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M&A reports, updates rattle media stocks


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M&A reports, updates rattle media stocks

Several media and communications stocks swung into the red during the trading week ended June 9 as analysts and investors digested news about M&A and other announcements.

Aside from the M&A chatter, Apple Inc. announced mostly incremental product updates at its annual WWDC developer's conference, but created some buzz with its in-home smart speaker with Siri personal assistance, machine learning and augmented reality announcements, as well as updates to its mobile payment platform. The new product categories gave investors something to talk about as the iPhone market matures.

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An analysis from Kensho Technologies Inc. showed a strong correlation between the WWDC conference and stock movements on the day of the event. In Kensho's platform, the lower the "p-value" the higher the correlation between an event and stock-price movement. WWDC registered a Kensho day-of p-value of 0.01, showing significant correlation. On average, there was an 0.83% loss on a given stock investment on the day of WWDC. There is also a strong correlation between the WWDC event and stock movement through the week following, with a p-value during that period of 0.02 and an average loss of about 1.9%.

Consistent with the Kensho analysis, shares of Apple responded negatively to the event, losing about a percentage point June 5 and dropping 3.5% for the five trading days ended June 9.

Among the rash of merger-related media reports through the week, Inc. and DISH Network Corp. could be considering a merger, according to Benzinga. The companies recently said they would integrate Amazon's personal assistant technology Alexa into DISH set-top boxes, and an unidentified source familiar with the situation told Benzinga that the two companies were in discussions over deepening their relationship further, including supporting Amazon delivery drones over DISH's 5G spectrum and potentially working toward a merger.

DISH shares dropped about 1.8% for the five trading days ended June 9 and Amazon shares were off about 2.9%.

Investors also speculated about a potential combination between T-Mobile US Inc. and Sprint Corp. The two companies are considering an all-stock transaction, Bloomberg News reported June 5, signaling ongoing consideration even as parent companies for the telcos, Deutsche Telekom AG and SoftBank Group Corp, have yet to agree on the merger and talks proceed with other potential candidates for both Sprint and T-Mobile. T-Mobile shares dropped 6.4% for the week, while Sprint shares were off by 8.3%.

Another takeover candidate, Pandora Media Inc. got a financial bump from Sirius XM Holdings Inc., with a $480 million cash investment announced on the last day of the trading week. Sirius will get newly issued series A convertible preferred stock in Pandora. It seems the deal is a concession agreement after a more thorough takeover bid fell apart, Reuters reported a day earlier.

Takeover speculation has been swirling around Pandora for some time as the legacy Internet radio company has shown difficulty keeping up with streaming music competition like Spotify, extending even into the telecom space where Verizon Communications Inc. was reportedly considering a Pandora investment.

Pandora's stock was off over 35% year-to-date ahead of the Sirius investment announcement, and shares fell 10.5% for the week.

In merger news, Yahoo! Inc. shareholders on June 8 approved its sale of the company's operating business to Verizon, sending Yahoo shares up almost 7% over the five trading days ended June 9.

Turning to Chinese e-commerce, Alibaba Group Holding Ltd. shares skyrocketed after its executives during a June 9 investor day presentation said the company expects to cross $1 trillion in gross merchandise volume by 2020, almost double what it did in 2016. Investors piled into the stock, bidding it up almost 12% for the week.

Lastly, newly public Snap Inc. continues to garner suspicion from investors, this time precipitated by a downgrade from Citi analyst Mark May. May dropped his rating on the social networking company to "neutral" from "buy," citing slower-than-expected monetization efforts and the expiration of the IPO lock-up period, which will flood the ticker with new shares. Snap's stock ended the week off by 12% on the five trading days.