy Incorporated (NYSE:GXP), it was.
Here’s what went wrong for these three names on Tuesday.
Banco Bradesco SA (BBD)
As if Brazilian bank Banco Bradesco needed anything else to deal with, it got it today, sending BBD shares lower by more than 5%.
Brazil, to put it modestly, is in shambles. Already deep into a recession stemming from tepid commodity prices (the country’s proverbial bread and butter), the nation has been rocked by political scandal that ultimately led to the impeachment and suspension of President Dilma Rousseff.
It has been a difficult environment to do any business in, but the sheer uncertainty of what the future holds as well as the placement of several new government officials has been particularly tough on banks.
Fanning the flames of worry is today’s news that the country’s currency, the real, continues to lose its value. The country’s currency is now back to its lowest level in a month versus the U.S. dollar, making it difficult to secure overseas financing as well as creating an inflationary environment for Brazil’s consumers.
Eventually, banking will be impacted.
Coca-Cola Enterprises Inc (CCE)
In the grand scheme of things, something like today’s 24% plunge from newly formed Coca-Cola Enterprises stock wasn’t entirely unexpected. On the other hand, CCE shareholders are still starting out in the hole to the tune of 24%.
It had more to do with math than a sudden perceived loss of value. Coca-Cola Enterprises — born out of a union of three different bottlers — fell well below its issue price as calculated by the three-way merger. Investors need not worry too much, however.
The drop from near $51 to today’s price around $39 mostly reflects the one-time special dividend payment of $14.50 CCE owners will be receiving as part of the deal.
Great Plains Energy Incorporated (GXP)
Last but not least, Westar Energy Inc (NYSE:WR) are certainly loving the deal, but Great Plains Energy shareholders … not so much.
This morning, Great Plains Energy unexpectedly announced it would be acquiring peer and rival Westar Energy in a deal that valued Westar at $8.6 billion. If the deal goes through, WR owners will receive $51 worth of cash and $9 worth of GXP stock for every one share of Westar Energy they own.
Great Plains Energy cited the potential for cost-saving synergies as the motivation for the proposed pairing, but the near-6% selloff GXP shares suffered today implies investors aren’t entirely sure Westar Energy is worth it … particularly given the amount of cash the deal requires, and the amount of debt Great Plains Energy is taking on to make it happen.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.