Month: May 2022

It was another night of wild moves overnight (our time) on US markets. Sure, we didn’t see the kind of savage falls that have recently come to define the US markets. But we still saw a bevvy of US shares, particularly US tech shares, continue to bounce around. Apple Inc (NASDAQ: AAPL) was up, as was Tesla Inc (NASDAQ: TSLA), while Amazon.com Inc (NASDAQ: AMZN) dropped.

But looking at after-hours trading, a very different picture emerges. Instead of a 4% rise, Apple was down 1.34%. Tesla went from a 1.66% rise to a 2.65% fall. And Meta Platforms Inc (NASDAQ: FB), the company formerly known as Facebook, went from a 1.4% gain to a loss of 7.1%. So what happened after hours that caused such a dramatic turnaround?

Well, it appears to be the fortunes of Snap Inc (NYSE: SNAP), the social media company behind Snapchat, that seems to be the catalyst here.

Snap share price plunge makes for a less than pretty picture for the Nasdaq

Snap stock suffered a nasty fall of 3.4% to US$22.47 a share yesterday during normal trading, but plunged by almost 31% in after-hours trading to US$15.51 a share. That represents the lowest level Snap shares have been at since April 2020.

This after-hours plunge in Snap’s value seems to have been sparked by an SEC (US Securities and Exchange Commission) filing. The filing stated the following:

Since we issued guidance on April 21, 2022, the macroeconomic environment has deteriorated further and faster than anticipated. As a result, we believe it is likely that we will report revenue and adjusted EBITDA below the low end of our Q2 2022 guidance range.

We remain excited about the long-term opportunity to grow our business. Our community continues to grow, and we continue to see strong engagement across Snapchat, and continue to see significant opportunities to grow our average revenue per user over the long term.

According to reporting from CNBC, Snap CEO Evan Spiegel also sent a note to employees. Here’s some of what that reportedly said:

Today we filed an 8-K, sharing that the macro environment has deteriorated further and faster than we anticipated when we issued our quarterly guidance last month… As a result, while our revenue continues to grow year-over-year, it is growing more slowly than we expected at this time.

Nasdaq heading for a nasty Tuesday

This was clearly the last thing the markets wanted to hear at this time. Snap’s after-hours plunge looks to have taken the wind out of many other US tech shares’ sails. Companies in Snap’s space, such as Meta, Twitter Inc (NYSE: TWTR) and Pinterest Inc (NYSE: PINS) were hit the hardest. Indeed, most US tech shares that finished last night’s session in the green subsequently went red in after-hours trading.

According to Bloomberg, futures for the Nasdaq 100 are now pointing to a drop of 1.3% for the tech-heavy Nasdaq. Although Snap isn’t a Nasdaq share, many other US tech shares are. So it seems we have the Snap share price to thank for what is shaping up to be anther painful session of trading on the Nasdaq tonight.

The post Snapchat share price dives 30% pulling Nasdaq futures lower appeared first on The Motley Fool Australia.

More reading

• Here’s why ASX 200 tech shares are under pressure on Tuesday

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Sebastian Bowen has positions in Amazon, Apple, Meta Platforms, Inc., Pinterest, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, Meta Platforms, Inc., Pinterest, Tesla, and Twitter. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia has recommended Amazon, Apple, Meta Platforms, Inc., and Pinterest. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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In his post-election speech, newly-elected Prime Minister Anthony Albanese noted that Australia can “take advantage of the opportunity for Australia to be a renewable energy superpower”.

A Labor government has committed to slashing carbon emissions by 43% by the year 2030, compared to 2005 levels.

But what impact is this set to have on financial markets? And what tickers are set to benefit? Let’s take a look.

Clean and renewable energy on the agenda

It appears for the first time in at least 70 years that around one-third of Australians voted neither for Laboror nor the Coalition.

The Greens received roughly 12% of the vote while the so-called teal independents have taken a swathe of formerly Liberal seats, campaigning on a platform of greater climate action.

This new representation in federal parliament is set to have far-reaching impacts on Australia’s stance on climate change.

Bloomberg journalist Ben Westcott, speaking on Bloomberg Day Break Australia on Monday, concurs.

Commenting on the outlook for Australia’s climate emission reductions, he said: “[Now Prime Minister Anthony] Albanese went to the election with a promise of about 40% climate commission cuts by 2030 but the Greens Party wants 70%, the Independents want 60%.”

Westcott said it remains to be seen how this will play out in climate policy but it may be that the Labor government could “be forced to take tougher action to cut emissions”.

The regime change has been welcomed by The Clean Energy Investor Group (CEIG), a not-for-profit advocacy organisation representing institutional investors.

The group’s CEO Simon Corbell said any shift in policy towards renewables is “deeply consequential for clean energy investment opportunities in Australia”. Corbell told The Australian:

The message from the incoming Prime Minister is clear.

He wants Australia to be a renewable energy superpower. And that will send an enormously positive signal, right across the sector, about the opportunity in the Australian market.

We now have a national government that will not simply grudgingly accept the energy transition, but which will enthusiastically embrace it.

And that’s enormously positive for investor sentiment.

What ASX shares might benefit?

With the push towards renewable energy imminent, several names within the domain are now front and centre.

ASX shares such as Infratil Ltd (ASX: IFT) and Genesis Energy Ltd (ASX: GNE) come to mind. Each stock has finished 5% and less than 1% in the green over the past five days of trading respectively.

More ‘traditional’ energy companies with a renewable footprint are contenders too, such as Origin Energy Ltd (ASX: ORG) which has ownership of substantial solar power generation assets.

Secular names such as Hazer Group Ltd (ASX: HZR) also spring to mind given its focus on research into alternative power sources.

Except for Origin – with its 29% gain this year to date – each of these ASX shares has been beaten down in 2022, trading in the red during that time.

In wider market moves, the S&P/ASX 200 Index (ASX: XJO) is trading 0.04% higher early on Tuesday afternoon.

The post If the ‘election outcome is deeply consequential for clean energy investment’, which ASX shares might benefit? appeared first on The Motley Fool Australia.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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S&P/ASX 200 Index (ASX: XJO) shares have come under selling pressure in 2022.

The combination of fast-rising inflation and interest rates along with major geopolitical turmoil has seen the benchmark index lose 5.8% year to date.

That followed on from a strong 2021, where ASX 200 shares gained 13%.

While it may be overly optimistic to hope for similar gains at this stage of the calendar year, could the market already have hit its low point?

Has the bottom come and gone for ASX 200 shares?

A bullish sign to support the thesis that markets may be at or near their lows is coming from some of the top bosses of companies in the United States.

According to data from Washington Service, some 1,100 CEOs and top executives have been actively buying their own companies’ shares in May.

If the trend persists this week, May will be the first month since March 2020 where the top brass is buying more than they’re selling. That month, as you’ll likely recall, marked the bottom of the vicious early pandemic sell-off and the start of a new bull market.

And, as Bloomberg notes, corporate insiders were also buying more of their own shares in August 2015 – right before the markets bottomed – as well as in the latter months of 2018, which marked another market bottom.

So why are many investors hitting the sell button, both with ASX 200 shares and in US markets, even as company executives are buying?

Boots on the ground

According to Craig Callahan, CEO of Icon Advisers (quoted by Bloomberg):

It is a function of investors functioning at the ‘30,000 foot level’ or ‘macro’ whereas insiders are functioning at the ‘boots on the ground’, company-fundamentals level. We believe the company-fundamentals view is usually correct.

“It’s encouraging in the sense that they have enough confidence in their businesses to put more money in,” John Carey, managing director at Amundi Asset Management, added.

“We’ll see if the trend persists, if the insider buying continues, but generally it’s a positive sign.”

How low confidence could boost ASX 200 shares

For a final signal that ASX 200 shares may be at or near their bottom point, we turn to Jim Paulsen, chief investment strategist at The Leuthold Group (courtesy of The Australian Financial Review).

Citing historically low investor confidence, he believes the stock market sell-off is close to running its course.

“Conviction across both Main Street and Wall Street is currently lower than about 94 per cent of the time since 1960,” he said.

Paulsen continued:

Historically, when confidence was this low, the bear was close to expiring, and the average year-ahead S&P 500 return was more than plus 20%. Compared to historical norms, based on today’s extremely negative sentiment, the stock market finds itself in an area where, traditionally, bears die … and … bulls come out to play.”

While he’s specifically singling out the S&P 500 Index (SP: .INX), when US markets run higher, ASX 200 shares generally follow.

The post Could this mean the bottom has been and gone for ASX 200 shares? appeared first on The Motley Fool Australia.

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• The board has acknowledged a ‘disappointing experience’ in relation to the AMP share price. What now?
• ASX 200 midday update: Nufarm, Tabcorp and TechnologyOne tumble
• Here’s why the Wide Open Agriculture share price has surged 28% so far this week
• Why is the Chalice Mining share price on ice today?

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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It has been a mixed day for the ASX 200 index on Tuesday. In afternoon trade, the benchmark index is trading largely flat.

Pleasingly, that hasn’t stopped a number of lithium shares from pushing higher today.

ASX 200 lithium shares rise

Among the best performer in the battery materials sector are the following:

• The Allkem Ltd (ASX: AKE) share price is up almost 4% to $13.46
• The Liontown Resources Limited (ASX: LTR) share price is up 3.5% to $1.34
• The Mineral Resources Limited (ASX: MIN) share price is up 3% to $61.59
• The Pilbara Minerals Ltd (ASX: PLS) share price is up 3% to $2.89

What is driving lithium shares higher?

The gains being made by ASX 200 lithium shares today appear to have been driven by concerns that supply won’t be able to keep up with demand and news of a lithium bidding frenzy in China.

In respect to the former, with demand being tipped to outstrip supply for some time to come due to electric vehicle adoption, prices of lithium could remain higher for longer. This bodes well for companies already producing lithium such as Allkem and Pilbara Minerals.

As for the latter, according to Bloomberg, an auction for a controlling stake in a Chinese lithium mine received a whopping 3,448 bids over the weekend. Bloomberg notes that this underscores “the scramble to secure the battery metal that’s key to the clean-energy transition.”

Bidders were hoping to secure a 54.3% stake in Yajiang Snowway Mining Development, which owns the Sichuan based lithium mine. The lucky bidder ultimately paid approximately 2 billion yuan (US$299 million) for the stake, which was almost 600 times greater than the starting price.

Daiwa Capital Markets’ analysts Dennis Ip and Leo Ho said in a note: “We believe the auction price indicates a bullish Chinese primary market for future lithium prices as well as the strategic importance of Sichuan spodumene assets.”

The post Why are ASX 200 lithium shares kicking goals today? appeared first on The Motley Fool Australia.

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• Here are the 3 most traded ASX 200 shares on Monday
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Motley Fool contributor James Mickleboro has positions in Allkem Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The AMP Ltd (ASX: AMP) share price’s downwards trajectory over recent years has undoubtedly been disappointing for investors, as the company’s chair acknowledged at last week’s annual general meeting (AGM).

Especially as, while AMP’s stock tumbled 35% in 2021, the company decided to forego paying shareholders dividends.

But now the financial services provider has offloaded its Collimate Capital business, could its stock be heading towards greener pastures? Here’s what AMP’s management is expecting the company’s future to bring.

What’s next for disappointed AMP shareholders?

The AMP share price slipped 35% last year. It’s also currently 78% lower than it was five years ago. But the company is confident it’s now on the right path.

“We acknowledge the disappointing shareholder experience – in terms of share price and a lack of dividends,” AMP chair Debra Hazelton said at the company’s AGM on Thursday.

Under-performance was in large part the result of the significant disruption throughout the industry driven by regulatory change based on findings of the Financial Services Royal Commission in 2018.

Your board has been listening to you … We are making significant progress dealing with legacy matters, simplifying the business and setting AMP up for a better future, focusing on growth and delivering better shareholder outcomes.

AMP’s Debra Hazelton

However, AMP isn’t ready to get back on the dividend horse. Though, it plans to hand back most of the proceeds of its Collimate sales to shareholders through share buybacks and a capital return.

AMP will review its dividend policy after doing so.

Meanwhile, the company’s new CEO Alexis George has jumped straight in to set AMP on a new strategic path.

“My vision for AMP is to restore its standing as a trusted company, helping Australians and New Zealanders to create their tomorrow and achieve their financial goals,” George told the AGM.

The strategic path is made up of three tracks – simplifying the business, repositioning it, and exploring new opportunities.

George noted much of the work towards simplification has been done by selling off Collimate.

Now it will work to reposition towards growth opportunities in AMP Bank and its wealth management Platforms business.

Finally, AMP will look to explore new partnerships and opportunities to grow the business. New retirement products are one key area on which it is focused.

But the path forward didn’t appear to sate disappointed investors. Nearly 21% voted against the company’s renumeration report at its AGM. Another 4% would have brought about a strike.

Additionally, AMP’s control of the AMP Capital Wholesale Office Fund (AWOF) is in uncertain territory again. Stakeholders requested its management be put to a vote yesterday.

Losing control of the fund would half the earnout payable by Collimate real estate and domestic infrastructure business’ buyer Dexus Property Group (ASX: DXS).

AMP share price snapshot

While last year was a disaster for the AMP share price, the stock is outperforming in 2022.

Right now, the AMP share price is $1.11. That’s 11% higher than it was at the start of the year.

For comparison, the S&P/ASX 200 Index (ASX: XJO) has slid 5.7% in that time.

The financial services stock is also performing relatively in line with the index over the last 12 months. It has gained around 1% since this time last year.

The post The board has acknowledged a ‘disappointing experience’ in relation to the AMP share price. What now? appeared first on The Motley Fool Australia.

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Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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At lunch on Tuesday, the S&P/ASX 200 Index (ASX: XJO) is on course to record a small gain. The benchmark index is currently up 0.2% to 7,163.8 points.

Here’s what is happening on the ASX 200 today:

Tabcorp share price crashes following demerger

The Tabcorp Holdings Limited (ASX: TAH) share price has crashed materially lower on Tuesday. This has been driven by the demerger of its lottery and Keno businesses into a separate listed entity – The Lottery Corporation Limited (ASX: TLC). This will leave Tabcorp with its wager and media and gaming services businesses. The Lottery Corporation share price is trading at $4.59 on day one, giving it a market capitalisation of approximately $10.2 billion.

Technology One shares fall on half-year results

The TechnologyOne Ltd (ASX: TNE) share price is trading lower on Tuesday. This follows the release of the enterprise software company’s half-year results. TechnologyOne reported a 19% increase in revenue to $172.5 million and a 44% jump in SaaS annual recurring revenue (ARR) to $225.1 million. While this was ahead of expectations, its profit before tax fell well-short due to softer margins.

Nufarm sinks amid major share sale

The Nufarm Ltd (ASX: NUF) share price has tumbled notably lower today after a major shareholder sold down its stake in the agricultural chemicals company. Sumitomo Chemical Company has decided to sell its 15.9% shareholding in Nufarm for an average of $5.38 per share. This was a 7.8% discount to its last close price. The two companies intend to keep working together despite this sale.

Best and worst ASX 200 performers

The best performer on the ASX 200 on Tuesday has been the Virgin Money UK (ASX: VUK) share price with a 4% gain. This follows a similarly strong gain by its UK listed shares overnight. Going the other way, the worst performer has been the Tabcorp share price by some distance. Its shares are down 80% following its demerger.

The post ASX 200 midday update: Nufarm, Tabcorp and TechnologyOne tumble appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Wide Open Agriculture Ltd (ASX: WOA) share price is skyrocketing so far this week.

The company’s share price has soared 27.78% since it closed at 54 cents on Friday. It’s now trading at 69 cents, up another 2.22% on the day so far. For perspective, the  S&P/ASX 200 Index (ASX: XJO) has remained steady over the same time frame.

So why is Wide Open Agriculture having such a great start to the week?

Taiwan plan

Wide Open Agriculture’s Dirty Clean Food has signed an exclusive two-year distribution agreement with DKSH Taiwan Ltd.

Under the agreement, DKSH Taiwan will market and sell the company’s oat milk in Taiwan. This is expected to generate $650,000 in annual sales.

The oat milk product is carbon neutral and made with regeneratively-farmed oats. Today’s agreement is the fifth distribution agreement for Dirty Clean Food in the past seven months.

Commenting on the deal, managing director Dr Ben Cole said:

We are thrilled to partner with DKSH to launch Dirty Clean Food’s entry into the plant-based drinks market in Taiwan.

DKSH is a global leader in market expansion services, with broad reach and best in class capabilities. We are hopeful that this is the beginning of a long and fruitful partnership between our companies.

Supply agreement

In another deal this week, Wide Open Agriculture has also signed an agreement with Monde Nissin Australia to supply Buntine Protein for potential commercialisation. The product is a plant-based protein concentrate made from lupin seeds.

Wide Open Agriculture will supply the protein from a pilot production plant. The facility is under construction with the company targeting production of Buntine Protein in the fourth quarter of FY22.

Again, the product has no carbon footprint and can replace animal-based ingredients in food and beverages.

Commenting on the deal, Cole said:

WOA is excited to be working with MNA who share our passion to develop the market for regenerative lupin products.

This agreement has the potential to catalyse farmers to grow more regenerative lupins and offer consumers a range of innovative, delicious plant-based products.

Share price snapshot

The Wide Open Agriculture share price has lost 5.5% in the past year, while it is down 2% year to date.

In the past week, it has surged 22%, while it is up more than 6% over the past month.

For perspective, the benchmark S&P/ASX 200 Index has climbed 1% in the past year.

Wide Open Agriculture has a market capitalisation of about $88.5 million based on today’s share price

The post Here’s why the Wide Open Agriculture share price has surged 28% so far this week appeared first on The Motley Fool Australia.

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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Chalice Mining Ltd (ASX: CHN) share price won’t be going anywhere on Tuesday.

This comes as the company requested that its shares be placed in a trading halt.

At the time of writing, the mineral exploration company’s shares are frozen at $6.67 apiece. It’s worth noting that Chalice shares have gained more than 22% in value over the past week.

Why is the Chalice share price halted?

Prior to the market opening, the company requested the Chalice share price be halted while it prepares an announcement.

According to the release, the company is planning to make an announcement regarding a proposed capital raising.

Chalice has requested that the trading halt remain in place until Thursday 26 May or following the release of the announcement, whichever comes first.

Julimar exploration access update

While details remain unknown about the company’s latest equity raise, we take a look at its flagship Julimar Project.

Located 70 kilometres north-east from Perth in Western Australia, the Julimar Project is a rich PGE-Ni-Cu target. Chalice controls 100% of a 2,000 square kilometre exploration licence prospective in the Avon Region.

PGE-Ni-Cu stands for a number of different minerals. The first, platinum group elements (PGE) consist of palladium (Pd), iridium (Ir), osmium (Os), rhodium (Rh) and ruthenium (Ru). Next on the list is nickel (Ni), and then copper (Cu).

Last week, the company advised that it received approvals to conduct a planned low-impact exploration drilling at the Hartog-Dampier targets.

The drill program is designed to provide an initial test of the potential for green metals (PGE-Ni-Cu) in the area.

These metals are very rare and are critical for decarbonising the global economy and addressing climate change through technologies such as renewables, electric vehicles, energy storage systems and green hydrogen.

About the Chalice share price

Since this time last year, Chalice shares have travelled south to register a loss of around 14%.

In 2022, the company’s shares have fallen further on the back of weakened investor sentiment, down 30%.

In contrast, the S&P/ASX 300 Metals and Mining (ASX: XMM) sector is up 6% year to date.

Based on valuation grounds, Chalice has a market capitalisation of roughly $2.42 billion, with approximately 355.02 million shares outstanding.

The post Why is the Chalice Mining share price on ice today? appeared first on The Motley Fool Australia.

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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Nufarm Ltd (ASX: NUF) share price has crashed to a more than three-month low this morning. It comes after the company’s largest shareholder decided to dump its shares.

The Nufarm share price is currently down 14.47% to $4.995, while the S&P/ASX 200 Index (ASX: XJO) is down 0.04%.

The agricultural chemicals group told the ASX it had received word that Sumitomo Chemical Co Ltd (TYO: 4005) will be selling its entire 15.9% holding in Nufarm.

Nufarm share price sinks despite reassurances

The ASX group tried to reassure investors that its partnership with Sumitomo is still intact despite the sell-off.

Nufarm said:

Nufarm and Sumitomo plan to continue their mutually beneficial business alliance that started more than 12 years ago. The crop protection business is important to both companies and therefore the desire to continue to grow the commercial relationship and synergies in global agriculture markets remains a key objective.

Sumitomo licking its Nufarm wounds

No reason was given why Sumitomo was quitting the Nufarm share register. Perhaps the 20% jump in the Nufarm share price over the past year (before today’s crash) enticed it to sell.

Mind you, not that Sumitomo is exiting with a profit. The Japanese group paid $14 a share for Nufarm back in late 2009, reported the Australian Financial Review.

It’s believed that Sumitomo sold the Nufarm shares at $5.38 to crystallise the painful 160% loss.

The investment was meant to help Sumitomo negotiate strategic agreements to distribute chemicals globally.

But China foiled those plans when its manufacturers sent the glyphosate share price tanking by flooding the market with the chemical.

Nufarm share price could find redemption

The block sale comes after Nufarm reported a 41% increase in first-half underlying earnings before, interest, tax, depreciation and amortisation (EBITDA) to $330 million.

However, the Nufarm share price slumped on the earnings news, even though most brokers were impressed by the results.

Strong soft commodity prices and a good crop outlook should be bolstering the fortunes of ASX agri-businesses.

The Elders Ltd (ASX: ELD) share price is one example. That shot up strongly on its strong profit result yesterday.

Perhaps once the dust settles, the Nufarm share price can find supporters again.

The post Here’s why the Nufarm share price is tanking 14% appeared first on The Motley Fool Australia.

More reading

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• Why Nufarm, Pendal, Wesfarmers, and Westpac shares are sinking
• Nufarm share price tumbles despite huge first-half profit growth

Motley Fool contributor Brendon Lau has positions in Elders Limited and Nufarm Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Elders Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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While shareholders were licking their lips amid a record half-year result from Incitec Pivot Ltd (ASX: IPL) yesterday, another snippet of news derailed the euphoria. Plans to split the company into two left Incitec Pivot shares down 3.7%.

Unfortunately, the pain is continuing today with the fertiliser and explosives manufacturer weakening a further 1.67% this morning. This places the company’s share price approximately 15% below the 52-week high that it reached last month.

What does the split mean for Incitec Pivot shares?

The united explosive and fertiliser business has operated for 14 years under the Incitec Pivot banner. The Australian fertiliser maker acquired Dyno Nobel back in 2008, yet the combined company has never seen the same heights in its share price since.

Fast forward to the present, Incitec’s plan is to break up the two segments of the business and list them individually on the ASX.

This would see the currently-listed entity become known as Dyno Nobel Limited — a global leader in industrial and mining explosives manufacturing. Meanwhile, the company’s fertiliser division would list separately on the ASX as Incitec Pivot Fertilisers Limited.

After undergoing a strategic review, the company concluded the demerger would be beneficial for several reasons. The rationale included: a declining synergy in ammonia manufacturing; an improved focus on technology specific to the industry; and, a potential re-rating for shares in Incitec Pivot and Dyno Nobel from investors.

If approved, shareholders will receive a proportional holding of both companies as per their existing holding. The company is targeting separation completion of the two businesses in the first half of 2023.

What do analysts think of the proposal?

The proposal to split up Incitec Pivot was also not received well by analysts. The teams at Citi and Jefferies have both reduced their price targets on Incitec Pivot shares following the latest announcement.

According to Citi, it is unclear whether splitting into two companies will deliver more value than the cost of doing so. At a one-off separation cost of $80 million to $105 million and ongoing costs of $25 million to $35 million each year, Citi is not confident in the value proposition of the separation.

The two brokers cut their price target on Incitec Pivot shares to $3.70, representing a paltry ~4% upside.

The post Own Incitec Pivot shares? Here’s what you need to know about the proposed demerger appeared first on The Motley Fool Australia.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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