🗞️The Wrap: In Reverse

DraftKings sneaks its way onto the market, Outlook’s got a better outlook than the US government and FOMO is affecting fine art. Read on for more.

5 Stocks Reaching 52 Week Highs

  • Nordic American Tankers (NAT) +32.3%
  • Genmark Diagnostics (GNMK) +40.1%
  • Audiocodes (AUDC) +39.9%
  • Inseego (INSG) +23.1%
  • Sandstorm Gold (SAND) +21.1%

Energizer Bunny

AAA. The most secure, valuable form of debt. Perhaps surprisingly, the US hasn’t had a AAA rating since 2011 when S&P downgraded it to AA+, although Moody’s and Fitch held the rating. Only a handful of nations have a AAA rating, including Australia, Canada and Germany.

Now, there are only 2 companies left in the US with a credit rating higher than their government: Johnson and Johnson and Microsoft. In fact, 80% of the outstanding AAA-rated corporate debt is owed by $JNJ and $MSFT. This figure stood above 90 thirty years ago.

Does it even matter? While it’s a notch in the belt of these companies, it may not mean a heap to investors, the difference between ratings is somewhat subjective. There are no fixed standards for a credit rating and companies are still able to borrow at an extremely low cost.

Plus, anyone who has watched the Big Short knows there’s a huge moral dilemma when companies are forced to pay to have themselves rated.

Draft Kings

DraftKings (DKNG) very quietly became available to trade on Stake in the last few days. Partly because it’s been available for months. How so?

DraftKings completed a reverse merger; a unique way of entering capital markets. This is when a company takes over another in order to list. In this case $DEAC, which was a shell company set up specifically to be acquired.

Up until Monday, traders could buy shares in $DEAC which is now $DKNG. Shares in $DEAC traded between $10 and $20 over the past few months as the market awaited the reverse merger.

While there is money to be made speculating (read: gambling) on Special Purpose Acquisition Companies (SPACs), there can also be a lot of money lost as the market adjusts its valuation on the private company with each piece of new information.

Virgin Galactic carried out a reverse merger to list as $SPCE last year.

Fantasy sports fans are well aware of the gambling site which has become one of the largest legal wagering options in the States over the last decade. On that note, how good is CEH to the Chiefs for fantasy.

Auction Fever

One for the behavioural economists. Sotheby’s auction house is struggling as their auctions took to the interweb in lieu of the more traditional face to face events.

An observation put together by The Hustle, while online auction clearance rates jumped 63%, the average value of each piece in March was down to US$6.3k, compared to US$40k seen for much of 2019.

Of course, people may have less money to spend on collectables now than before but it’s unlikely to completely explain the drop.

They argued that a live auction is all about “auction fever”. Without the excitement of an auction room, bursting with emotion and opportunity, bidding just isn’t the same. Just like happy hour isn’t quite what it used to be.

Top 5 Gainers

  • Apergy Corp (APY) +58.4% in the last week
  • Noble Midstream (NBLX) +50.2%
  • Bed Bath and Beyond (BBBY) +46.8%
  • Matador Resources (MTDR) +46.7%
  • NGL Energy (NGL) +46.6%

Top 5 Fallers

  • CNX Resources (CNX) -17.3% in the last week
  • Blueprint Medicines (BPMC) -16.4%
  • EQT Corp (EQT) -14.0%
  • Clovis Oncology (CLVS) -11.2%
  • Arconic Corp (ARNC) -11.9%

What We’re Reading | Smartest Guys in the Room

A throwback title; written in 2004, this story follows the infamous rise of fall of Enron. For the Gen Z’s in the room, me included, Enron was an “energy” company that rose from $5 to $90 over two decades before crashing to zero in 18 months in 2001. From the 7th largest corporation in America to the cause of trust issues amongst a generation of investors.

The book takes you inside the boardrooms of how one the most elaborate financial scams in history was put together. Shammed balance sheets, inflated revenues, webs of lies and more. While it is a case study on a single company, authors Eklind and McLean point out what may be wrong with corporate America on a larger scale.

The way Joe breaks down how he formed his model is insightful. He goes through the step by step process he used to model a whole baseball season. Did you realise that the home team has won almost exactly 54% of games every year over the last century? A great look at how data can influence decisions.

Get it on Kindle here. There’s also a movie too.

Trader Teaser

There are 75 people in a room. What is the probability two share the same birthday?

Best Buy | WLL +261%

Like a penny stock, $WLL whipsawed its way to 300% gains in a few days from trough to peaks. Holding for a few hours (and bravely overnight), this trader saw 261% gains in one of last week’s most heavily traded stocks on the whole exchange.

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