Before the Bell: Will Amazon Really Acquire AMC, and an Australian Lithium Mine’s Price Is More Than Albemarle Thinks

Premarket action on Wednesday had the three major U.S. indexes trading higher. The Dow Jones industrials were up 0.77%, the S&P 500 up 0.86% and the Nasdaq 0.8% higher.

Six of 11 market sectors closed lower on Tuesday. Communications services (−1.02%) and health care (−0.57%) slipped the most. Energy (1.45%) and industrials (0.54%) posted the day’s best gains. The Dow closed down 0.12%, the S&P 500 down 0.16% and the Nasdaq down 0.45% on Tuesday.

Two-year Treasuries rose eight basis points to end Tuesday at 4.02%, and 10-year notes rose two basis points to close at 3.55%. In Wednesday’s premarket, two-year notes were trading at around 4.02% and 10-year notes at about 3.54%.

Tuesday’s trading volume was well below the five-day average. New York Stock Exchange winners outpaced losers by 1,790 to 1,200, while Nasdaq decliners led advancers by about 5 to 4.

After markets closed Tuesday, the American Petroleum Institute reported that U.S. crude oil inventories dropped by about 6.1 million barrels last week. Gasoline inventories fell by 5.9 million barrels while distillate inventories rose by 548,000 barrels. The Energy Information Administration will release its inventory reports after markets open on Wednesday.

Spice maker McCormick & Co. Inc. (NYSE: MKC) was the big gainer among S&P 500 stocks on Tuesday, adding 9.61% to its share price after reporting a solid quarter and reaffirming fiscal-year guidance. Cooking at home during the pandemic sped up sales in McCormick’s consumer business while the commercial business lagged. The situation has now reversed, the company said, reporting commercial sales up 10% year over year and consumer sales up just 2%.

Health care provider and insurer Humana Inc. (NYSE: HUM) dropped 4.65% on Tuesday to put up the worst showing among S&P 500 stocks. On Monday, Ohio Attorney General Dave Yost filed suit against Humana, Cigna Group (NYSE: CI) and privately held Prime Therapeutics, charging the companies with a price-fixing scheme that drove prices for drugs, including insulin, higher.

AMC Entertainment Holdings Inc. (NYSE: AMC) shot up by 13.2% on Tuesday, and not because of a short squeeze. According to a report at The Intersect, Inc. (NASDAQ: AMZN) is exploring an acquisition of AMC’s 600 theaters that the e-commerce giant would use as “marketing weigh stations,” whatever those are.

Bloomberg cited Wedbush analyst Alicia Reese who said the firm does not believe “that AMC is a likely acquisition target in general, given its massive debt and inflated valuation.” AMC apes aside, there are few people who believe that movie theaters are a good investment for anything other than their real estate value. And why Amazon, which has spent billions on producing movies and TV-style shows for its Prime customers, would want to saddle itself with a theater chain, much less the most poorly managed and indebted theater chain around, is nearly incomprehensible. Amazon did not become a $1 trillion company by throwing money away.

Australian lithium miner Liontown Resources has rejected a takeover bid from the world’s largest producer of lithium, Albemarle Corp. (NYSE: ALB). This is the third time in five months that the Australian firm has rejected Albemarle’s overtures. In a filing with the Australian Stock Exchange, Liontown said the proposed takeover price of AUD$2.50 (about $1.67) per share “substantially undervalues” the company and is not in shareholders’ best interests. Liontown’s board had previously rejected offers of AUD$2.35 and AUD$2.20 per share. Liontown’s shares closed at AUD$1.525 ($1.01) the night before Albemarle’s latest offer.

Among its reasons for turning down Albemarle’s latest offer, Liontown includes this one:

The positive near-term outlook for existing or new lithium producers, underpinned by a forecast growth in global lithium demand of 5x by 2030, with predicted supply deficit that is expected to deliver stronger lithium prices for longer.

That prediction was attributed to Albemarle. So, the reasoning must go, why accept a 64% premium when you can muddle along with a possible 500% payoff in seven years?

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