Always looking for new ways to keep our readers updated, we decided to start sending our "The Week That Was" feature out on Friday afternoons. Not intended to be an exhaustive recap, TWTS simply discusses the week's new issues and several other names to help you review recent activity and get a jump on next week before you head out for the weekend.
Speaking of weekends, have a great one!
There was a lot of news to report this week, but unlike last week, there were no bankruptcies (a sigh of relief). There were a total of six new issues announced for the week. Three were mandatories - Cloud Peak Energy, Kindred Healthcare, and William Lyon Homes - and one was a financial firm - Redwood Trust. The Cloud Peak Energy deal was pulled due to lack of demand and as we generally don't cover mandatory and financial new issues, we won't say anymore about those.
The first of the two new issues we commented on was LGI Homes (LGIH) hillsi.de/14Yrug8, a small homebuilder with communities concentrated in the south and southwest. The company is growing rapidly and burning cash to fund inventory expansion. The proceeds from the $75mm convertible deal will bolster cash balances to just over $100mm, but with cash burn of $161mm over the last twelve months, LGHI may be looking for additional capital in the not so distant future. The new convertible received a HOCS slash line of 58 Overall / 61 Growth / 52 Safety. This is a subdued score for a new issue and is being penalized for the company's small market cap and the elevated leverage (6.7x).
The second new issue we commented on was Lexicon Pharmaceuticals (LXRX) hillsi.de/1yzUFza, a start-up biotech with a pipeline but no marketed products. The company is burning through about $100mm annually. The $75mm convertible deal together with a $50mm follow on stock offering, will keep the company flush for a while longer. The new convertible received a HOCS slash line of 48 Overall / 56 Growth / 33 Safety: a low score for a new issue, reflecting the speculative nature of the company.
One active name this week was Finisar's 0.50% of 2033. The volatile optical equipment maker continues to rally from its mid-October lows, but is still far below its spring highs. As such, the low-90's price point makes for an attractive entry spot despite the mediocre optics (no pun intended) and high premium. At a recent level of 94 versus 17.47, the bond's slash line is 60/55/71, with the price point and premium reflected in the safety bias.
Good news was rampant this week for solar stocks. At the macro level, oil found a bottom and the China interest rate cut powered Chinese solar stocks Jinko Solar (JKS), Trina Solar (TSL) and Yingli (YGE). Sun Edison (SUNE) and its subsidiary TerraForm Power (TERP) gapped up after announcing that it would acquire First Wind, ironically a wind power company, to make Sun Edison one of the world’s largest renewable energy companies. SUNE is trading close to $23/share after closing at $16.61 last week. SolarCity got a boost when it announced a deal to expand its relationship with Wal-Mart to build solar systems combined with energy storage at store sites. SolarCity was up almost 3% after the announcement. Overall, the Guggenheim Solar ETF (TAN) was up about 8.5% for the week.
In other news, Alon USA Energy (ALJ) pulled the plug on a previously announced senior notes offering and the planned acquisition of the Krotz Spring Refinery from Alon Energy......... Salesforce.com reported 3Q14 earnings Wednesday after the close. While earnings beat consensus, management issued 4Q14 guidance which was below consensus estimates........ Illlumina (ILMN) signed an exclusive agreement with French company bioMerieux to co-develop applications used in microbiology sequencing technologies...... Intel (INTC) announced a 6.7% dividend increase on November 20th at its analyst day.... Jinko Solar (JKS) announced earnings November 20th. EPS beat consensus but revenue was light..... Mentor Graphics (MENT) announced earnings on Thursday. Management's 4Q14 guidance was below consensus estimates..... MGM Resorts (MGM) announced plans to issue $1.15bn of debt with proceeds to be used for repayment of 2015 maturities and the funding of development costs for Maryland and Massachusetts projects.
Companies announcing earnings for next week include: NUAN, TSL, PANW, QIHU, WDAY, VNEM for Monday, TIVO for Tuesday, and CTRP for Wednesday.