A humorous look at the companies that caught our eye, for better or worse, this week
Dow Jones Industrial Average (DOG)
“Looks like, by April, you know in theory, when it gets a little warmer, it miraculously goes away” – U.S. President Donald Trump, speaking at a rally in February. Well, the novel coronavirus didn’t go away: This week, the number of confirmed U.S. cases topped two million – by far the highest total for any country – as daily reported infections continued to rise in nearly half of U.S. states. For the stock market, the combination of spiking virus numbers with a gloomy economic assessment from the Fed was too much to bear as the Dow on Thursday suffered its steepest percentage loss since March. A miracle, indeed.
Superior Plus (STAR)
Most people think of propane as a fuel for grilling dead animal parts. But for Superior Plus investors, propane is a way to grill up some tasty profits. Shares of the propane distributor jumped after Brookfield Asset Management agreed to purchase US$260-million of 7.25-per-cent convertible preferred shares issued by a U.S. subsidiary of Superior, giving the Toronto-based company additional cash to pursue acquisitions in the U.S. market. With Brookfield now backing Superior’s consolidation strategy, investors are throwing some triple-A steaks on the grill.
Simon Property Group (DOG)
And the award for the worst timing of a business deal goes to … Simon Property Group. On Feb. 10 – roughly one month before the World Health Organization declared the novel coronavirus a pandemic – the largest U.S. mall operator agreed to buy rival Taubman Centers for US$3.6-billion. Within weeks, malls were closing across the U.S., culminating with Simon’s decision this week to back out of the deal. In a court filing, Simon accused Taubman of breaching its obligations by failing to cut costs and take other steps to mitigate the impact of the pandemic. Well, at least the lawyers will be making money.
You can probably guess why shares of Guess have been falling. Like many retailers, the fashion chain closed hundreds of stores globally when the pandemic hit, causing sales to plunge 52 per cent for the first quarter ended May 2. After posting a loss of US$157.7-million or US$2.40 a share in the quarter, the company said it plans to permanently shut about 100 stores in North America and China over the next 18 months. If Guess models look a little more pouty than usual, you’ll know why.
Hertz Global Holdings (STAR)
Drowning in debt and with its business hammered by a massive slump in the travel industry, car-rental giant Hertz filed for Chapter 11 bankruptcy in May, sending its stock to a record low. Yet, the stock is now surging? Even as its bonds trade at 40 cents on the dollar and some observers predict that the shares could be worthless after the company reorganizes, speculators have been taking a flyer on the shares, prompting the company to ask for court approval to sell up to US$1-billion of additional stock. There’s a sucker born every minute, I guess.
Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.