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PreMarket Prep Recap: McDonald's, Under Armour Investors Are Singing 'I Don't Like Mondays'

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PreMarket Prep Recap: McDonald's, Under Armour Investors Are Singing 'I Don't Like Mondays'

Barring a major macroeconomic event or a few Trump tweets, there is not much news on the markets or individual issues on weekends. But this weekend was an exception, and the two major stories that emerged while the markets were closed were covered at the top of Monday's PreMarket Prep show. 

McDonald's Investors Feel Indigestion After CEO Departs

On Sunday evening, McDonald's announced that Steve Easterbrook was out as CEO amid a relationship with an employee.

The issue, which had been under selling pressure since its third-quarter miss Oct. 22, cratered on the news in after-hours trading. The weakness continued into the regular session.  

On the surface, it appears that the company is simply following through on enforcement of its own policies. Yet it seems to be quite a harsh punishment for a man in a consensual relationship that has resurrected the company during his tenure, while handsomely rewarding shareholders along the way.

It was speculated on PreMarket Prep that the Golden Arches may have been looking to oust the CEO for other reasons. Whatever the case may be, the issue is now out of favor, and the hosts of the show are at least waiting for it to at least stop before attempting to pick a bottom.

The Worst News Possible For A Company: Accounting Issues

Wall Street can be very forgiving when it comes to some problems a company may have. One issue is has zero tolerance for: accounting issues.

On Sunday, Under Armour Inc (NYSE: UAA) announced that it is subject of Federal accounting probe. Whether the investigation will reveal any wrongdoing is irrelevant. Just the fact that it is taking place will weigh on the issue until it is resolved.

The issue has been a horrible performer in a roaring bull market; the recent news is just another deterrent for investors eyeing Under Armour for the long-term.  

Takeover Arbitrage And The Impact On The Acquirer

On many occasions, cash takeovers are pretty straightforward. The company being acquired goes up, and the company making the acquisition goes down. For those doing the arbitrage, they simply have to calculate how the change in the price of the acquirer will impact the price of the company being purchased. 

As deals have become more complicated, so does the arbitrage between the two companies. PreMarket Prep co-host Dennis Dick, an active arbitrage trader, discussed how he calculates and trades deals using Stryker Corporation (NYSE: SYK) and Wright Medical Group (NASDAQ: WMGI) as his example.

The discussion can be found at the 47-minute, 45-second mark on Soundcloud

Nic Chahine Joins Tuesday

Midway through the show, Jeff Mills, CIO at Bryn Mawr Trust, joined the crew to discuss the third-quarter earnings season, the future course of interest rates and sectors on his radar.

On Tuesday, Nic Chahine, author of "Create Income With Options Spreads," will be our guest, bringing a technical and fundamental take on the markets.

PreMarket Prep is a daily trading show hosted by prop trader Dennis Dick and former floor trader Joel Elconin. You can watch PreMarket Prep live every day from 8-9 a.m. ET here. The replay can be found on Benzinga's YouTube channel, and the podcast is on iTunesGoogle PlaySoundcloudStitcher and Tunein.

Related Links: 

PreMarket Prep: Alibaba, The Jobs Number And Market Structure Discussion

PreMarket Prep: Big Beats From The Big Boys

Photo by Dustin Blitchok. 

Posted-In: PreMarket PrepLong Ideas News Short Ideas Trading Ideas Best of Benzinga

 

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