Commonwealth Bank of Australia (ASX: CBA) shares are some of the most popular investments on the S&P/ASX 200 Index (ASX: XJO). For many years, CBA was the biggest share on the ASX 200 by market capitalisation. And it remains the largest ASX 200 bank on our share market.

As such, CBA is one of the most common shares to find in an ASX share portfolio. But that doesn’t mean it’s automatically a good investment.

So today, let’s discuss three reasons why I’m personally avoiding CBA shares for my portfolio.

3 reasons why I’m avoiding CBA shares in 2023

The property market

CBA is one of the banks most heavily exposed to residential property. According to the bank’s own numbers, it had a 25% share of Australian home lending as of 31 December 2022, well above its closest competitor’s 20%. But with greater market share comes greater risk.

And it’s no secret that property prices are facing a lot of pressure right now, thanks to rising interest rates. If rates keep rising and disposable incomes fall further, then CBA might be faced with a spike in loan arrears.

This leads me to believe that CBA might not enjoy the same kinds of prosperity it has in the past from residential property, at least for the next year or two.

CBA shares are expensive

Investors have a special affinity with the CBA share price, thanks to its dominance of the Australian banking sector. But this affinity comes at a cost – investors routinely price this ASX bank share at a premium against its competitors. Let’s use a simple metric to demonstrate – the price-to-earnings (P/E) ratio.

At present, CBA’s big four competitors all have lower P/E ratios than CBA does itself. Right now, ANZ Group Holdings Ltd (ASX: ANZ) has a P/E ratio of 10.2

National Australia Bank Ltd (ASX: NAB) is at 13.85, while Westpac Banking Corp (ASX: WBC) is sitting at 14.27.

But CBA is perched atop this pole with a current P/E of 16.92. Now some might argue that Commonwealth Bank deserves to trade at a premium. But this is a steep one. This indicates to me that this bank’s share price is still elevated and doesn’t have much of a cushion for any future falls.

You can get better dividends elsewhere

Many ASX investors, especially retirees, love holding CBA shares for their fully franked dividends. And sure, right now, the bank is offering a decent dividend yield of 4.28%.

But you can get far better yields elsewhere. For example, CBA’s fellow big bank ANZ currently has a trailing dividend yield above 6%. Its smaller banking rival Bank of Queensland Ltd (ASX: BOQ) has a yield of 6.65% right now. Both come fully franked too.

And even an index exchange-traded fund (ETF) like the Vanguard Australian Shares Index ETF (ASX: VAS) has a higher trailing yield than CBA. Vanguard Australian Shares ETF units are currently sitting on a trailing yield of 7%.

So I think there are better places to go than CBA if dividend income is your primary motivation for owning this bank share.

The post 3 good reasons I’m avoiding CBA shares at all costs! appeared first on The Motley Fool Australia.

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More reading

• Why is the ASX 200 taking a tumble today?
• Why is the Woodside share price wilting 7% on Wednesday?
• ASX 200 bank shares slump could continue: Morgan Stanley
• 3 ASX shares to avoid like the plague (and one to buy for the next 4 years): expert
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Sebastian Bowen has positions in National Australia Bank, Bank of Queensland and Vanguard Australian Shares Index ETF. 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 Westpac Banking. 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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Last month, a large number of ASX 200 shares released their latest results and decided to share some of their profits with shareholders in the form of dividends.

Once a company declares its dividend, it names a date in which its shares will trade ex-dividend.

This is essentially when the rights to the dividend payment have been finalised. If you buy its shares on the ex-dividend date, you’re too late to the party and the seller will be the one that receives the dividend even though you may be holding the shares on the dividend payment date.

In light of this, a share will more often than not fall in line with the amount of its dividend to reflect this.

A number of ASX 200 shares are going ex-dividend today are trading lower for this reason. Listed below are six such examples:

Blackmores Ltd (ASX: BKL)

The Blackmores share price is down 1.5% after trading ex-dividend for the company’s 87 cents per share fully franked interim dividend. This will be paid to eligible shareholders on 28 March.

Brambles Limited (ASX: BXB)

The Brambles share price is dropped almost 1% to $13.19. It will be paying eligible shareholders a partially franked 17.7 cents per share interim dividend on 13 April.

Costa Group Holdings Ltd (ASX: CGC)

The Costa share price is down 1.5% this afternoon. Its shares have gone ex-dividend for its partially franked 5 cents per share interim dividend. This will be paid to shareholders on 6 April.

Smartgroup Corporation Ltd (ASX: SIQ)

The Smartgroup share price has sunk almost 7% after trading ex-dividend for the company’s 29 cents per share fully franked final dividend. Eligible shareholders can look forward to receiving this dividend on 23 March.

Super Retail Limited (ASX: SUL)

The Super Retail share price is down almost 4%. This retailer will be paying its fully franked 34 cents per share interim dividend on 14 April.

Woodside Energy Group Ltd (ASX: WDS)

The Woodside share price has tumbled 7.5% after going ex-dividend for the energy giant’s massive 211.3 cents per share fully franked final dividend. It will be paid to eligible shareholders in just under a month on 5 April.

The post 6 ASX 200 shares trading ex-dividend today appeared first on The Motley Fool Australia.

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More reading

• Why is the Woodside share price wilting 7% on Wednesday?
• 5 things to watch on the ASX 200 on Wednesday
• Why did the Woodside CEO just sell off over $200,000 worth of shares?
• Woodside share price gains as Albanese supports gas in energy ‘wake-up call’
• Hoping to bank the supersized Woodside dividend? You’d better hurry

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 positions in and has recommended Super Retail Group. The Motley Fool Australia has positions in and has recommended Smartgroup and Super Retail Group. The Motley Fool Australia has recommended Blackmores and Costa Group. 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 Harvey Norman Holdings Limited (ASX: HVN) share price is down 0.5% to $3.85 amid news its founder has just dropped $8 million in an epic ‘buy-the-dip‘ exercise.

A change of directors interest notice lodged with the ASX reveals Gerry Harvey bought 270,000 Harvey Norman shares last Thursday. He bought a further 1,865,000 shares on Friday.

When company insiders spend big money on their shares, that implies a lot of confidence in the stock.

Does this mean you should buy, too? Let’s hash this out together.

What was the Harvey Norman share price when Gerry bought?

Firstly, let’s look at the price Harvey paid, which indicates where he sees good value.

The 270,000 Harvey Norman shares purchased on Thursday were bought at an average price of $3.71. Point of interest: Harvey has already made a capital gain of $37,800 on this parcel of shares.

The shares purchased on Friday were nabbed at an average price of $3.7478. So the capital gain there is already $190,603. Smart move, Gerald!

The total consideration paid for both lots of shares is $7,993,785.17. Both purchases were indirect interest buys through various trusts.

Why did the retail legend buy?

Well, the timing is relevant here.

The purchases took place a few days after the company reported its 1H FY23 results.

The retailer revealed a 15.1% decline in reported net profit after tax (NPAT) to $365.9 million. It also slashed its interim dividend by 35% to 13 cents per share fully franked.

Investors didn’t react well. As we reported, the Harvey Norman share price was smashed by 12% at its intraday low.

Harvey criticised the market response, calling it a “total overreaction”. But then he did what all smart long-term investors should do — he took advantage of it and bought the dip.

Harvey said last week:

Harvey Norman is on a 6 per cent dividend yield, or better, at $4 a share and we only paid out half (our earnings) in dividend; if we paid out the lot it would be a 12 per cent dividend fully franked. We have a wonderful record of paying dividends over 35 years.

We’ve got a long record that’s very, very good and so the market … should be delighted, not disappointed.

Another director follows the same path

Harvey Norman’s chief financial officer Chris Mentis also got in on the action last week.

According to a separate notice lodged with the ASX, Mentis purchased 40,000 shares on market for $147,164 on Thursday. The purchase was an indirect interest buy through his super fund.

Mentis also serves as an executive director and the company secretary.

Should you buy Harvey Norman at today’s share price?

So, the Harvey Norman share price is still in ‘buy the dip’ territory. At $3.85, it is still down significantly — about 8% — since the 1H FY23 results were released last Tuesday.

We know from Harvey’s purchases that he sees value in his ASX retail share at the $3.70-ish mark.

But what do the brokers think?

According to my Fool colleague James, Goldman Sachs has retained its buy rating on Harvey Norman shares. It has trimmed its 12-month price target to $4.70.

Based on where the Harvey Norman share price is trading at the time of writing, that implies a very healthy potential 22% upside for investors who buy today.

Although Goldman was disappointed with the 1H FY23 results, it believes the half represented the peak cash drag on franchisee support. It also sees a lot of value in the company’s property holdings.

Excluding those property assets, Goldman notes that Harvey Norman shares are trading at a price-to-earnings (P/E) ratio of 6 times FY24 estimated earnings.

Generally speaking, the market considers any established stock on a P/E lower than 15 times as cheap.

So, the Harvey Norman share price could be considered a value buy at this time.

The post Gerry Harvey just bought $8 million worth of Harvey Norman shares. Should you buy? appeared first on The Motley Fool Australia.

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More reading

• Top brokers name 3 ASX shares to buy next week
• Give yourself a passive income boost with these ASX dividend shares: experts
• Top brokers name 3 ASX shares to buy today
• Buying opportunity? Harvey Norman boss says share slump is a ‘total overreaction’
• 5 things to watch on the ASX 200 on Wednesday

Motley Fool contributor Bronwyn Allen has positions in Harvey Norman. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Harvey Norman. The Motley Fool Australia has positions in and has recommended Harvey Norman. 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 S&P/ASX 200 Index (ASX: XJO) is having a day to forget.

As we head into the lunch hour the benchmark index is down 0.7%, having earlier posted losses of 1%.

This comes after the ASX 200 rallied on the back of the RBA’s 0.25% interest rate hike announcement yesterday, closing the day up 0.6%. (Full story here.)

So, why the reversal today?

Why is the ASX 200 falling today?

Somewhat ironically, today’s woes on the ASX 200 also have to do with inflation, interest rates and central bank policy. Not the RBA though. This time it’s the United States Federal Reserve investors are eyeing.

The ASX 200 is following in the footsteps of US markets, which all closed sharply lower yesterday (overnight Aussie time). The Dow Jones Industrial Average Index (DJX: .DJI) led the charge down, sliding 1.7%.

This came on the heels of a hawkish tone set by Fed chair Jerome Powell as he addressed the Senate Banking Committee.

Powell stated:

The latest economic data have come in stronger than expected, which suggests that the ultimate level of interest rates is likely to be higher than previously anticipated. If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes.

Markets are now pricing in the likelihood that the world’s most influential central bank will raise interest rates by another 0.50% when the Federal Open Market Committee meets again later this month. That could pressure US markets, which in turn would throw up some headwinds here for the ASX 200.

Commenting on Powell’s speech, Anna Wong and Stuart Paul, Bloomberg economists, said, “We now expect the dots tracing Powell’s expected path of policy rates – and those of multiple other committee members – to shift higher and stay higher for longer.”

LH Meyer/Monetary Policy Analytics economists noted, “Powell’s comments make it sound as though they need to be convinced not to speed the pace up. The presumption that’s been established is that they will hike 50 [basis points] in March, unless they are convinced otherwise.”

Judging by Powell’s words, the Fed may take a fair bit of convincing before easing back on their tightening path.

“Although inflation has been moderating in recent months, the process of getting inflation back down to 2% has a long way to go and is likely to be bumpy,” he said.

With the ASX 200 looking to be pricing in another outsized rate hike from the Fed, we may already be experiencing the next bump in the road today.

The post Why is the ASX 200 taking a tumble today? appeared first on The Motley Fool Australia.

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More reading

• Why is the Woodside share price wilting 7% on Wednesday?
• ASX 200 bank shares slump could continue: Morgan Stanley
• 5 things to watch on the ASX 200 on Wednesday
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Owners of this ASX 200 share are soon going to receive a bigger dividend

Motley Fool contributor Bernd Struben 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 Nuix Ltd (ASX: NXL) share price has come under significant pressure on Wednesday.

At the time of writing, the investigative analytics and intelligence software provider’s shares are down 16% to $1.07.

Why is the Nuix share price crashing?

Investors have been hitting the sell button on Wednesday after the company’s former CEO, Edward Sheehy, appealed a recent court decision.

This relates to Sheehy’s claims that he validly exercised options in January 2020 that would have entitled him to be issued with approximately 22.6 million shares. And with the former CEO claiming that he would have sold these shares long before Nuix shares had collapsed, he was seeking an award of damages of up to $169 million plus interest.

A month ago, the Nuix share price rocketed higher after the court dismissed his claims.

However, Nuix has now been notified that Sheehy has lodged a notice of appeal in respect of certain aspects of that decision.

The release notes that Sheehy contends that the primary Judge was incorrect in concluding that he was precluded from raising the matters in his claims by reason of the doctrine of Anshun estoppel and that share options held by Mr Sheehy could not be exercised following Nuix’s IPO in December 2020.

What’s next?

It is worth noting that Sheehy is not appealing the primary Judge’s findings that Nuix had not engaged in any oppressive or unconscionable conduct.

In addition, Nuix notes that:

Mr Sheehy has also not appealed the primary judge’s finding, that: even if he was to be successful in his claims that he was entitled to 22,663,650 shares in respect of his 453,273 options; and that he was entitled to exercise those options following the Nuix IPO.

As a result, his maximum potential damages claim would be approximately $61 million plus interest rather than the $169 million plus interest he originally claimed.

Nevertheless, Nuix continues to reject Sheehy’s claims and will defend the appeal.

The post Nuix share price dives 16% on new legal battle with former CEO appeared first on The Motley Fool Australia.

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• Why Inghams, Kelsian, Nuix, and Perenti shares are racing higher
• Nuix share price surges 6% on return to profit
• Earnings preview: Here are the ASX shares reporting on Monday
• Dash for trash fades as earnings cliff looms for ASX shares, with the market shooting first and asking questions later
• Why Appen, Lendlease, Nuix, and Star shares are sinking today

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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It’s been a day of red ink so far this Wednesday on the S&P/ASX 200 Index (ASX: XJO). At the time of writing, the ASX 200 has slipped by a meaningful 0.88% this session thus far to 7,300 points. But that’s nothing compared to the apparent woes of the Woodside Energy Group Ltd (ASX: WDS) share price.

ASX 200 energy share Woodside closed at $37.62 a share yesterday. But the company opened at just $35.20 a share this morning and has fallen even further to $34.77 at present.

So what’s going on with Woodside? Why are we witnessing the Woodside share price wilt by a whopping 7.6% this Wednesday?

Well, there has been some news out of Woodside today. The company announced this morning that directors Dr Sarah Ryan and Dr Christopher Haynes are both standing down from Woodside’s board of directors.

This will be effective from Woodside’s annual general meeting on 28 April next month. The company has announced that Arnaud Breuillac is to join the board in their place, with Angela Minas also nominated for membership.

But it seems unlikely that these changes at the top are what’s weighing on Woodside shares.

No, today’s share price falls can largely be attributed to Woodside trading ex-dividend.

Woodside share price falls after going ex-dividend

Last month, during its full-year results for FY2023, Woodside reported some pleasing metrics. These included a 142% rise in revenues and a 223% spike in net profits. This enabled the company to announce a record final dividend of US$1.44 per share. This is scheduled to hit investors’ bank accounts on 5 April.

However, eligibility for this monster payout has just closed. Woodside shares have traded ex-dividend for the company’s final dividend payment this morning. That means that anyone who buys Woodside shares from today onwards will not be receiving this latest dividend payment.

As such, the value of this dividend has left the Woodside share price – making the shares intrinsically less valuable. That’s why we are seeing a big drop in the Woodside share price this Wednesday, as is typical when a share goes ex-dividend.

It should be mentioned that Woodside would probably be having a tough day anyway, even if it wasn’t going ex-dividend. Most of Woodside’s peers in the ASX 200 energy sector are falling in value this session.

Beach Energy Ltd (ASX: BPT) and Santos Ltd (ASX: STO) are both down by more than 1% so far. And Karoon Energy Ltd (ASX: KAR) is down 2.5%.

Today’s falls put the Woodside share price down by 1.74% in 2023 to date:

At the current Woodside share price, this ASX 200 energy share has a dividend yield of 10.85%.

The post Why is the Woodside share price wilting 7% on Wednesday? appeared first on The Motley Fool Australia.

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• ASX 200 bank shares slump could continue: Morgan Stanley
• 5 things to watch on the ASX 200 on Wednesday
• Why did the Woodside CEO just sell off over $200,000 worth of shares?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Owners of this ASX 200 share are soon going to receive a bigger dividend

Motley Fool contributor Sebastian Bowen 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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ASX dividend shares are a popular investment choice for Aussies who want to generate investment income. But, there’s an argument to say that it could harm returns for some businesses over the long term.

There are plenty of high-quality businesses on the ASX that are among the best at what they do, such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and Telstra Group Ltd (ASX: TLS).

Investors may expect a high level of dividend income from these businesses each year. But for plenty of companies, there could be better uses of money.

Growth spending is better?

When a business makes a profit, there’s a variety of different things that the management could do with that money.

One of the most popular things for them to do in Australia is to pay a dividend. Investors like to receive a ‘real’ return. Institutional investors may want to get that cash out of the business – boosting their short-term returns.

But, that ASX dividend (yield) may only be worth a few percent in investors’ hands. It could be worth less than 1%.

Some, or all, of that money, could be re-invested back into the business and generate a much better return.

A business could open a new, advanced, manufacturing plant. It could use the cash to open a few new stores in a new city/country. It could hire more sales people, or spend a bit more on developing the next product or service.

Some businesses can generate enormous returns on money invested in the business. This can be measured in a few different ways such as the return on equity (ROE) or return on capital (ROC). Those figures are good indicators of how much money the company is earning on the cash that has been invested in the business by the business.

For example, Wesfarmers Ltd‘s (ASX: WES) ROE in the first half of FY23 was 32.8%. It could make sense for Wesfarmers to retain more of its cash and achieve a high internal return, which would hopefully translate to a boost to profit, the share price and dividends down the line.

Berkshire Hathaway is a great example of what a great business (and investor) can do with retained profit. Warren Buffett’s business has achieved a compound annual gain of 19.8% per annum between 1965 to 2022 – that’s a total return of 3,787,464%.

The US giant has a policy of not paying a dividend because the cash is worth more to investors staying in the business than as a dividend. If it had paid a dividend, Buffett would have had a smaller money pile to compound, so it would have grown into a smaller amount over the years, even if he achieved the same investment returns in percentage terms.

Tax can also have an impact on the effectiveness of paying dividends. When a company makes a profit, it generally pays tax on that net profit. Not only has the company paid tax, but then the individual typically has to pay tax on the dividend too, particularly if they’re in a high tax rate. The shareholder’s wealth, on paper, can be reduced by receiving the dividend.

ASX dividends can make sense

There are some situations where it does make sense to pay dividends.

For starters, in Australia, companies generate franking credits – a refundable tax offset. It can make sense for the company to unlock the franking credits that it generates. For shareholders with a low (or zero) tax rate, the franking credits give investors an after-tax boost to the cash return.

Plus, a business may not always have a good opportunity to invest that money. That’s why I think it’s worthwhile investing in businesses that have lots of growth options. But, eventually, a business may not have attractive growth options. In that case, it’d be better to give out the cash than invest it badly or make a terrible acquisition.

For example, Wesfarmers shouldn’t keep expanding its Bunnings network until there’s a warehouse on every street corner.

I think businesses need to make a careful choice about what’s best for the shareholder. But, I do believe it does make sense for some Aussie companies to unlock some franking credits for investors each year, particularly if that’s what shareholders want.

The post Too much of a good thing? When ASX dividends could hurt your overall returns appeared first on The Motley Fool Australia.

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More reading

• Why is the Woodside share price wilting 7% on Wednesday?
• Sayona Mining share price dips despite first lithium production
• Lynas share price rebounds on $200m Japanese Government investment
• Mesoblast share price rockets 23% on FDA news
• 10 ASX 200 stocks trading ex-dividend tomorrow

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has positions in and has recommended Telstra Group and Wesfarmers. The Motley Fool Australia has recommended Berkshire Hathaway. 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 Sayona Mining Ltd (ASX: SYA) share price is down 3.3% on Wednesday morning, currently trading for 23.7 cents per share.

It’s not just the Sayona Mining share price under pressure today.

In fact, all of the S&P/ASX 200 Index (ASX: XJO) lithium stocks are well into the red at the time of writing.

Which could be why Sayona Mining is sliding, despite reporting its first lithium production.

What did the ASX 200 lithium stock report?

The Sayona Mining share price is in the red even though the miner announced the production of its first spodumene concentrate at its flagship North American Lithium (NAL) operation.

Some 70 tonnes of lithium concentrate were produced at NAL, located in Quebec, Canada.

The emerging lithium producer labelled it “another milestone in NAL’s restart”.

It said that commissioning is proceeding on schedule and within budget. The first saleable concentrate is expected to be produced soon.

Commenting on the progress that’s yet to lift the Sayona Mining share price, managing director Brett Lynch said:

This is another great achievement for the team at NAL. I extend my thanks to everyone concerned for progressing the NAL restart on time and on budget – something few others have achieved in recent times amid escalating cost and supply chain pressures.

“These are exciting times with the first saleable lithium concentrate to be produced soon, marking the next step in Sayona’s evolution towards becoming a leading hard rock lithium producer,” Lynch added.

According to Sayona Mining, its NAL project will be the most significant source of hard rock lithium production in North America.

The company expects to ship its first spodumene concentrate from NAL in July 2023. It’s targeting four shipments in the first half of fiscal 2024.

Sayona Mining also updated the market on its drilling program alongside joint venture partner Jourdan Resources.

Plans are in place for more than 50,000 metres of drilling in 2023 at NAL and Jourdan’s adjacent Vallée Lithium Project.

Sayona Mining share price snapshot

Despite today’s dip, the Sayona Mining share price remains up an impressive 81% over the past 12 months.

Though, as you can see on the chart below, it hasn’t exactly been a smooth ride.

The post Sayona Mining share price dips despite first lithium production appeared first on The Motley Fool Australia.

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More reading

• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why InvoCare, Pentanet, Sayona Mining, and Weebit Nano shares are storming higher
• Sayona Mining share price charges higher following $55m cap raise
• Here are the 10 most shorted ASX shares this week
• Why has the Sayona Mining share price just been halted?

Motley Fool contributor Bernd Struben 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 Lynas Rare Earths Ltd (ASX: LYC) share price is up 1.15% to $7.455 in early trading on Wednesday.

The share price bounce follows news from the rare earths miner posted after the market close yesterday.

The Japanese Government is giving Lynas $200 million in exchange for priority supply until 2038.

In a statement, Lynas said the new deal will “further strengthen the Lynas balance sheet and support funding of capital projects designed to meet accelerating global demand for Rare Earth materials”.

What news has the Lynas share price rebounding today?

Lynas hit a new 52-week low of $7.26 yesterday amid various negative news over the past fortnight.

The big one is the recent revelation from Telsa Inc (NASDAQ: TSLA) that its next-gen electric vehicle (EV) motor won’t use any rare earths.

On top of that, Lynas has problems with its new Malaysian licence, and last week it reported a 4% decline in profit in 1H FY23 and a 32% increase in costs. All kinda depressing for investors.

So, this new $200 million investment is welcome news today for investors in Lynas shares.

Here are the details.

The new agreements are between Lynas and Japan Australia Rare Earths B.V. (JARE).

JARE is a special-purpose company established by the Japanese Government administrative institution, the Japan Organization for Metals and Energy Security (JOGMEC), and Sojitz Corp (TYO: 2768).

Under the new agreements, JARE will give Lynas $200 million and forego the US$11.5 million in interest that Lynas owed but deferred in 2016 under their shared long-term loan facility.

The $200 million will be provided via a subscription for Lynas shares at a price that will be the higher of the 5-day volume-weighted average price (VWAP) immediately before and following the announcement.

Lynas will use the cash to fund current and planned projects to increase production.

Part of the deal involves Lynas giving supply priority to the Japanese market until 2038.

Lynas CEO Amanda Lacaze said:

Lynas has a huge appetite for growth and a large capital investment plan. This $200 million capital investment from the Japanese Government, through JARE, will boost our balance sheet and assist in assuring the delivery of our major growth projects.

JARE has been a valued and strategic partner to Lynas since 2011 and we welcome these new
agreements which better reflect demand forecasts from the Japanese rare earths market.

Today, Lynas is the market leading supplier of NdPr to the Japanese rare earths industry and these new
agreements demonstrate the deep commitment of JARE to the ongoing growth and success of our
company.

Investors watch Lynas performance

The Lynas share price is down 4% in 2023 while the S&P/ASX All Ordinaries Index (ASX: XAO) is up 5%.

Over the past 12 months, Lynas shares have lost 23% in value while All Ords stocks have risen by 3.3%.

The post Lynas share price rebounds on $200m Japanese Government investment appeared first on The Motley Fool Australia.

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More reading

• Lynas Rare Earths has plunged 20% in a month: Is it a buy?
• Why did the Lynas share price just hit a 52-week low?
• Here are the 3 most heavily traded ASX 200 shares on Tuesday
• Why Brainchip, Lynas, Megaport, and Universal Store shares are dropping today
• Why Fortescue, Lynas, Myer, and New Hope shares are dropping today

Motley Fool contributor Bronwyn Allen 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 market may be sinking today, but the same cannot be said for the Mesoblast Ltd (ASX: MSB) share price.

In morning trade, the biotech company’s shares rocketed as much as 23% to $1.14.

The Mesoblast share price has pulled back a touch since then but remains up 13% to $1.03.

Why is the Mesoblast share price rocketing higher?

Investors have been buying the company’s shares after it was given some good news by the United States Food and Drug Administration (FDA).

According to the release, the FDA’s Office of Therapeutic Products has accepted the company’s Biologics License Application resubmission for remestemcel-L in the treatment of children with steroid-refractory acute graft versus host disease (SR-aGVHD).

And while this is not an approval, it is a big step in the right direction. Furthermore, the release notes that the FDA considers the resubmission to be a complete response to previous feedback and has set a Prescription Drug User Fee Act (PDUFA) goal date of 2 August.

What is a PDUFA?

My US colleagues cover the PDUFA in detail here. But here’s a summary:

The PDUFA’s primary goal was to authorize the FDA to collect fees from drugmakers to help pay for the FDA staff needed to review regulatory filings for drugs. But the pharmaceutical industry objected to paying money to the FDA without anything guaranteed in return. The PDUFA helps the FDA by providing the agency with a way to generate money and establishes a set timeline for the agency to make approval decisions.

All in all, this guarantees that Mesoblast will have an answer from the FDA by 2 August for remestemcel-L in the treatment of children with SR-aGVHD.

Mesoblast’s Chief Executive, Silviu Itescu, was pleased with the news. He said:

Over the last two years we have worked tirelessly to address the issues previously raised by FDA. We look forward to working closely with the Agency over the review period with the aim to make remestemcel-L available as a therapy for children suffering from SR-aGVHD.

The post Mesoblast share price rockets 23% on FDA news appeared first on The Motley Fool Australia.

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More reading

• Why De Grey, Kogan, Mayne Pharma, and Mesoblast shares are charging higher
• 2 ASX All Ords shares smashing new 52-week highs on Thursday
• Mesoblast share price soars 11% on FDA update

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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