Jarden Brief: AfterPay shares surge after Square acquisition news

Jack Dorsey is the CEO and co-founder of Square. Photo / Getty Images

Keeping you up to date with the latest market moves, in association with Investment firm Jarden

New Zealand:

The NZX 50 started the week off well, climbing 0.9 per cent to 12,702.97 points.
Leading the markets higher were healthcare and financials, rising 1.8 and 6 per cent respectively. The only sector in the red was consumer cyclical.

Logistics company Mainfreight was the biggest winner of the session, increasing by 3.5 per cent. The company had its annual shareholder meeting last Thursday, which lead to a big improvement of the share price in Friday's session. Analysts raised their target prices for the company on the back of the positive trading update.

Second on the leader board was Summerset Group, rising 3.1 per cent. The retirement village operator released a notice of allotment of options yesterday, whereby select employees have the option to acquire ordinary shares from the company.

A2 Milk Company rounded out the top performers, up 2.7 per cent.

Market operator NZX Limited was the worst performer on Monday, declining by 3.1 per cent. Film software company Vista Group International was down 3.0 per cent.

Agribusiness company Scales Corporation decreased by 2.4 per cent.

Energy generator, Genesis (-1.6 per cent), was making headlines as it lost a dispute with Beach Energy about which company would be liable for the $53 million cost of carbon generated by a gas supply agreement. Genesis had to update its earnings guidance for financial year 2021 to $358 million, down from $405-410 million published on 20 July.
At the same time, Genesis entered a 20-year power purchase agreement with Tilt Renewables over a new 75MW wind farm in Northland. This agreement is part of Genesis' strategy to greener generation, displacing baseload coal and gas-fired plants with 2650GWh renewable energy by 2030.

INTERNATIONAL:
United States:

At time of writing, the major US indices were all slightly improved this morning. The S&P 500 was trading up 0.1 per cent, the DJIA increased by 0.1 per cent, and the NASDAQ was up 0.4 per cent.

Concerns about the Delta Covid-19 variant continue to be a risk amongst an earnings season which is largely beating expectations.

Consumer discretionary and utilities were the best performing sectors, each increasing 0.6 per cent. On the flip side, consumer staples and materials were underperforming, declining 0.7 and 0.4 per cent, respectively.

DXC Technology was the top performer of the session, up 7.1 per cent and reaching a new 52-week high. The IT service and solutions provider announced a programme yesterday to train 7,500 underserved students in "new-age technologies". The initiative from DXC Technology to train these students in Artificial Technology and coding was favourably received by investors.

Another stock to hit a 52-week high as the time of writing this morning was Fortinet which had risen 5.3 per cent.

Global Payments was the worst performer of the trading session at the time of writing, down 10.7 per cent. The payment technology service provider declined despite a positive earnings announcement of US$2.04 earnings per share (exceeding US$1.90 earnings per share expectation) following the announcement of Square's acquisition of Afterpay.

Fidelity National Information Services had fallen 6.9 per cent.

Rest of the World Markets:

The Nikkei traded up 1.8 per cent, while the Hang Seng improved, trading 1.1 per cent higher. The Shanghai index recovered some of last week's decline, up 2.0 per cent.

Commodities

Gold rose a slim 0.1 per cent to US$1,819.70 per ounce.

Oil was trading lower, down 3.8 per cent to US$71.11 per barrel.

Cryptocurrencies performance was mixed, with Bitcoin decreased 4.0 per cent and Ethereum rising a slim 0.2 per cent.

The US 10-year treasury rate was yielding 1.179 per cent, at the time of writing.

Australian Markets:

The ASX soared 1.3 per cent yesterday, led by a 6.6 per cent gain from tech stocks as well as solid gains from the banking sector.

Carrying the index was AfterPay, which dominated market headlines after news that the buy now, pay later leader would be acquired by US-listed payments company Square for a record-breaking A$39 billion - the biggest M&A deal in ASX history. AfterPay shareholders will not be paid any cash for the deal and will instead receive 0.375 Square shares for each AfterPay share they hold. Square last closed at US$247.26, which means that each shareholder in AfterPay should receive around A$126.21 of value per share.

This was at a 30.6 per cent premium to AfterPay's close on Friday and shares immediately shot up by more than 20 per cent in response to the news. However, it is worth noting that the market darling has dropped by more than A$60 per share since February - and investors who bought in during the highs will still be eating a substantial loss.

The news created positive momentum for the rest of the sector, with Zip Co up 9.0 per cent to A$7.24 and Sezzle climbing 3.7 per cent to A$7.48.

Meanwhile, the energy sector was bolstered by news that the Santos - Oil Search merger has been agreed upon - with Oil Search to receive 38.5 per cent stake in the combined entity. Oil Search shareholders will receive 0.6275 new Santos shares for each of their shares. The target closed up 4.7 per cent on the news, while Santos eased up 0.6 per cent.
Moving to a much smaller transaction, cyber security company Family Zone is set to raise A$145 million in order to buy a UK-based business with more than 6.1 million students.

The acquisition will treble Family Zone's current student base, with the group currently engaged with 3 million students and 5,600 schools.

Basic materials stocks weighed on the benchmark index after a -7.4 per cent fall in iron ore prices on Friday - with China doubling down on its carbon reduction commitments by ordering further cuts to the country's steel output. The commodity is now more than 20 per cent down from its US$237.57 a tonne high, which it reached in May.

Fortescue fell 2.1 per cent, while Mineral Resources dropped 4.3 per cent.

• For more information on the latest market moves, get in touch with Jarden.

Disclaimer: This Morning Brief has been prepared in good faith and reflects opinions and views at the time of publication, using external sources, systems and other data and information we believe to be accurate, complete and reliable at the time of preparation. We make no representation or warranty as to the accuracy, correctness and completeness of that information, and will not be liable or responsible for any error or omission. This Morning Brief is not to be relied upon as a basis for making any investment decision. Please seek specific investment advice before making any investment decision. Jarden Securities Limited is an NZX Firm, a broker disclosure statement is available free of charge at www.jarden.co.nz. Jarden is not a registered bank in New Zealand. Full disclaimer available at: https://www.jarden.co.nz/limitations-and-disclaimera>