Yesterday's market moves
Dow (DJINDICES:^DJI): 15,639, +24 (+15%)
Dow (DJINDICES:^DJI): 15,639, +24 (+15%)
S&P 500: 1,768, +6 (+0.36%)
It's official -- the Biebs has officially been dethroned on Twitter as the world's most followed human (don't mess with Katy Perry). But the real Twitter news was on Wall Street. The Dow rose 24 points on a bunch of market drama, from the Twitter IPO and the Blackberry debacle, to more corporate earnings and an insider trading case.
1. Twitter changes IPO price
The price is right -- well, at least it is now. The social network for impatient people, Twitter, revised its IPO pricing information Monday afternoon: It's now offering 70 million shares from between $23 and $25 per share when it goes public in a few weeks, whereas it had previously announced a price of $17 to $20 per share.
So that gives Twitter a 40-character-worthy $13.6 billion valuation by market capitalization. For the sake of comparison, that's still well below Facebook's debut $81.2 billion valuation, but it surpasses Groupon's $12.9 billion valuation. Twitter's movin' on up.
Twitter is trying not to pull a Facebook. After Zuckerberg and Co. raised Facebook's IPO price before its trading debut in May 2012, the market disagreed, sending the stock price down by half over the next few months, which took the 'Book a whole year to recover. Twitter and the investment banks running its IPO show think this time they've got it right.
2. BlackBerry replaces CEO
Nobody's wants you, BlackBerry (NYSE:BB), and it makes investors sad. Canada-based BlackBerry announced Monday that its largest shareholder, Fairfax Financial Holdings, will not be purchasing the entire company. Instead, it's injecting $1 billion in debt to the company and replacing the CEO, Thorsten Heins.
Heins was brought in to BlackBerry from across the pond in Germany, where he was a top Siemens executive. After taking over in January of 2012, Heins tied his success to that of the new Z10 smartphone, which is pretty much a BlackBerry dressed up as an iPhone 4. Consumers gave the phone a thumbs-down, and the company officially put itself up for sale, seeking a larger buyer to take it over and salvage the immense value of BlackBerry's trove of patents.
Fairfax was trying to purchase the company for $9 a share, but evidently it couldn't get enough financing together. Now that the $9-per-share offer is officially dead, the stock has plummeted to its lowest levels in more than a year. For now, the $1 billion is a last-ditch lifeline to see if the company can turn things around. If the company wins the Comeback Stock of the Year award and rises above $10 a share, then the debt Fairfax injected Monday would convert to valuable equity shares.
3. SAC Capital to pay record $1.8 billion for insider trading
One large order of insider trading, four orders of securities fraud, and a side of wire fraud -- that will be $1.2 billion. SAC Capital Advisors, a Stamford, Conn.-based hedge fund owned by billionaire Steven Cohen, agreed Monday to plead guilty to five counts of criminal insider-trading charges. It marks the first major guilty plea by a major Wall Street firm in decades, and it's a major headline event for the Manhattan district attorney. Federal prosecutors originally hit SAC Capital with a $1.8 billion fine, but the $616 million SAC already owes the Securities and Exchange Commission for a parallel settlement will be credited to Monday's plea-agreement fine, bringing the additional penalty down to $1.2 billion.
For you MarketSnacks readers born in 1992, SAC Capital has returned nearly 30% annually on its investments for every year of your life. The five-star performance of SAC's traders made the owner, Cohen, a billionaire. It turns out that at least six of the top decision-makers at the firm were receiving insider information on companies before the rest of the market knew about it, and they used that information to make lucrative bets on stocks. That's dirty money, and justice was served Monday.
Mr. Cohen is paying the $1.2 billion right out of his pocket, but he's not completely off the hook yet. He still could be charged personally with civil or criminal charges. A lesson to all you investors out there: If you know a secret, don't trade on it -- or the Manhattan DA will come after you.
MarketSnacks Fact of the Day: The recycling industry is worth $500 billion annually and employs more people than any other industry on Earth except for agriculture.
Originally published on MarketSnacks.com