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A look at North American equities heading in both directions

On the rise

Waterloo Brewing Ltd. (WBR-T) surged after agreeing to be acquired by Danish brewer Carlsberg for a total equity value of around $144-million in cash.

The deal is part of Carlsberg’s strategy towards 2027 to grow in categories beyond its core beer market, adding products like cider, seltzers and premium brand beers.

“Carlsberg’s international beer and cider portfolio complements Waterloo Brewing’s portfolio of local beers and ready-to-drink beverages,” said Carlsberg in a statement.

It expected the deal, still subject to approval by Waterloo’s security holders, to close in the first half of 2023. Boards of both companies have approved the transaction and Waterloo’s board recommends shareholders to vote in favour.

Waterloo shareholders will received $4 in cash for each share held. The stock closed at $3.35 on Wednesday.

Travel company Transat A.T. Inc. (TRZ-T) rose after it reported a fourth-quarter net loss attributable to shareholders of $126.2-million compared with a loss of $121.3-million in the same quarter last year.

The parent company of Air Transat says the loss amounted to $3.32 per diluted share for the quarter ended Oct. 31 compared with a loss of $3.21 per diluted share a year ago.

Revenue totalled $573.1 million, up from $62.8 million in the same quarter last year.

Excluding non-operating items, Transat reported an adjusted net loss of $75.9-million or $2.00 per share for its fourth quarter compared with an adjusted loss of $118.4-million or $3.14 per share a year earlier.

Transat chief executive Annick Guerard says the recovery in travel, already apparent in the third quarter, accelerated in the fourth.

In its outlook for 2023, the company says it expects to deploy capacity equivalent to 90 per cent of the 2019 level.

Vancouver-based AbCellera Biologics Inc. (ABCL-Q) gained with the announcement it has entered into collaboration with AbbVie Inc. (ABBV-N) to advance new antibody therapies.

Under the agreement, AbbVie has the right to develop and commercialize therapeutic antibodies resulting from the collaboration

AbCellera will receive research payments and is eligible to receive downstream clinical and commercial milestone payments and royalties on net sales of products.

Quebec City-based H2O Innovation Inc. (HEO-T) saw gains after announcing it has been awarded a new operation and maintenance (O&M) service contract and has extended an existing contract. Both projects are in Texas and have a total value of $29.9-million, increasing the Corporation’s O&M backlog by 24 per cent to $156.2.million.

In a research note, Desjardins Securities analyst Frederic Tremblay said: “We are pleased to see the company continuing to build on its strong track record of customer retention and market share gain in the O&M sector. Furthermore, with today’s announcement, HEO continues to add sizeable new mandates across its broad portfolio of products and services. Recall that earlier this month, the WTS segment won C$12.1m in new US municipal water treatment projects.

“[Wednesday], we identified HEO as a top pick based on: (1) the excellent organic growth outlook supported by a record backlog and a tidal wave of opportunities, which HEO can continue to capture via product innovation, synergies across the various business units and expansion of the distribution/sales network; (2) the business resilience stemming from the essential nature of water/wastewater treatment, secular sector tailwinds and HEO’s large base of recurring revenue; (3) the targeted improvements in cash flow generation through working capital management and margin expansion; and (4) a mouth-watering valuation.”

Tesla Inc. (TSLA-Q) boss Elon Musk disclosed another US$3.6-billion in stock sales on Wednesday, taking his total near US$40-billion this year and frustrating investors as the company’s shares wallow at two-year lows.

Tesla shares fall as investors bash Musk’s Twitter focus

A U.S securities filing showed he unloaded 22 million shares in the world’s most valuable carmaker over three days from Monday to Wednesday.

The sale is the second big chunk of stock he has cashed out since his US$44-billion purchase of Twitter in October. It isn’t clear if the sales are related to the Twitter acquisition, but they are annoying investors who are upset by a perception he is diverting his focus and resources to Twitter ahead of Tesla.

“It doesn’t put a lot of confidence in the business, or speak volumes for where his attention is at,” said Tony Sycamore, an analyst at brokerage IG Markets, where Tesla is a popular stock among small-time investors.

“It’s not a good situation. I’ve spoken to a lot of investors who have Tesla shares and they’re absolutely furious at Elon.”

Mr. Musk’s 13.4-per-cent stake in Tesla is down from about 17 per cent a year ago, according to Refinitiv data.

Tesla stock, which was positive on Thursday, has halved this year, underperforming both automakers and the broader tech-heavy Nasdaq, which is down about 30 per cent this year.

The value of Mr. Musk’s total selling over the past year comes to nearly $40-billion.

“It will start to be tiring for investors,” said Tareck Horchani, head of prime brokerage dealing at Maybank Securities in Singapore.

Mr. Musk’s fortune, mostly tied up in Tesla shares, has fallen with prices this year and he briefly lost his title as the world’s richest person last week - according to Forbes - when he was overtaken by Louis Vuitton boss Bernard Arnault.

Besides Tesla and Twitter, where Musk’s management and tweets are attracting political attention and blowback, Musk also heads rocket company SpaceX and Neuralink, a startup developing interfaces to connect the human brain to computers.

Tesla, meanwhile, is grappling with lingering logistics challenges and said in October it expected to miss this year’s vehicle delivery target. It is more profitable than rivals who have struggled to make money from selling electric cars.

Homebuilder Lennar Corp. (LEN-N) forecast a slowdown in new orders for the first quarter as high mortgage rates make properties unaffordable for some buyers.

The company’s shares were narrowly higher on Thursday.

Lennar expects new orders in the current quarter to be between 12,000 and 13,500 homes, compared with new orders for 13,200 homes in the fourth quarter.

Over the past two years, high demand for homes from people working remotely due to the pandemic drove up prices across the United States, boosting profits for builders such as Lennar and D.R. Horton Inc. (DHI-N).

However, the U.S. Federal Reserve’s aggressive monetary policy tightening to curb decades-high inflation has made borrowing more difficult for customers as mortgage rates have more than doubled since the beginning of the year.

That has led to some buyers stepping away from the market, sending a chill through the sector and cooling prices. The S&P 500 Homebuilding index is down about 20 per cent year to date.

Homebuilders have also been hit by worker and supply shortages that have driven up costs.

Sales of previously owned homes fell for an eighth straight month in September, while homebuilding dropped, signaling that higher mortgage rates are choking the housing market.

“As we have seen over the past quarters, interest rates are fluctuating and are likely to continue to move, and the housing market will continue to rebalance pricing and interest rates,” Lennar Executive Chairman Stuart Miller said.

Last month, rival D.R. Horton warned home prices were set to decline next year.

Net income attributable to Lennar rose to US$1.32-billion, or US$4.55 per share, in the fourth quarter, from US$1.19-billion, or US$3.91 per share, a year earlier.

The company reported revenue of US$10.17-billion, compared with estimates of US$10.10-billion, according to Refinitiv IBES data.

On the decline

Empire Co. Ltd. (EMP.A-T) dipped after it announced a deal to sell its 56 gas stations in Western Canada to a subsidiary of Shell Canada for about $100-million in cash.

The sale came as the parent company of Sobeys reported it earned $189.9-million in its latest quarter, up from $175.4-million in the same quarter last year.

The grocer said the profit amounted to 73 cents per share for the quarter ended Nov. 5, up from 66 cents per share a year earlier.

Sales in what was the second quarter of the company’s 2023 financial year totalled $7.64-billion, up from $7.32-billion in the same quarter last year.

Same-store sales were up 3.9 per cent, while same-store sales, excluding fuel sales, were up 3.1 per cent.

Empire also estimated the cost of what it described as a cybersecurity event last month will be about $25-million, net of insurance recoveries, on its 2023 annual net earnings.

TC Energy Corp. (TRP-T) slid despite announcing it is resuming operations in a section of its Keystone pipeline a week after a leak of more than 14,000 barrels of oil in rural Kansas triggered the whole pipe’s shutdown.

The company said in a statement on Wednesday that it had given notice to regulators and customers about the restart of pipeline sections unaffected by the incident. The segment of the pipeline where the incident occurred remains sealed off.

“This restart facilitates safe transportation of the energy that customers and North Americans rely on and extends from Hardisty, Alberta, to Wood River/Patoka, Illinois,” TC Energy said.

The 622,000 barrels per day (bpd) pipe has been shut since Dec. 7, when the leak was discovered. Oil sprayed nearby pastures and leaked into Mill Creek before being shut by operator TC Energy.

More than 300 people are involved in the clean-up. The timeline for the full restart of the pipeline remained uncertain, and neither a root cause failure analysis nor a full restart plan had been submitted, the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) said.

Keystone is a crucial artery shipping Canadian crude to U.S. refineries and traders have been awaiting news of when it might restart operations. The spill is the largest in nearly a decade and the clean-up operation is expected to take weeks.

First Quantum Minerals Ltd. (FM-T) declined after it failed to reach an agreement with the Panamanian government over a new royalty payment structure, and now there are fears its massive copper mine in the country could be nationalized.

Vancouver-based First Quantum faced a deadline of midnight yesterday, to get a new royalty agreement in place with Panama regarding the Cobre Panama mine.

If agreement wasn’t reached by that time, the Panama government said it would take “alternative measures” to ensure the operation of the mine.

In a statement, the Ministry of Commerce and Industries of Panama, said that First Quantum had made “unreasonable demands” that often moved the two sides further apart instead of closer together. The Ministry said it negotiated in good faith past the deadline last night but early this morning First Quantum sent it a new proposal that “fundamentally changed” certain aspects of the agreement.

First Quantum said in a release that its proposal achieved the government’s revenue objectives but “legal protections on termination, stability and transition arrangements could not be agreed upon.”

- Niall McGee

Ivanhoe Mines Ltd (IVN-T) fell on news the RCMP has searched its Vancouver office to seek information on $2.7-million in bank transfers from Ivanhoe to a Swiss bank account in connection with contracts for its Congolese mining operations.

The RCMP obtained the search warrant after saying it had reasonable grounds to believe that Ivanhoe violated Canada’s Criminal Code and Corruption of Foreign Public Officials Act between 2014 and 2018, according to a brief disclosure by Ivanhoe in an annual information form.

Ivanhoe co-operated in the search of its Vancouver office in November, 2021 and no charges have been laid against the company or its directors or employees, Ivanhoe said in the disclosure earlier this year.

British Columbia court documents in the case – obtained by The Sentry, a U.S.-based investigative organization, and shared with The Globe – contain a six-page list of documents and computer equipment that the RCMP was authorized to seize from Ivanhoe’s office. Some of the documents authorized for seizure were related to three bank transfers from Ivanhoe to the Swiss bank account of a company called Stucky Technologies from 2015 to 2018.

- Geoffrey York

Hexo Corp. (HEXO-T) dropped after saying its “ability to continue as a going concern is dependent upon its ability in the future to achieve profitable operations.”

With the release of its quarterly results before the bell, the company announced it will seek external financing, by debt or offering equity, to finance operations.

“There remains a risk that the Company’s cost saving initiatives may not yield sufficient operating cash flow to meet its financial covenant requirements, and as such, these circumstances create material uncertainties that lend substantial doubt as to the ability of the Company to meet its obligations as they come due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern,” it said.

For its first quarter of 2023, revenue fell to $35.8-million from $50.7-million a year ago. Its net loss narrowed to $57.1-million from $117.4-million.

Through Wednesday’s close, shares of Hexo had fallen 78 per cent year-to-date.

Netflix Inc. (NFLX-Q) slumped after Digiday reported the entertainment services firm will let its advertisers take their money back after missing viewership targets.

The online trade journal said Netflix has delivered roughly 80 per cent of the expected audience, according to five agency executives.

“They can’t deliver. They don’t have enough inventory to deliver. So they’re literally giving the money back,” one of executives told Digiday.

Warner Bros Discovery Inc. (WBD-Q) was lower after it raised its expectations of costs related to content write-offs by US$1-billion and said the charges could now reach up to $3.5 billion.

For the media company, formed earlier this year by the merger of AT&T Inc’s (T-N) WarnerMedia unit and Discovery Inc, the total financial restructuring cost could now be between US$4.1-billion and US$5.3-billion.

Warner Bros has undertaken a series of cost-cutting measures since the merger, including canceling projects such as the live-action version of the DC Comics character Batgirl, a planned Wonder Twins film, and shutting down the CNN+ streaming news service.

Some reports said the shows Nevers and Westworld would be pulled from HBO Max.

The company has said the restructuring initiatives will be substantially completed by the end of 2024.

With files from staff and wires

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Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 22/05/24 3:59pm EDT.

SymbolName% changeLast
Abbvie Inc
Abcellera Biologics Inc
AT&T Inc
D.R. Horton
Empire Company Ltd
First Quantum Minerals Ltd
Ivanhoe Mines Ltd
Lennar Corp
Netflix Inc
TC Energy Corp
Tesla Inc
Transat At Inc
Discovery Inc Series A

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