The possibility that Britain may remain part of the European Union after all fanned the bullish flames early on Monday morning, though they cooled somewhat later in the session. All told, the S&P 500‘s close of 2083.25 was only 0.58% better than Friday’s close, though the index had been up as much as 1.4% earlier in the day.
Here’s the deal.
Cypress Semiconductor Corporation (CY)
Most of the time a corporate fund-raising — be it via the sale of equity or debt — doesn’t come as a complete surprise to the market. The announcement of such a fund-raiser from Cypress Semiconductor on Monday, however, caught investors a bit off guard, sending CY shares a bit more than 4% lower as a result.
All told, Cypress Semiconductor Corporation is aiming to raise $250 million by issuing senior convertible debt due in 2022. Much of the money will be used to repay debt, though between the sale of the notes and use of a credit facility, the fundraiser will also assist the recently announced acquisition of Broadcom’s Internet of Things business.
Regardless of the purpose, the issuance of debt poses a dilution risk to existing CY shareholders.
Eagle Pharmaceuticals Inc (EGRX)
Eagle Pharmaceuticals shares plunged almost 9% today following a major downgrade.
Mizuho did the deed, citing a challenging environment from hospitals that have already made the switch from a blood cancer drug Treanda to Bendeka, made jointly by EGRX and Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA). Eagle Pharmaceuticals doesn’t have as many big catalysts like this one in the pipeline; therefore, the stock has already realized the bulk of any upside potential.
Mizuho analyst Irina Koffler noted:
“The Treanda/Bendeka switch is a genuine success story for Eagle, but its other hospital launches like Ryanodex and Docetaxel have been more challenging. We are reminded that cost is still critical within this setting, and this insight has influenced our longer-term outlook on Bendeka and the rest of Eagle’s portfolio.”
Energy Transfer Equity LP (ETE)
Last but not least, anyone who thought the drama between Energy Transfer Equity and Williams Companies Inc (NYSE:WMB) was over was sorely mistaken.
The Q&D version: Two years ago, Energy Transfer Equity was ready, willing and able to acquire Williams Companies, scaling up and splitting costs. But in the meantime, an ongoing deterioration in the price of crude oil has made the pairing less and less attractive.
In fact, things have become so bleak that ETE chairman Kelcy Warren has decided he’d rather not plow into what has since become a bad deal. Williams Companies, however, argues that a deal’s a deal, good or bad.
The matter has become so contentious that the two parties are now arguing the issue in court, even as both sides continue to work towards a merger. At the heart of the ETE legal argument is whether the planned pairing would qualify for tax-free treatment, as required within the deal’s terms.
The court case is expected to end by Tuesday, but today’s 6% slide from ETE doesn’t bode well for the trial’s outcome.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.