The price of oil was back on its upward climb mid week and it took the loonie with it. The loonie closed above $0.76 cents US (rising a full cent in one day!) and the price for WTI crude (North American oil) was up over $2 at $38.24. Two key pieces of data brought the buyers in after a small two-day slide, an announcement from the US Federal reserve and a statement from OPEC. The US Fed announced it would not be raising interest rates which helped both oil and the loonie. OPEC announced it would be meeting with 15 oil producing members on April 17th and they would be discussing a freeze on oil output, something they have not considered since prices have collapsed. One of the most powerful OPEC members is Saudi Arabia and they have wanted to keep supply high despite falling prices to push many US producers out the market…and its working. The policy however is also dramatically affecting many countries in the Middle East like Qatar who rely on oil revenue and are now having to go into debt. If the meeting does freeze oil output or cut it back somewhat, many in companies in the Canadian prairies will be breathing a sigh of relief.
The stock price carnage for shareholders continued this week in Canadian pharmaceutical company Valeant. Their stock price fell another 50% during trading on Tuesday to close at $45.14 per share. The company has been overwhelmed be scandals since the fall. Although revenue was higher than expected at $2.79 , compared to analysts expecting $2.76 billion, everything else was much worse in the company’s financial filings. Quarterly earnings were a loss of 98 cents per share. It was also confirmed the Securities and Exchange Commission has launched a formal investigation into the company as well as the US Congress for alleged drug pricing shenanigans. The stock price was up at $320 per share as recently as September. Activist investor Bill Ackman is one of the biggest shareholders of the firm and his hedge fund now control 3 director seats on the board as the company tries sort thorough the mess of losses and scandal. Many see it as a very long road to shareholder value and one not likely to succeed for many years. The scandals are based on very good evidence which means expensive fines and lawsuits even if the firm corrects poor behavior quickly.
A very large merger is attempting to take place with 2 of the biggest stock exchanges in the world. The Deutsche Boerse AG wants to acquire the London Stock Exchange Group (LSE) in a deal valued at an incredible $30 billion dollars. The German Boerse is motivated to combine with the LSE as quickly as they can as the American NYSE has stated it was wanted to take a run at LSE. It is not a done deal as the merger requires many regulatory hurdles and for the Germans, this is actually their third attempt at the LSE. Many market participants see the value and benefits of scale in the large exchanges combining forces, but there is also the worry that a small group will be begin to control almost all of the exchanges which are vital to our capital markets system. This article also highlights the potential challenges the Deutsche Boerse could have post merger if the UK exits the EU. These are challenges the current leadership team for the exchanges appears to be attempting to ignore.