Stock index futures moved lower just before the market open on Tuesday morning, spurred by lawmakers' failure to make progress in discussions about raising the debt ceiling. Declines were relatively modest, with the Nasdaq Composite leading the way lower with a drop of about a third of a percent.
Even with the downbeat mood on Wall Street, some stocks managed to post solid gains. Yelp (YELP 2.40%) became the subject of speculation about a potential sale of the company, while PacWest Bancorp (PACW) continued to gain ground as sentiment concerning regional banks kept improving. Read on to get the details about both of these stocks.
Could Yelp be up for sale?
Shares of Yelp were higher by 11% in premarket trading Tuesday morning. The move came amid calls for the review website to look at ways to enhance shareholder value.
TCS Capital Management has a stake of more than 4% of Yelp's outstanding shares, making it one of the company's biggest shareholders. TCS reportedly sent a letter to the board of directors of Yelp that argued that the current share price was dramatically below the company's true value, which the activist investment specialist argued could fetch $70 per share or more in a sale.
There are a couple of ways that Yelp could realize this value, in TCS Capital's view. An outright sale could be possible, with reports suggesting that TCS itself might lead a group of investors interested in a buyout. Alternatively, a tax-free stock merger with a company like Angi might also help to unlock shareholder value and get Yelp's share price moving in the right direction.
Yelp's stock has fallen over the past decade, and the share price hasn't really reflected the periods of growth in the broader economy over that time span. It's understandable for TCS Capital and others to be impatient with how Yelp has performed as an investment, but it's unclear whether the activist investor's projections are wishful thinking or whether someone might actually come forward with a buyout bid.
PacWest keeps gaining ground
Elsewhere, shares of PacWest Bancorp rose 15% in premarket trading. That move higher added to the nearly 20% rise for the regional bank's stock on Monday and reflected rising optimism about the bank's ability to weather the storm that has hit the industry in recent months.
Monday's gains stemmed from PacWest's decision to sell off a portion of its loan portfolio in order to raise cash. PacWest successfully sold $2.7 billion in real estate construction loans, according to a filing with the U.S. Securities and Exchange Commission. Shareholders welcomed the move because it responded to PacWest's earlier announcement that deposits had fallen by nearly 10%.
Analysts were pleased with the move. D. A. Davidson's pros boosted their price target on PacWest stock from $3 per share to $8. That spurred the latest run higher for the bank's shares.
More broadly, regional bank stocks have been on the rise as bargain-hunting value investors try to predict whether there will be any more high-profile bank failures. Interest rates remain at relatively high levels, but they've stopped rising as quickly as they were throughout much of 2022. That won't necessarily take away the challenge of retaining deposits, as customers at banks offering rock-bottom rates on savings can move their money to money market mutual funds or even online banking competitors to get much higher interest payments on their account balances. However, given that many regional bank stocks were priced as though they would fail, merely seeing modest pressure on earnings is an improvement.
