Good news at LIC and for Meridian – plus the thrilling new stock battle over Game Stop in the US

Blackrock spending spree revealed
SkyCity confirms new senior appointments
BNZ appoints new chief economist
Microsoft reports blockbuster quarterly revenues
The bizarre story of GameStop, the talk of Wall St

Livestock Improvement Corp (LIC) yesterday reported a 10 percent lift in its first-half net profit as a result of strong sales of its premium artificial breeding options.

The farmer-owned and NZX-listed cooperative also raised its forecast guidance for the full year.

Net profit for the six months ended November 2020 rose to $33.4 million, up from $30.3 million in the same prior period. LIC is forecasting underlying net profit for the year ending May will come in between $19 million and $23 million, assuming no significant climatic events or a fall in the milk price.

Chair Murray King said the first-half result was pleasing, considering the disruption caused by the second Covid-19 lockdown, given the company operates from multiple sites in both Hamilton and Christchurch.

King said LIC continued to invest in research and development, including its MINDA farm management software, as well as capital investments in new facilities on its farms.

LIC’s inseminations from genomic sires have risen to about 1.4 million from less than 400,000 in 2017, he said.

“Genomic science and genome sequencing technology is generating markedly increased productivity and health traits for dairy cows and better returns for dairy farmers as a result.”

LIC has invested $78 million into genomic science in the past three decades. The cooperative is leading a world-first pilot trial seeking to identify a possible link between the methane cows produce and their genetics.

LIC shares closed up 3.7 percent at 84 cents on light volume.

Blackrock spending spree revealed

A significant shareholder notice, posted on Tuesday, revealed the world’s largest fund manager bought more than 1 percent of all Meridian shares on issue between Dec. 22 and Jan. 22, sending the share price surging to a new all time high.

BlackRock spent about $210 million buying 26 million Meridian Energy shares on the NZX in the past month, paying as much as $9.50 per share, as a wave of clean energy investment fuelled the market at a time most investors were on holiday.

Starting in late December, the share price climbed more than 20 percent, from $6.70 to $8.08, spiking at $9.94 immediately after the Georgia US Senate election in early January.

The outsized rally was fuelled by billions of dollars flowing into two of BlackRock’s renewable energy exchange traded funds listed on the Nasdaq and London Stock Exchange.

It’s estimated Blackrock spent approximately $210 million acquiring the 26 million shares.

In its largest single trade on January 8, BlackRock spent more than $5 million when it bought 548,000 Meridian shares at $9.27.

BlackRock now owns 7.9 percent of the renewable electricity generator, making it second only to the New Zealand Government which still owns a majority stake.

Meridian shares closed yesterday at $7.75, down 1.9 percent.

SkyCity confirms new senior appointments

Recently appointed SkyCity Entertainment CEO Michael Ahearne, has announced his new senior management team, with one obvious omission.

As yet, there has been no indication of a successor for chief financial officer Rob Hamilton, who leaves the group next month. Hamilton had been a contender for the CEO role.

Callum Mallett, a long standing SkyCity employee and former head of operations at SkyCity Darwin, is the company’s new chief operating officer responsible for the group’s New Zealand businesses.

David Christian, the current general manager of SkyCity Adelaide, will oversee the company’s operations in Australia.

Matthew Ballesty has been promoted into the role of chief casino officer, responsible for Auckland’s casino operations as well as providing strategic direction on all gaming products across the group.

The company is due to report its half year results on February 18.

SkyCity shares closed unchanged at $3.05 yesterday.

BNZ appoints new chief economist

Bank of New Zealand has appointed Paul Conway as its chief economist.

Conway, who will start in the role next week, was previously director of economics and research at the Productivity Commission for seven years and has also worked for the Reserve Bank, OECD and the World Bank.

The bank has been without a chief economist since Tony Alexander resigned in September 2019 after nearly 25 years in the role.

BNZ chief financial officer Peter MacGillivray said Conway will be able to use his previous experience to focus on the potential to improve productivity and wellbeing through digital transformation.

Conway said he was keen to broaden the role and that Covid-19 “presents a unique opportunity to build a more productive economy that delivers better outcomes for all New Zealanders and it’s the right time to change the direction of this role and embrace these new opportunities and challenges.”

Microsoft reports blockbuster quarterly revenues

Microsoft exceeded Wall Street analysts’ expectations for quarterly revenue by nearly $3 billion and hit a three-month sales record according to its latest quarterly financials.

The results signal that the pandemic is continuing to buoy the tech giant’s business — from computers and gaming systems to the cloud computing systems helping companies navigate continued remote working.

Microsoft posted US$43.1 billion in revenue for its fiscal second quarter – a 17 percent increase from the same period in the prior year and well above the US$40.2 billion analysts had predicted.

The company’s stock jumped as much as 6 percent in after-hours trading immediately following the report.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” Microsoft CEO Satya Nadella said in a statement. “Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”

Microsoft’s cloud computing continues to drive sales, as the pandemic has sped up many companies’ transitions away from operating their own on-premises servers. Revenue growth from Microsoft’s Azure cloud platform, which competes with Amazon Web Services and Google Cloud, accelerated from the previous quarter to 50 percent.

The bizarre story of GameStop that has become the talk of Wall Street

While there has been plenty of focus on Bitcoin’s wild ride in recent months, an even more bizarre story currently playing out on Wall Street has seasoned professionals both baffled and incredulous – in equal measure.

The story, which has all the makings of a Hollywood movie or sci-fi novel, involves a large group of activist amateur investors pitting their wits against a small number of professionals over a loss-making video game retailer called GameStop.

Simply put, the amateur investors have, on mass, been buying up the stock of GameStop – in direct opposition to a group of wealthy investors who are counting on profiting from the stock price continuing to plunge.

The resulting trading action has become one of the wildest rides ever seen on Wall Street, even eclipsing some of Bitcoins recent moves, with GameStop’s stock soaring nearly 145 per cent in less than two hours only for the gains to disappear quickly afterward.

The struggling company, based in Grapevine, Texas, has lost a total of US$1.6 billion (NZ$2.22b) over the past three years and, not surprisingly, its stock price has declined accordingly.

As a result, GameStop had been targeted by numerous professional investors, who say the company will continue to founder as sales of games continue to go online which is why they have been shorting the stock. (A short position allows an investor to profit when the price falls.)

However, just recently their bets have proven to be disastrous.

After trading at less than US$18 a few weeks ago, GameStop’s stock price shot higher after the company named three new directors to its board on January 11 to help speed its turnaround, including a co-founder of online pet-supply retailer Chewy. The thought was that should help GameStop’s digital transformation.

Using social media and chat rooms a growing cohort of smaller investors has been exhorting each other to drive the stock’s momentum to new heights. Many are pitching it as a David & Goliath battle of regular investors versus hedge funds and big Wall Street firms.

As a result of their actions, it took just five days for GameStop’s stock to double following the announcement of the board shakeup. And then last Friday, its share price surged a remarkable 51 percent in a day in what could be just the beginning of this extraordinary battle of nerves.

The meteoric rise forced some short sellers to close out their bets requiring them to buy the stock back, further helping to accelerate its upward momentum. Earlier in the week this virtual ‘tug-of-war’ had become so extreme that trading in GameStop’s stock was temporarily halted at least nine times due to volatility.

It closed on Monday this week at US$76.79, after swinging between US$65.01 and US$159.18 earlier in the day.

The episode has left Wall Street veterans wondering if this is the start of a whole new trading phenomenon where tech savvy amateurs take on the professionals en masse at their own game. Stranger things have happened and, coming at a time where there has been plenty of talk of ‘speculative bubbles’ in recent weeks, perhaps this is just one more example of why markets might be in need of a healthy clear out.

Andrew Patterson is Newsroom's Markets Editor and has worked for decades as a financial journalist, radio presenter and editor with Australia's ABC, Radio Live and NBR.

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