Personal Finance

December 27, 2013

Sprint shares continue rise; 10-year T-bills top 3 percent; Denver issues pot business licenses

Audi to spend $30 billion developing new models; Twitter downgraded after stock run-up.
T-Mobile speculation drives Sprint shares

Sprint Corp., the third-largest U.S. wireless carrier, jumped as much as 15 percent in early trading today amid speculation that the company is getting closer to merging with rival T- Mobile US Inc.

The stock was trading at $10.82 as of 10:32 a.m. in New York, after climbing as high as $11.47 earlier in the session. Sprint shares have almost doubled since Japan’s SoftBank Corp. acquired majority control of the Overland Park, Kansas-based carrier in July.

A Sprint deal with T-Mobile would unite the third- and fourth-largest mobile-phone services in the U.S., creating a stronger competitor to Verizon Wireless and AT Inc. It also might curb T-Mobile’s price-cutting tactics, leading to a healthier industry, said Jennifer Fritzsche, an analyst at Wells Fargo Co. in Chicago.

“Part of the plan all along has been for these two – No. 3 and No. 4 – to come together,” she said in an interview with Betty Liu on Bloomberg Television’s “In the Loop.” That suggests that the latest deal speculation may be valid, said Fritzsche, who has the equivalent of a buy rating on Sprint shares. “I very much think, where there’s smoke there’s fire.”

According to people familiar with the matter, SoftBank Chief Executive Officer Masayoshi Son has held discussions with banks about financing a T-Mobile deal. The plan would be to take control of T-Mobile by paying cash for the 67 percent stake owned by Deutsche Telekom AG, said the people. Sprint would then be integrated with T-Mobile.

Scott Sloat, a spokesman for Sprint, didn’t immediately respond to requests for comment.

Yields highest in more than two years

Treasury 10-year yields touched the highest level in more than two years as signs of a quickening economic recovery boosted bets the Federal Reserve will keep reducing debt purchases.

The benchmark yield rose above 3 percent for the first time in three months before fluctuating as investors weighed the Fed’s decision last week to reinforce its commitment to low interest rates while starting to cut bond-buying in January. Citigroup Inc.’s Economic Surprise Index, which measures whether data surpasses or falls short of market expectations, climbed yesterday to the highest since October.

The Fed is “gradually pulling back, which means the market will pull back from its distorted levels,” said Guy Haselmann, an interest-rate strategist at Bank of Nova Scotia in New York, one of 21 primary dealers that trade directly with the U.S. central bank. “I expect a slow drift to 3.25 percent by the end of the first quarter.”

The benchmark 10-year yield was little changed at 2.99 percent at 10:31 a.m. New York time, according to Bloomberg Bond Trader prices. It increased earlier as much as three basis points to 3.02 percent, the highest level since July 26, 2011. The yield has climbed 10 basis points this week. The price of the 2.75 percent security maturing in November 2023 rose 1/32, or 31 cents per $1,000 face amount, to 97 31/32.

The two-year yield slipped one basis point to 0.39 percent. The security, which is not included in the Fed’s monthly program of asset buying, headed for a fifth weekly decline, the longest stretch since September.

Pot licenses issued

The first batch of Denver businesses approved to sell recreational marijuana are getting their licenses.

The city is giving out licenses to the owners of 42 medical marijuana shops and growers Friday.

Denver is one of 19 municipalities and seven counties in Colorado that will allow retail sales of recreational pot to those 21 and older under voter-approved Amendment 64.

Only existing medical marijuana businesses in Denver are now allowed to make the transition to recreational sales. Of the 42 approved so far, eight are retail shops, 30 are growers and four are infused product manufacturers.

The state has approved 348 marijuana business licenses in Colorado.

Audi to spend for new models

Volkswagen AG’s Audi unit, the world’s second-biggest maker of luxury cars, plans to spend 22 billion euros ($30.3 billion) through 2018 developing new models and expanding production to gain the premium segment’s top spot.

About 15.4 billion euros, or 70 percent of the total, will be invested in new cars and sport-utility vehicles along with developing technology, the Ingolstadt, Germany-based carmaker said today in a statement. Audi targets 2 million deliveries annually after achieving a goal of selling 1.5 million autos in 2013, two years ahead of its original plan.

“We are now decisively steering toward our next milestone,” Chief Executive Officer Rupert Stadler said in the statement. “This is why we’re keeping our foot on the gas pedal regarding investments.”

Twitter warning

Twitter, the social-networking company that has seen its shares soar since debuting on the New York Stock Exchange last month, was downgraded by Macquarie Capital, which said the stock has gone “too far, too fast.”

Ben Schachter, a Macquarie analyst in New York, lowered his rating from neutral to underperform, the equivalent of sell. The shares have jumped 40 percent since Macquarie initiated coverage on Dec. 11, without any improvement in Twitter’s fundamentals, Schachter said in a report.

“We continue to believe that Twitter as a company has a bright future and many opportunities ahead,” he said. “However, as a stock, we believe nothing has changed over the last 15 days to justify the rise in valuation.”

Through Thursday, the stock had almost tripled from its $26 IPO price.

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