Last Friday U.S. equities inched lower as excitement over the Federal Reserve’s “no hike” policy decision on Wednesday was replaced by a mixture of apprehension and fear ahead of Monday’s Super Bowl-sized presidential debate between Hillary Clinton and Donald Trump. Policy dependent areas include monetary policy, energy stocks, healthcare, trade policy and immigration. All of this will have an effect on the course of corporate profits and interest rates in 2017. So it’s clearly a big deal. As for Trump, who is enjoying reports Kim Kardashian may support his candidacy, a selloff in the Mexican peso reflects the volatility that could result from his rising chances of victory and that realization his energetic nationalism could reshape the bi-partisan “status quo” that’s been in play for decades.
Last Friday, Twitter shares rocketed more than 20% higher amid reports that the social media company was in talks with several companies about a deal. One of the company’s is ALPHABET Inc. (Google). The other big name is WALT DISNEY CO. Bloomberg News reported this afternoon that Disney is working with a financial adviser to discuss a possible buyout bid for Twitter.
Twitter stock is rated “Underperform” after the quick uplift we can expect a price of $17 for a share. A media company is the most likely acquirer of Twitter and would not pay meaningfully more than the valuation implied by our price target. TWTR was down 2% in early trade, but flipped up to 1% gains on the Disney buyout talk.
Naturally, Twitter stockholders are excited about the potential buyout — especially since TWTR stock is down more than 50% from its April 2015 highs. The news drove heavy options volume on Friday, setting a daily record at nearly 2.4 million contracts. Calls were the most popular contract on the day, with these typically bullish bets snapping up 71% of the day’s take.
J. Mason ♦