Inspired by a surprisingly strong showing from the most centrist establishment presidential candidate in France’s upcoming election, traders found plenty of reason to step back into stocks today. The S&P 500 ended the day at 2,374.15, up 1.08%, leaving behind a big gap en route to its best close since Mar. 21.
Not every stock was celebrating the beginning of the new trading week, however. Wayfair Inc (NYSE:W), Sprouts Farmers Market Inc (NASDAQ:SFM) and Becton Dickinson and Co (NYSE:BDX) all found a way to skip the rally and head lower instead. Here’s the deal.
Becton Dickinson and Co (BDX)
It wasn’t the premise of the Becton Dickinson acquisition of peer and rival medical technology company C R Bard Inc (NYSE:BCR) that spooked BDX shareholders today — the two companies should meld together quite nicely. At the heart of the 4.4% setback BDX suffered on Monday is the price Becton Dickinson paid for Bard shares.
The offer of $317 per share of BCR, $222.93 of which is to be paid in cash, was a 25% premium to C R Bard’s closing price on Friday. That translated into a valuation of $24 billion for a company that turned $3.71 billion worth of sales into a profit of $528.8 million last year. Becton Dickinson is already $9 billion in long-term debt, and has less than $1 billion in the bank.
That means it’s going to have to take on more debt to get the deal done. But, after a string of other pricey acquisitions, BDX shareholders are understandably concerned the company may be taking on more than it can handle.
Sprouts Farmers Market Inc (SFM)
What’s good for Whole Foods Market, Inc. (NASDAQ:WFM) is bad for rival health-friendly grocer Sprouts Farmers Market. At least that’s the way the market saw things on Monday, when WFM shares jumped 3% on rumors that grocery chain Albertson’s was mulling an acquisition of the company. It’s bad for SFM shares simply because some Sprouts Farmers Market were hoping their company would be the one first targeted by a suitor, catapulting the stock upward as a result.
The headwinds organic grocery stores have been facing is anything but a secret. As traditional grocers have added more organic and whole foods to their aisles and consumers have clamped down on their grocery spending, these specialty grocers have floundered.
Whole Foods Market has been the poster child for that struggle, leading some to think it was largely unworthy of a purchase, where as Sprouts would be easy to salvage. Today’s whispers, however, suggest otherwise.
SFM ended the day down 3.3%.
Wayfair Inc (W)
Last but not least, already positioned for a setback after renowned (and highly vocal) short seller Andrew Left compared online furniture retailer Wayfair to a ponzi scheme, news that Amazon.com, Inc. (NASDAQ:AMZN) was also mulling an entry into the furniture market put an even bigger target on Wayfair’s back. It’s surprising W shares only fell 5.4%.
Andrew Left, of Citron Research fame, reiterated his concerns about the company on Wednesday of last week, pointing out that the company’s accounts payable makes up more than half of the company’s total assets. The implication is that Wayfair is nowhere near as liquid as many believe, and is teetering dangerously close to insolvency.
Then today, an Amazon bomb was dropped in W shareholders. Word spread that the e-commerce giant was considering adding furniture to its menu, which would cut into a huge piece of Wayfair’s business. Amazon has not confirmed it, but the premise came from a credible source.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.