This week is shaping up to be less controversial than last week on the S&P/ASX 200 Index (ASX: XJO). It should be somewhat less eventful after the contentious AGMs of Crown Resorts Ltd (ASX: CWN), Qantas Airways Limited (ASX: QAN), and the Q3 update from AMP Limited (ASX: AMP) we saw last week.

Nevertheless, there are still some very interesting events coming up on the ASX this week. Some of these are due to recent developments, while others will provide an insight into companies known to be impacted by the pandemic. The following covers off just some of what is happening among ASX 200 shares this week. It is however, by no means a definitive list of all AGMs and events this week and, for example, excludes pending announcements from National Australia Bank Ltd. (ASX: NAB), South32 Ltd (ASX: S32), and St Barbara Ltd (ASX: SBM).

5 ASX 200 events this week

Tuesday

At 10.30am on Tuesday, Boral Limited (ASX: BLD) will hold its AGM. The troubled ASX 200 company is currently in the midst of a turnaround attempt and has had a turbulent 2020. The company has installed a new CEO, Zlatko Todorcevski. Meanwhile, current chair, Kathryn Fagg, has announced she will retire from the company in 2021.

The chair is retiring partially due to the role she played in the acquisition of Headwaters in the United States, resulting in a $1.2 billion write down. Moreover, there are questions over her plan to allow two  Seven Group Holdings Ltd (ASX: SVW) executives to join the board after Seven raised its ownership stake in Boral to 19.9%.

Investors will also be looking for an update on Boral’s portfolio review. With the number of Seven Group directors reduced back to one, it is unlikely the AGM will be contentious. 

At 11.00am, Bendigo and Adelaide Bank Ltd (ASX: BEN) will hold its AGM. Investors may be interested in the benefits to shareholders of the tie up with Tyro Payments Ltd (ASX: TYR) in merchant transactions. The ASX 200 bank’s AGM will also provide an indication of its performance in Q1 and anticipated recovery from the pandemic.

At 11.30am, Link Administration Holdings Ltd (ASX: LNK) will hold its AGM. This promises to be a very interesting event. The company is presently fending off a $2.8 billion non binding proposal. It has rejected the offer as undervaluing the ASX 200 company. Moreover, it is considering a demerger of its shareholding in property transaction company, PEXA. 

Wednesday

At 11:30am, the Australian Bureau of Statistics will release the Q3 consumer price index (CPI). This will provide investors with an idea of the scale of the repair underway to the Australian economy. For example, the June quarter report carried news of a -95.0%. fall in child care costs. The results of the CPI report will likely influence share prices across several ASX 200 companies. 

Thursday

At 10.30am, ASX 200 company JB Hi-Fi Limited (ASX: JBH) will hold its AGM. Investors will be looking at the Q1 results as a guide to whether the company can continue the high volume of sales achieved during the pandemic. I’ll also be mindful to exclude the effects of Victoria’s extended lockdown on JB’s results.

The company recorded an exemplary 33.2% growth in underlying net profit after tax between FY19 and FY20. In addition, online sales grew 56.6% year on year. This sets a high bar for the future.

More reading

• The Magellan (ASX:MFG) share price fell 4% last week. Here’s why.
• What zero COVID-19 cases in Victoria means for ASX 200 shares
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• 3 star ASX shares to buy for the rest of 2020
• 5 things to watch on the ASX 200 on Monday

Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Link Administration Holdings Ltd and Tyro Payments. The Motley Fool Australia has recommended Link Administration Holdings Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Magellan Financial Group Ltd (ASX: MFG) saw its share price lose 4% last week, significantly underperforming the S&P/ASX 200 Index (ASX: XJO). This was despite an AGM presentation which included a forecast that FY21 costs would remain flat. Nonetheless, Magellan’s critics have expressed concern over the company’s planned investment of $155 million in start up investment bank Barrenjoey.

What is weighing on the Magellan share price? 

In a report in September, CLSA analyst Ed Henning said of the investment in Barrenjoey: “At face value the investment looks questionable, given investment banks tend to trade on lower multiples versus Magellan and the investment will likely initially be loss-making, although a $155m investment for a $10bn company that is highly cash generative is only relatively small.”

To illustrate further, the Magellan share price is trading at a price-to-earnings (P/E) ratio of 27, while investment banks tend to trade at a P/E of between 10 and 14.

For instance, Macquarie Group Ltd (ASX: MQG) is an diverse financial group. However, the investment banking arm is regularly in the top 3 deal makers every year. Macquarie currently trades at a P/E of 16. Another example is Bell Financial Group Ltd (ASX: BFG), a stockbroking and financial services company with an investment banking arm built in. Bell has a P/E of 12.5.

What is more, another rule of thumb metric for an investment bank is between 1 and 1.5 times revenue. Given that Magellan has paid $155 million for 40% of Barrenjoey, we know that the full valuation would be just under $400 million. Meanwhile, the start up hasn’t earned a cent yet, even though they have managed to capture some top flight operators from UBS. The Magellan share price fell by 5% on the day of this announcement.

The view from Magellan

Although listed in the AGM notes as a principal investment, $155 million is modest for a 10 billion dollar company. Chair and chief investment officer Hamish Douglass is dismissive of such criticism. During the company’s AGM he argued that Barrenjoey’s partnership model allowed for a nimble and entrepreneurial approach, designed to “uniquely position the business in the Australian market”. 

He went on to explain how the market opportunity likely extended beyond Australia and New Zealand. Moreover, that the company would boost Magellan’s intellectual capital through new, highly skilled staff entering the business.

Mr Douglass added:

We are excited about the prospects for Barrenjoey and it reminds me of the early days here at Magellan… Fourteen years later, it is incredible to see what can be achieved by talented people who are aligned in a common goal, with a common purpose, backed by a strong balance sheet, and not being constrained by existing systems or processes.

Magellan has also taken a sizable stake in FinClear. An unlisted financial services company that provides infrastructure to financial planners, stockbrokers, wealth managers and fintechs. The company’s technology plays a hand in at least 50% of transactions on the ASX. 

More reading

• What zero COVID-19 cases in Victoria means for ASX 200 shares
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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 for cannabis-based products has continued to grow in 2020 despite the impact of the COVID-19 pandemic. The the quarter ended 30 September was no exception, with online sales jumping. Cannabis products are becoming more mainstream and healthcare professionals are increasingly embracing their benefits. This means competition in the Australian cannabis sector is increasing as industry players look to secure distribution channels and patient access. That said, this last quarter saw mixed results for ASX cannabis shares. While some reached new records, others struggled as shareholdings shifted. 

In significant industry news, the Therapeutic Goods Administration (TGA) made an interim decision to down-schedule CBD. The amendment would allow Australian patients to purchase CBD products upon consultation with a pharmacist, without the need for a prescription, from 1 June 2021. If the interim decision becomes final, this will provide another potential source of revenue for ASX cannabis shares.

With that in mind, let’s take a look at how ASX cannabis shares performed in the last quarter. 

Althea Group Holdings Ltd (ASX: AGH) 

Althea continues to go from strength to strength, launching online sales in Australia in July. This fast-tracked response to COVID-19 drove record revenue and patient numbers for the month. Total patients passed 8,000 with 740 patients prescribed Althea products for the first time. Unaudited revenue of $692,091 was recorded. A total of 628 Australian healthcare professionals had prescribed Althea products as at 31 July 2020. 

Althea’s online platform, Althea Concierge, has been updated to cater for online sales. Used in conjunction with telemedicine, Althea Concierge allows doctors to prescribe Althea medicinal cannabis products which are delivered directly to the patient’s door. This eliminates the need for multiple visits to the doctor and pharmacy while complying with regulatory requirements. 

Althea engaged with the TGA throughout the consultation process on the down-scheduling of CBD. CEO Josh Fegan said:

We see it as one of the biggest developments in our industry to date. The interim decision reflects the significant shift in community and government attitudes towards medicinal cannabis.

Althea launched a CBD preparation last year, so is well positioned to take advantage of this market opportunity. 

Althea subsidiary Peak Processing was granted a Canadian cannabis licence last month, and commenced operations immediately. Peak manufactures Cannabis 2.0 products on behalf of third parties such as cannabis-infused edibles, beverages, concentrates, and topicals. The plant will also supply medicinal products to Althea’s pharmaceutical operations, greatly reducing the cost of goods sold. 

Cann Group Limited (ASX: CAN) 

Cann Group saw major shareholder Aurora Cannabis Inc exit its position this quarter. The Canadian cannabis producer sold its 11.84% shareholding in Cann Group despite listing Australia as one of its “primary market opportunities” as recently as February. Aurora did not participate in Cann Group’s July capital raising, where the company raised $24.3 million to provide working capital. The Cann Group share price tanked in the aftermath of the raising, losing some 50% of its value.

Cann Group says Aurora’s exit has no impact on its business plans. It remains focused on developing a supply base with B2B customers and expanding manufacturing capacity. The company says it has secured multiple new offtake and supply agreements which will support short term revenues and de-risk expansion plans. Expansion of the company’s Mildura facility has been central to Cann Group’s growth strategy, but has hit a number of snags. 

An oversupply in the cannabis market late last year forced Cann Group to take a staged approach to construction of the Mildura facility. COVID-19 then slowed progress of potential funding options as well as the practical timing of construction. The company remains in discussions to secure a debt facility to fund the first stage of the expansion. More than $50 million has been spent on the project, which is intended to increase production capacity to 12,500 kilos annually. 

In FY21, Cann Group is forecasting revenues of $15 million, underpinned by existing supply contracts. New commercial supply agreements have recently been secured to supply product to the UK, Germany, and other European countries. Germany is Europe’s largest medicinal cannabis market, with 2019 sales exceeding all other European markets combined. Cann Group also has agreements in place to supply medicinal cannabis to pharmacies and hospitals in Australia through a distribution arrangement with Symbion Health.

Ecofibre Ltd (ASX: EOF) 

Ecofibre completed its acquisition of TexInnovate in the September quarter. The acquisition is aimed at accelerating the transition of Ecofibre’s Hemp Black business from R&D to commercialisation. The Hemp Black business focuses on developing textiles and materials from hemp, which has natural antimicrobial and conductive properties. TexInnovate is a portfolio of 5 businesses with expertise across a range of high-performance textile disciplines. 

The Hemp Black business pivoted rapidly at the onset of COVID-19, re-prioritising efforts from athleisure wear to PPE in response to global demand. By the end of FY20, Hemp Black had delivered $2.4 million in PPE sales. Ecofibre is aiming to embed Hemp Black’s technology across a range of industries, including high-performance apparel, personal protection, military, healthcare, and travel. 

Ecofibre’s Ananda Health business, which sells CBD products in US pharmacies, has been performing strongly, increasing profit before tax by 63% in FY20 to $20.8 million. The Ananda Food business, which sells hemp food products and nutraceuticals, has recorded steady growth, but profits have been slower than expected. Ecofibre has not provided FY21 revenue or profit guidance, but says it will consider paying a dividend for FY21. This is based on the company’s cash position, confidence in delivering profitable growth in Ananda Health, and a pathway to profitability for Hemp Black and Ananda Food. 

More reading

• Ecofibre (ASX:EOF) share price plummets 24%. Here’s why
• Why is the Althea (ASX:AGH) share price up 8% today?
• The Cann Group share price getting smoked after a strategic shareholder exits

Motley Fool contributor Kate O’Brien has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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 Clinuvel Pharmaceuticals Limited (ASX: CUV) share price is pushing higher this morning following the release of an update.

At the time of writing, the biopharmaceutical company’s shares are up 0.5% to $21.99.

What did Clinuvel announce?

This morning Clinuvel provided the market with an update on the use of its SCENESSE drug for the treatment of xeroderma pigmentosum (XP).

According to the release, the first male XP patient started SCENESSE treatment in September under a Special Access Program and has been closely monitored by the expert clinical centre responsible for medical care.

This includes regular clinical observations over the 42-day treatment period to assess the patient’s health, including the response to overall SCENESSE treatment.

Today’s update reveals that the patient tolerated the melanocortin drug well and no drug related adverse events have been reported.

In addition, specific attention was given to the consequences of ultraviolet (UV) exposure, pigmentation, and overall status of the patient’s skin. This is because XP patients are known to exhibit poikiloderma (a degeneration and disintegration of the skin) and are prone to frequent bleeding from chronic wounds.

At the end of the 42 days, the integrity of the skin of the patient has shown to be unaffected by SCENESSE.

CLINUVEL’s Clinical Operations Manager, Dr Pilar Bilbao, commented: “We are delighted with the consistent safety reports from the XP-C patient receiving systemic treatment with afamelanotide [SCENESSE]. This positive observation and clinical feedback from the treating physician form the basis for progressing the planned XP study, CUV150.”

This bodes well for the company and supports previous findings. The company notes that scientific evidence supports the use of afamelanotide, the active ingredient in SCENESSE, to protect skin from UV and light (systemic photoprotection), and repair UV-induced DNA damage.

Further details of the company’s DNA Repair Program will be provided in a strategic update, which is due to be released this month.

More reading

• These are the 10 most shorted shares on the ASX
• These are the 10 most shorted shares on the ASX
• These are the 10 most shorted shares on the ASX
• Here are the 10 most shorted ASX shares
• These are the 10 most shorted ASX shares

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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 Marley Spoon AG (ASX: MMM) share price has returned from its trading halt on Monday and is crashing lower.

In early trade the subscription-based meal kit provider’s shares are down 17.5% to $2.88.

Why was the Marley Spoon share price in a trading halt?

Marley Spoon requested a trading halt at the end of last week whilst it launched a fully underwritten placement to institutional investors.

This morning the company revealed that it has successfully completed its placement, raising $56 million at a price of $3.22 per share. This represents a discount of 7.7% to its last close price.

According to the release, the placement was oversubscribed with strong support from domestic and international institutional investors. This includes both existing securityholders and new investors.

Marley Spoon raised the funds to accelerate its global growth strategy with a strong balance sheet.

Proceeds from the placement will also be used to fund investments into infrastructure to service growth, invest into the growth of the customer base at attractive unit economics, and increase working capital.

Management commented: “Given the continued traction in online meal kit adoption and strong recent business performance, Marley Spoon considers it appropriate to improve its balance sheet and access additional growth capital. With additional balance sheet flexibility, Marley Spoon will be well positioned to accelerate its global growth strategy and capitalise on the opportunities available in its core markets.”

How is Marley Spoon performing?

This placement was announced in conjunction with its third quarter update last week. That update revealed that Marley Spoon achieved revenue of 69.3 million euros for the three months ended 30 September. This was up 109% on the prior corresponding period.

The key driver of its growth was its US operations. They reported revenue of 34.2 million euros, up 163% in constant currency terms. Supporting its growth were its Australia and Europe businesses. Australian revenue rose 84% to 25.3 million euros and European revenue jumped 83% to 9.8 million euros.

At the end of the period, Marley Spoon had a total of 362,000 active customers, up 86% year on year.

While this is strong year on year growth, it is actually only up 3% quarter on quarter. I suspect investors may be concerned that its growth is close to peaking. This could be the reason why its shares are under significant pressure today.

More reading

• Marley Spoon (ASX:MMM) share price in a trading halt after explosive Q3 growth
• Up 900% this year, can the Marley Spoon (ASX:MMM) share price continue to climb?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Victoria has this morning announced zero new daily coronavirus cases for the first time since June. Here’s what that could mean for ASX 200 shares and the S&P/ASX 200 Index (ASX: XJO) as we kick off the trading week.

What did Victoria announce?

Victoria’s Department of Health and Human Services (DHHS) confirmed no new COVID-19 cases were recorded in the past 24 hours. This comes after Victorian Premier Daniel Andrews put a “pause” on the easing of restrictions despite the 14-day daily moving average falling below the 5 cases milestone set for Melbourne.

Premier Andrews paused a planned easing of restrictions to investigate two clusters in northern Melbourne. That means investors will be eagerly anticipating today’s press conference following this morning’s case numbers.

That could be good news for ASX 200 shares given Victoria’s ongoing restrictions have weighed on some top stocks.

What does that mean for ASX 200 shares?

Easing restrictions is good news for the Victorian and Australian economies. Victoria has ~25 per cent of Australia’s population and is a major cog in the Australian economy across a variety of industries.

Australia’s 2019 Gross Domestic Product (GDP) totalled $1.89 trillion, while Victoria contributed $454.59 million of that or 24% of the country’s total economic output.

That means easing restrictions should be good news for ASX 200 shares this morning, particularly in hard-hit industries. That includes retail, hospitality and leisure which continue to advocate for eased restrictions across the state.

ASX futures are pointing up 0.3% to 6,179 points which could mean a strong start to the session. That would be welcome news for investors after the benchmark Aussie index edged lower last week.

Foolish takeaway

All eyes will be on some of the biggest ASX 200 shares on the market in early trade in anticipation of eased restrictions.. Big retailers like Wesfarmers Ltd (ASX: WES) have been pushing hard for eased restrictions and could be worth watching today.

More reading

• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• 5 things to watch on the ASX 200 on Monday
• 5 things to watch on the ASX 200 next week
• These were the best performing ASX 200 shares last week
• These were the worst performing ASX 200 shares last week

Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Emerge Gaming Ltd (ASX: EM1) is a small cap share with a market capitalisation of $96 million. It is developing a mobile eSports platform with real cash prizes on offer for players. During Friday’s trading, the Emerge share price shot up by 36.36%. Moreover, the company’s shares have skyrocketed since last Monday, soaring more than 136% over the week’s trading. 

What’s moving the Emerge share price?

The company’s ‘Miggster’ mobile gaming and eSports platform is due for release in 15 countries in November. This product builds on the company’s existing tournament platform technology with an increased focus on community competition. Moreover, the platform will provide reward pools worth approximately US$500,000 (around A$700,000).

Last Monday, the company revealed it had achieved 3 million pre-registrations for the platform within one week. Furthermore, each subscription starts at US$8.50 per month providing much needed cash flow for the fledgling technology platform. However, the company will receive only 64.5% due to its go-to-market strategy.

Emerge already operates an online eSports platform it launched with South African company, MTN. In addition, the company has already achieved 25,000 subscribers of which Emerge pockets 40% of fees. MTN pays for marketing and cash prizes. 

The go-to-market plan

Possibly the key point in last week’s movement of the Emerge share price was its go-to-market strategy. The company has entered into an affiliate marketing agreement with Impact Crowd Technology, a company seeking to mobilise a community salesforce. The current number of pre-registrations, 3 million, make it increasingly likely the Miggster platform will achieve the 100,000 subscriber guarantee in the agreement. 

At 100,000 subscribers, Emerge will generate gross revenues of $850,000 per month. Accounting for the 64.5% of revenues as per the agreement, this translates to $548,000.

Johan Staël von Holstein, CEO of Impact Crowd Technology parent company Tecnología de Impacto Multiple S.L. (TIM), commented:

I truly believe that online gaming on mobile devices will be a great success for everyone involved. And we could not have asked for a better business partner than Emerge Gaming in this promising joint venture. We have the most ambitious and fastest growing sales force in the world while Emerge Gaming delivers outstanding technology solutions and content.

Gregory Stevens, CEO of Emerge Gaming, commented:

The ability of Emerge to market its eSports and Gaming products through an established and successful affiliate sales network delivers rapid growth and scale whilst targeting a key strategic growth market of high lifetime value users. We are excited to be partnering with TIM, leveraging their 10 million affiliate member network as both users and advocates to market our tournament platform technology and support our objective of building the world’s biggest gaming community.

Foolish takeaway

The rapid growth in the Emerge share price underscores the effectiveness of affiliate marketing for this product. Within the first 68 hours, the company had over 1 million pre-registrations, leading to 3 million within the first week. A second takeaway for this product is the introduction of community level cash prizes. Moreover, the company points out that the addressable market is US$90 billion in mobile gaming revenue. 

With the product launch due in November, and the affiliate marketing approach still in full swing, it will be very interesting to see the percentage of registrations the company is able to convert to paying subscriptions.

More reading

• AMP (ASX:AMP) asset sales part of wealth sector transformation
• Coca-Cola Amatil (ASX:CCL) in $10 billion takeover bid
• These are the 10 most shorted shares on the ASX
• Where to invest $20,000 into ASX shares right now
• Westpac (ASX:WBC) share price on watch after cash earnings update

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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When AMP Limited (ASX: AMP) appointed a new chair, Debra Hazelton, she kicked off an asset portfolio review. This came on the heels of the company completing a $3 billion sale of its life insurance assets in July. AMP has made it clear that it is considering further asset sales after receiving many unsolicited bids. At the time of writing, many private equity firms are rumoured to be running the ruler over the troubled $4.6 billion company. In some cases they are considering specific parts of the business, like AMP Capital.

The AMP share price fell 5.2% over last week’s trading. This was largely due to the company reporting net cash outflows of $1.95 billion from its Australian wealth management arm during the September quarter. Over year-to-date trading, AMP has seen $6.35 billion in outflows. 

Which companies are in the asset sale race?

A column in The Australian has placed private equity firm, Kohlberg Kravis Roberts (KKR) squarely in the frame, with the company believed to be working on a buyout proposal. What’s more, the private equity firm is currently completing the purchase of 55% of Colonial First State wealth management from Commonwealth Bank of Australia (ASX: CBA). Any potential acquisition would need to integrate with these assets in some manner. 

Coincidentally, AMP’s problems have occurred at the same time the large banks are retreating from the wealth management businesses.  Elsewhere in the sector, IOOF Holdings Limited (ASX: IFL) purchased MLC from National Australia Bank Ltd (ASX: NAB) for $1.44 billion. Nonetheless, KKR was also a potential suitor at the time. As a result, Westpac Banking Corp (ASX: WBC) remains the last large bank to sell its wealth management business.

Ms Hazelton committed to providing an update on the portfolio review by the end of the year. However, a real estate asset sale may occur sooner than that due to buyer interest. Recently, Vicinity Centres (ASX: VCX) was rumoured to have joined the fray in the hunt for the AMP real estate portfolio. DEXUS Property Group (ASX: DXS), Lendlease Group (ASX: LLC) and Charter Hall Group (ASX: CHC) are among other companies mentioned. 

Foolish takeaway

While there are many rumours at play, it is uncertain exactly which way the management of AMP will proceed. Subsequently, there has been a lot of speculation about the asset sale of the company’s real estate portfolio. Yet, there remain persistent reports of approaches for either the AMP Capital assets, or for the entire company. 

Moreover, the Australian Competition and Consumer Commission (ACCC) has remained silent on the potential for consolidation. 

More reading

• Westpac (ASX:WBC) share price on watch after cash earnings update
• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• Top brokers name 3 ASX shares to sell next week
• 3 important rules to help you build wealth
• The ASX 200 was mixed today, it finished down 0.1%

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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News broke on Bloomberg on Sunday that Coca-Cola Amatil Ltd (ASX: CCL) may be the subject of a $10 billion takeover bid by Coca-Cola European Partners PLC (NYSE: CCEP), the largest independent bottler of Coke. Discussions are rumoured to be in an advanced stage, to the point where an announcement is possible as early as today. The proposed deal would include a $1.73 billion net debt as at 30 June.

M&A speculation

On Thursday last week, the Coca-Cola Amatil share price jumped on the back of speculation the company was looking at a significant capital raising. The beverage producer then called a trading halt on Friday, ahead of a “potential material transaction”.

Two groups of assets were included in this speculation. The first is a range of brands Japanese brewer, Asahi, has to divest of. This is to satisfy the ACCC after its acquisition of Carlton Breweries. Moreover, Coca-Cola had been in negotiations to buy high profile beer brands from Asahi some time ago.

The second is the Lion Dairy & Drinks business. Apparently, Bega Cheese Ltd (ASX: BGA) and Coca-Cola Amatil are frontrunners in the deal. However, there has been a plot twist over the weekend. Even if these deals are still on the cards, the potential $10 billion plus deal dwarves them. 

Why Coca-Cola Amatil?

According to its website, Coca-Cola Amatil has 32 production facilities in Australia, New Zealand, Fiji, Indonesia and Papua New Guinea. This makes it one of the largest bottlers and distributors of ready-to-drink beverages in the Asia Pacific region. In addition, the Asia Pacific region is less impacted than Europe by the pandemic. 

Moreover, Bloomberg has pointed out that soft drink bottlers are under pressure to consolidate due to a reduction in popularity of sugary drinks. In addition, Coca-Cola European Partners decided early this year to halt its buyback program and defer a dividend to preserve cash. This was directly due to the impact of coronavirus on European markets. Bloomberg has also stated this will be the largest merger involving an Australian company this year.

The company hasn’t disclosed the deal structure. However, it may cover an acquisition or merger, a majority stake, or even sales of Coca-Cola Amatil assets within the region. 

More reading

• 5 things to watch on the ASX 200 on Monday
• Coca-Cola Amatil (ASX:CCL) share price jumps on M&A speculation
• 5 things to watch on the ASX 200 next week
• 3 ASX stocks the rally left behind that brokers are urging you to buy today
• Here’s why this broker has a buy rating on Coca-Cola Amatil (ASX:CCL) shares

Motley Fool contributor Daryl Mather has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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Every Monday I like to look at ASIC’s short position report to find out which shares are being targeted by short sellers.

This is because I believe it is well worth keeping a close eye on short interest levels as high levels can sometimes be a sign that something isn’t quite right with a company.

With that in mind, here are the 10 most shorted shares on the ASX this week according to ASIC:

• Webjet Limited (ASX: WEB) remains the most shorted share on the Australian share market with short interest of 14.7%. Last week the online travel agent released a trading update which revealed that bookings are still down materially because of the pandemic.
• Speedcast International Ltd (ASX: SDA) has short interest of 10.6%. This communications satellite technology provider’s shares have been suspended since February. This was done in order to undertake a recapitalisation. It has now filed its restructuring plan and expects to emerge in the first quarter of 2021.
• InvoCare Limited (ASX: IVC) has short interest of 10%, which is up slightly week on week. Social distancing restrictions have been weighing on the funerals company’s performance this year.
• Myer Holdings Ltd (ASX: MYR) has seen its short interest fall again to 9.4%. Short sellers have been going after Myer this year due to the belief that its department stores will be left behind by the shift to online shopping.
• Mesoblast Limited (ASX: MSB) has seen its short interest rise again to 9.1%. Short interest has been building after the US FDA didn’t approve its remestemcel-L application for steroid-refractory acute graft versus host disease (SR-aGVHD). The company has also been hit with a class action this month.
• Inghams Group Ltd (ASX: ING) has 8.6% of its shares held short, which is down slightly week on week. This poultry company reported a 68.2% drop in net profit to $40.1 million for FY 2020. Unfavourable changes in its sales mix and higher input costs weighed on its performance.
• Galaxy Resources Limited (ASX: GXY) has seen its short interest fall to 8.5%. Concerns that an oversupply of lithium may keep prices of the battery making ingredient lower for longer could be behind this high level of short interest.
• Flight Centre Travel Group Ltd (ASX: FLT) has recorded a small rise in short interest to 8%. Rising COVID-19 cases globally are expected to delay the recovery of the global travel markets.
• CLINUVEL Pharmaceuticals Limited (ASX: CUV) has seen its short interest rise slightly to 7.6%. The biopharmaceutical company’s shares trade on sky high multiples. It appears as though short sellers don’t believe its growth justifies the premium.
• Metcash Limited (ASX: MTS) has entered the top ten with short interest of 7.4%. Given the positive trading conditions it is experiencing in the Food and Hardware markets, this high level of short interest is a bit of a mystery. Furthermore, analysts at Macquarie upgraded its shares to an outperform rating last week.

More reading

• ASX 200 Weekly Wrap: ASX snaps winning streak… just
• Brokers name 3 ASX shares to buy right now
• ASX 200 down 0.3%: NAB announces provisions, BlueScope impresses, Webjet higher
• Why Adore Beauty, BlueScope, Qantas, & Webjet shares are charging higher
• 1 ASX 200 share to buy before an effective COVID vaccine announcement

Motley Fool contributor James Mickleboro owns shares of Galaxy Resources Limited. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited and InvoCare Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 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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