There's been plenty of volatility in the stock market lately, so many investors seem happy when they get an opportunity to take a break. Things appeared to be relatively quiet Wednesday morning, as stock index futures were close to unchanged across the board. Many market participants are waiting for more economic data, and the imminent beginning of earnings season next week will add a new perspective for those looking for direction in the stock market.
As a member of the Dow Jones Industrial Average, Johnson & Johnson (JNJ -0.46%) gets a lot of attention from the investing community, and so a notable rise in its share price attracted notice on Wall Street early Wednesday. However, shares of fintech disruptor DLocal (DLO 0.56%) fell sharply after the company reported financial results that failed to live up to expectations.
J&J looks to move on from litigation
Shares of Johnson & Johnson moved higher by nearly 3% in premarket trading Wednesday morning. The healthcare giant took a big step toward trying to resolve potential liability that has been a thorn in shareholders' side for quite a while now.
Johnson & Johnson announced late Tuesday afternoon that its LTL Management subsidiary had refiled a petition for Chapter 11 bankruptcy protection. In doing so, LTL intends to seek approval for a reorganization plan that would resolve all claims related to allegations about its cosmetic talc products.
J&J has been down this road before, but it significantly upped its settlement offer. Specifically, Johnson & Johnson agreed to contribute up to $8.9 billion, payable over a 25-year period, to resolve all current and future claims related to talc products. That's up from just $2 billion when LTL first filed for bankruptcy protection in October 2021. LTL believes that this plan has a much greater chance of success, as it has secured commitments from more than 60,000 potential plaintiffs in support of reaching a settlement.
It's unclear whether Johnson & Johnson's legal argument supporting LTL's second bankruptcy filing will answer the concerns that the U.S. Third Circuit Court of Appeals raised in dismissing the original bankruptcy case, but the company seems hopeful that it has addressed those concerns. In any event, shareholders are pleased at the prospect of getting this potentially costly and lengthy process of addressing talc claims behind them, prompting the rise in the stock price today.
DLocal heads down
Shares of DLocal were lower by 10% in premarket trading. The Uruguay-based payments company reported fourth-quarter financial results that showed continued growth but at a slower pace than many investors had wanted to see.
On their face, DLocal's numbers looked strong. Payment volume for the full year in 2022 climbed 75% year over year to $10.6 billion, and the company brought in $419 million in revenue, up 72% from 2021 levels. DLocal boasted a net revenue retention rate of 165%, showing that existing customers are increasingly committed to using the company's payments platform.
DLocal has high hopes for expanding beyond its home territory in Latin America to serve other geographical areas. Revenue from sources in Africa and Asia quadrupled from 2021 levels and now represent close to a fifth of DLocal's overall worldwide sales. Moreover, the company expects 2023 to be strong as it keeps its upward momentum and scales up its business model.
However, the numbers didn't seem to allay concerns among investors, particularly those raised by well-known short-seller researcher Muddy Waters in November. Although the stock has risen substantially from the big loss following the release of the Muddy Waters report, it hasn't recovered fully, and it could take longer for DLocal to restore shareholder confidence entirely.
