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110% share price rise for GTT Communications, is it a value stock?

GTT Communications is facing bankruptcy rumours and its $2.1bn infrastructure deal is in question. Are Robinhood traders instigating a short-squeeze?
The post 110% share price rise for GTT Communications, is it a value stock? appeared first on Value the..



Multinational telecommunications giant GTT Communications (NYSE: GTT) has seen its share price soar over 110% in the last week. Is there good reason for this or is it yet another short squeeze instigated by Robinhood investors?

GTT Communications – Photographer: Denny Müller | Source: Unsplash

Vital service provider

Founded in 2006, GTT was previously known as Global Telcom & Technology.

The company is massive, with an international presence spanning several countries. It provides internet services and cloud networking packages to a global pool of clients.

In addition, it sells private networking options, optical transport, and software-defined wide-area networking. Therefore, it would appear to be a vital cog in the global tech machine powering business.

But that doesn’t necessarily mean it’s got what it takes to survive. Like any business, it needs to manage its money to endure, and the lack of transparency in this regard is worrying.

A volatile share price slide

To think the GTT share price was trading above $60 a share in March 2018 seems incredible. Since then, the global company has seen its market cap plummet to $175m. Today it trades below $3 a share.

Prior to the pandemic hitting in March 2020, the GTT share price was trading around $14. By the end of December, it was around $3.50.

GTT share price chart 2020
GTT Communications share price chart 2020 – Source: Yahoo Finance

It then enjoyed a brief revival at the height of the GameStop (NYSE: GME) short squeeze in January this year. Followed by bad news and a further slide.

GTT share price chart year to date
GTT Commumications share price chart year-to-date – Source: Yahoo Finance

The slide was exacerbated in February as bankruptcy rumours began to fly. The company failed to meet SEC filing requirements or release its financial results on time for three quarters running. This set tongues wagging and investors running for the hills.

Lack of communication

For a communications company, there’s been a serious lack of communication over the past year. In fact, the company hasn’t conducted a shareholder/analyst call since May 27 2020.

In October, GTT announced plans to sell its infrastructure division for $2.1 billion, within six months. The sale includes three transatlantic subsea cables, one of which reportedly includes the lowest latency route between Europe and North America.

The buyer is I Squared Capital (ISQ) a private equity firm focusing on global infrastructure investments. But this is also now in doubt, as a lack of communication keeps shareholders in the dark. It could be that the pandemic is creating challenges in the sale, but no-one seems to know.

The bankruptcy rumours began with the suggestion GTT may opt for a pre-packaged bankruptcy filing to reduce its debt.

Of course, if GTT does declare Chapter 11 bankruptcy protection then ISQ could swoop in and snap up the coveted infrastructure assets at a much lower price.

In its most recent SEC 8-K filing, the company said it does not expect to be able to file all the necessary documents by the latest expiration date. But it’s working on filing the Restated Financial Statements, as soon as possible.

If the Company doesn’t file the necessary paperwork by August 17, it may risk being delisted from the New York Stock Exchange (NYSE).

There are many risks and uncertainties surrounding this stock therefore it’s a highly risky investment.

Major shareholders

As of March 30, Hedge Fund Spruce House Investment Management is the firm’s biggest shareholder with 27% ownership. BlackRock (NYSE: BLK), Vanguard and Goldman Sachs (NYSE: GS) are also invested.

However, short positions in the stock have grown in recent weeks. According to Capital IQ and ZeroHedge, 36.9% of the available float (shares available to the public) has been shorted.

In addition, the volume on derivatives such as call and put options had risen fivefold. With 21,078 option contracts outstanding on Friday. This included call options at 69% volume and put options at 31% volume.

When short interest is high it encourages amateur day traders to swoop in as a group, using their collective power to boost the share price. This appears like that’s what may have happened to GTT Communications stock last week.

However, some argue it has staying power. The company is huge, with considerable assets that are considered valuable. It also has many companies reliant on GTT connectivity.

A comparison being made, is that telecommunications company Sprint saw its share price plummet to around $2 in 2016. It then recovered to over $7 by 2019 and was finally merged with T-mobile (NASDAQ: TMUS) last year.

Patient shareholders received T-mobile shares, which have soared in the past year. So, some GTT investors may be hoping for a similar scenario to take place. Nevertheless, this is still risky, because the GTT share price could fall further.

Dead Cat Bounce

The share price rising over 110% last week may have boosted the coffers of a few lucky traders but it’s unlikely to be anything more than a dead cat bounce.

Until the company comes clean and lets investors see exactly what’s going on, alarm bells continue to ring. Therefore, there’s no compelling reason to feel optimistic about its future on the information available to investors today.

The post 110% share price rise for GTT Communications, is it a value stock? appeared first on Value the Markets.

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Baltimore City Responds After Dozens Of Businesses Threaten Not To Pay Taxes

Baltimore City Responds After Dozens Of Businesses Threaten Not To Pay Taxes

This weekend, the Baltimore Police Department (BPD) closed down multiple city streets around the Inner Harbor, in a stretch called "Fells Point," after dozens…



Baltimore City Responds After Dozens Of Businesses Threaten Not To Pay Taxes

This weekend, the Baltimore Police Department (BPD) closed down multiple city streets around the Inner Harbor, in a stretch called "Fells Point," after dozens of local businesses threatened the new city government, run by Mayor Brandon Scott, to not pay taxes because they're "fed up and frustrated" with the outburst of violence. 

Last week, 37 restaurants and small businesses sent a letter to the mayor's office titled "Letter to City Leaders From Fells Point Business Leaders." They threatened to stop paying city taxes and other fees until "basic and essential municipal services are restored." This comes as Madam State's Attorney Marilyn Mosby halted petty crimes during the pandemic and made such a measure permanent - the idea was to decrease violent crime, but that seems to have severely backfired.

What's happened in the historic bar strict is absolute mayhem at night, transformed into a dangerous area where violent and rowdy crowds have ruined the once pleasant atmosphere along with multiple shootings. 

So this weekend, BPD closed down streets around Fells Point, which includes parts of Aliceanna, Thames, and Bond streets.

In addition, Maryland State Police will conduct sobriety checkpoints in Fells Point. 

Local news WJZ13's Mike Hellgren tweets a couple of images of the increased police presence across Fells Point.

One of the 37 concerned business owners on the list is Bill Packo, who owns Barley's Backyard and has been operating in Fells Point for three decades. He spoke with WJZ13 about the out of control violence and public drunkenness:

"It's a shame. What they're letting happen to Fells Point is what they let happen in the Inner Harbor, and now it has made its way here," Packo said. "There's alcohol being sold by individuals out there, drugs, and clearly we all know about the shootings that took place last weekend. But there needs to be some control out there. There is none whatsoever."

BPD's mobile police command was spotted outside another shop in the bar district. It looks very dystopic. 

Meanwhile, Scott, who was newly elected, skipped out on the virtual community town hall meeting on Thursday at 7 p.m that was to address the issues in Fells Point. 

Packo called out Scott for not attending the meeting: 

"It's an embarrassment to the city. It's an embarrassment to the mayor no matter what the schedule was," he said.

Again, as we've said before, the chaos in Fells Point comes as the city descends into what could be the most violent period ever. Mosby has halted police officers going after petty crimes that have inadvertently backfired. Another liberal-run town with good intentions in policies not exactly panning out as they thought. 

Local news WMAR2's Eddie Kadhim interviewed a man who summed up the city's response in Fells Point: 

Another man said the violent crime in low-income neighborhoods is just spilling over into the downtown area. 

Tyler Durden Sat, 06/12/2021 - 15:00

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Visualizing The History Of US Inflation Over 100 Years

Visualizing The History Of US Inflation Over 100 Years

Is inflation rising?

The consumer price index (CPI), an index used as a proxy for inflation in consumer prices, offers some answers. In 2020, inflation dropped to 1.4%, the lowest rate..



Visualizing The History Of US Inflation Over 100 Years

Is inflation rising?

The consumer price index (CPI), an index used as a proxy for inflation in consumer prices, offers some answers. In 2020, inflation dropped to 1.4%, the lowest rate since 2015. By comparison, inflation sits around 5.0% as of June 2021.

Given how the economic shock of COVID-19 depressed prices, rising price levels make sense. However, as Visual Capitalist's Dorothy Neufeld notes, other variables, such as a growing money supply and rising raw materials costs, could factor into rising inflation.

To show current price levels in context, this Markets in a Minute chart from New York Life Investments shows the history of inflation over 100 years.

U.S. Inflation: Early History

Between the founding of the U.S. in 1776 to the year 1914, one thing was for sure - wartime periods were met with high inflation.

At the time, the U.S. operated under a classical Gold Standard regime, with the dollar’s value tied to gold. During the Civil War and World War I, the U.S. went off the Gold Standard in order to print money and finance the war. When this occurred, it triggered inflationary episodes, with prices rising upwards of 20% in 1918.

However, when the government returned to a modified Gold Standard, deflationary periods followed, leading prices to effectively stabilize, on average, leading up to World War II.

The Move to Bretton Woods

Like post-World War I, the Great Depression of the 1930s coincided with deflationary pressures on prices. Due to the rigidity of the monetary system at the time, countries had difficulty increasing money supply to help boost their economy. Many countries exited the Gold Standard during this time, and by 1933 the U.S. abandoned it completely.

A decade later, with the Bretton Woods Agreement in 1944, global currency exchange values pegged to the dollar, while the dollar was pegged to gold. The U.S. held the majority of gold reserves, and the global reserve currency transitioned from the sterling pound to the dollar.

1970’s Regime Change

By 1971, the ability for gold to cover the supply of U.S. dollars in circulation became an increasing concern.

Leading up to this point, a surplus of money supply was created due to military expenses, foreign aid, and others. In response, President Richard Nixon abandoned the Bretton Woods Agreement in 1971 for a floating exchange, known as the “Nixon shock”. Under a floating exchange regime, rates fluctuate based on supply and demand relative to other currencies.

A few years later, oil shocks of 1973 and 1974 led inflation to soar past 12%. By 1979, inflation surged in excess of 13%.

The Volcker Era

In 1979, Federal Reserve Chair Paul Volcker was sworn in, and he introduced stark changes to combat inflation that differed from previous regimes.

Instead of managing inflation through interest rates, which the Federal Reserve had done previously, inflation would be managed through controlling the money supply. If the money supply was limited, this would cause interest rates to increase.

While interest rates jumped to 20% in 1980, by 1983 inflation dropped below 4% as the economy recovered from the recession of 1982, and oil prices rose more moderately. Over the last four decades, inflation levels have remained relatively stable since the measures of the Volcker era were put in place.

Fluctuating Prices Over History

Throughout U.S. history. there have been periods of high inflation.

As the chart below illustrates, at least four distinct periods of high inflation have emerged between 1800 and 2010. The GDP deflator measurement shown accounts for the price change of all of an economy’s goods and services, as opposed to the CPI index which is a fixed basket of goods.

It is measured as GDP Price Deflator = (Nominal GDP ÷ Real GDP) × 100.

According to this measure, inflation hit its highest levels in the 1910s, averaging nearly 8% annually over the decade. Between 1914 and 1918 money supply doubled to finance war efforts, compared to a 25% increase in GDP during this period.

U.S. Inflation: Present Day

As the U.S. economy reopens, consumer demand has strengthened.

Meanwhile, supply bottlenecks, from semiconductor chips to lumber, are causing strains on automotive and tech industries. While this points towards increasing inflation, some suggest that it may be temporary, as prices were depressed in 2020.

At the same time, the Federal Reserve is following an “average inflation targeting” regime, which means that if a previous inflation shortfall occurred in the previous year, it would allow for higher inflationary periods to make up for them. As the last decade has been characterized by low inflation and low interest rates, any prolonged period of inflation will likely have pronounced effects on investors and financial markets.

Tyler Durden Sat, 06/12/2021 - 19:00

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Visualizing The Biggest Companies In The World In 2021

Visualizing The Biggest Companies In The World In 2021

Since the COVID-19 crash, global equity markets have seen a strong recovery. The 100 biggest companies in the world were worth a record-breaking $31.7 trillion as of March 31 2021,…



Visualizing The Biggest Companies In The World In 2021

Since the COVID-19 crash, global equity markets have seen a strong recovery. The 100 biggest companies in the world were worth a record-breaking $31.7 trillion as of March 31 2021, up 48% year-over-year. As a point of comparison, the combined GDP of the U.S. and China was $35.7 trillion in 2020.

In today’s graphic, Visual Capitalist's Jenna Ross uses PwC data to show the world’s biggest businesses by market capitalization, as well as the countries and sectors they are from.

The Top 100, Ranked

PwC ranked the largest publicly-traded companies by their market capitalization in U.S. dollars. It’s also worth noting that sector classification is based on the FTSE Russell Industry Classification Benchmark, and a company’s location is based on where its headquarters are located.

Within the ranking, there was a wide disparity in value. Apple was worth over $2 trillion, more than 16 times that of Anheuser-Busch (AB InBev), which took the 100th spot at $128 billion.

In total, 59 companies were headquartered in the United States, making up 65% of the top 100’s total market capitalization. China and its regions was the second most common location for company headquarters, with 14 companies on the list.

Risers and Fallers

What are some of the notable changes to the biggest companies in the world compared to last year’s ranking?

Tesla’s market capitalization surged by an eye-watering 565%, temporarily making Elon Musk the richest person in the world. Food delivery platform Meituan and PayPal benefited from growing e-commerce popularity with their market capitalizations growing by 221% and 151% respectively.

Tech companies TSMC and ASML Holdings were also among the top 10 risers, thanks to a shortage of semiconductor chips and growing demand.

On the other end of the scale, Swiss companies Nestlé, Novartis, and Roche Holding were all among the bottom 10 companies by market capitalization growth. China Mobile was the only company to decline with a -12% change. The company was delisted from the New York Stock Exchange as a result of an executive order issued by former president Donald Trump, and recently announced its intention to list on the Shanghai Stock Exchange.

A Sector View

Across the 100 biggest companies in the world, some sectors had higher weightings.

Technology had the highest market capitalization and was also the most common sector, with Big Tech dominating the top 10. Companies in the consumer discretionary, financials, and health care sectors also had a strong representation in the ranking.

Despite having only five companies on the list, the energy sector amounted to almost 10% of the top 100’s market capitalization, mostly due to Saudi Aramco’s whopping valuation.

An Uncertain Recovery

From near market lows on March 31, 2020, all sectors saw increases in their market capitalization. However, top 100 companies in some sectors outperformed their respective industry index, while others did not.

Basic materials and industrials, both cyclical sectors, were high performers in the top 100 and outperformed their respective industry indexes. Technology companies also outperformed, and accounted for $255 billion or 31% of all shareholder distributions by the top 100, far more than any other sector. Apple alone spent $73 billion on share buybacks and $14 billion in dividends in the 2020 calendar year.

On the other hand, the worst-performing sectors in the top 100 were health care, utilities, and energy. While the index performance for health care and utilities was also relatively poor, the wider energy sector performed fairly well.

It’s perhaps not surprising that all sectors saw positive returns since their low levels in March 2020, buoyed by fiscal stimulus and central bank policies. As countries begin to reopen, will the value of the biggest companies in the world continue to climb?

Tyler Durden Sat, 06/12/2021 - 23:00

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