Adrenalina burned by PacSun; Kerkorian sells Ford holdings; banks ready to deal

By Aaron Hochman-Zimmerman

New York, Oct. 21 - Financial stocks outperformed the rest of the sinking equities on Tuesday as speculation grew that the Federal Reserve would encourage even more consolidation in the sector.

National City Corp. stayed positive on the day and remained in the forefront of deal speculation.

Also in finance, CIT Group Inc., which has plans to become a bank holding company, dropped in trading but is a juggernaut poised to benefit from Troubled Asset Relief Program assistance in its new incarnation, according to one trader.

Elsewhere, Kirk Kerkorian's Tracinda Corp. finally abandoned its holdings in Ford Motor Co. on the side of the road.

Kerkorian's investment heartened many around the struggling U.S. auto industry, but Kerkorian finally opted out in favor of a safer investment at the casino tables.

In retail, surf shop Adrenalina took a digger in the choppy seas after a quick rejection from Pacific Sunwear of California, Inc.

Elsewhere in technology, SanDisk Corp. said it was still open to moving forward with South Korea's Samsung Group, but the chipmaker is now in a position to play hardball after signing a deal with Japan's Toshiba Corp.

The Dow Jones Industrial Average ended lower by 231.77, or 2.50%, at 9,033.66, while the Nasdaq Composite Index gave back 73.35, or 4.14%, to finish at 1,696.68.

The S&P 500 lost 30.35 or 3.08%, to close at 955.05.

PacSun not shining for Adrenalina offer

PacSun did not turn many heads on the beach when it rejected Adrenalina's $4.50-per-share offer on Tuesday.

Many in the market thought the Miami-based retailer was in over its head - including PacSun, which said in a statement the offer is not in the best interests of its shareholders.

One analyst called the overture from Adrenalina "a non-starter."

Still, there may be room for a deal at a different price.

"They probably didn't spend very much time thinking about an offer like that," JJK Research analyst Janet Kloppenburg said about the $4.50-per-share offer.

"The stock is undervalued," she said, calling PacSun "a dominant player" in the sector, which is "having some issues right now."

Much of PacSun's retail base is in Arizona, California, Nevada and other places hardest hit by the subprime mortgage crisis.

"That has taken their stock down to levels we wouldn't have expected," she said.

PacSun is in good shape to be bought, Kloppenburg said, but it is difficult to speculate at what price or if other firms will step in to compete with Adrenalina.

Shares of PacSun (Nasdaq: PSUN) were lower by $0.20, or 5.26%, at $3.60.

Shares of Adrenalina (OTCBB: AENA) fell by $0.15, or 10.34%, to $1.30.

New liquidity refreshes bank deals?

The market buzzed about bank deals after an article in the New York Times suggested that part of the $250 billion government aid package was intended to foster consolidation in the banking industry.

Usual suspect in the world of bank deals, National City, was again at the center of attention.

A trader noted that "their capital rations are amongst the best in banking, deposits have stayed with them. ... They will be sold to someone shortly, I believe."

Also in finance, CIT Group intends to plug its liquidity leaks by filing to become a bank holding company, the trader said.

As a bank holding company it would be eligible for TARP assistance, he said. "The stock will double, in my opinion," he said.

Shares of National City (NYSE: NCC) inched up by $0.07, or 2.40%, to $2.99.

Shares of CIT Group (NYSE: CIT) dropped to a greater discount by $0.54, or 11.49%, to $4.16.

I got a little pile of tin

After arriving at Ford with much fanfare in April, Kerkorian put Tracinda into gear on Tuesday and drove away from Ford ... dragging a muffler.

During his ride with the rusting auto-giant, Kerkorian lost nearly 75% of his initial investment when Tracinda sold its 7.3 million shares at $2.43 before commissions, according to a press release.

The sale rattled shares of Ford (NYSE: F) by $0.16, or 6.87%, to close at $2.17 but was a boon to the gaming and hospitality industry.

Tracinda announced that "it sees unique value in the gaming and hospitality and oil and gas industries and has, therefore, decided to reallocate its resources and to focus on those industries," the press release said.

SanDisk still open to Samsung offer

Elsewhere in the technology sector, SanDisk complicated matters for its suitor Samsung by agreeing to sell 30% of its current manufacturing capacity to Toshiba for nearly $1 billion.

"We appreciate Toshiba's strong support for SanDisk through this agreement," Eli Harari, chairman and chief executive officer of SanDisk, said in a statement. "This is expected to reduce our capital spending, strengthen our financial position and increase our business flexibility while maintaining the economies of scale of Fabs 3 and 4."

During SanDisk's earnings call, Harari insisted that a deal with Samsung is still on the table but not at the offer price of $26.00 per share.

Shares of SanDisk (Nasdaq: SNDK) improved by $0.34, or 2.36%, to finish at $14.76.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.