The NextEra-Sode, Ford Gives Six-Week Notice, Aluminum & Antitrust
Da, da, da, da, da … it’s the one and only Mr. Great Stuff. (Joseph Hargeeeett!)
Da, da, da, da, da … you know I’m rolling with the N-E-E. (NextEra mutha….)
NextEra Energy (NYSE: NEE), yeah, it’s burnin’ it up.
NEE, clean energy, you should be turnin’ it up. Hydrogen, solar power, yeah, they hookin’ it up.
And when NEE stock goes down, baby, you got to get up.
Umm … yeah. How about a little less gin and juice and more of the sense-making, please?
What? Can’t a guy get laid-back with his mind on his money and his money on his mind?
We’re talking the NextEra Episode … or the NextEra-sode.
Sigh … probably not.
I’m betting Dr. Dre’s “The Next Episode” isn’t a fan favorite for Great Ones. But y’all might surprise me.
Anyway, we’re talking about alternative-energy giant NextEra Energy today because the company just rolled out a new equity offering. This one’s a little bit complicated, so bear with me…
NextEra will sell $2 billion in “equity units” to banking giants Citigroup, Goldman Sachs and Mizuho.
These “equity units” will sell for $50 each and will consist of an obligation to buy one share of NEE in the future and a 5% “undivided beneficial ownership interest” in NextEra Energy Capital Holdings — a subsidiary of NextEra.
“Equity unit” buyers must purchase NEE stock in a range of between $88.88 and $111.10 per share before September 1, 2025. Furthermore, the 5% ownership in NextEra Energy Capital Holdings pays out an annual distribution of 6.926%.
NextEra expects to raise $1.94 billion with the offering, which it will use to pay down debt and for general operating funds for NextEra Energy Capital Holdings.
In a way, this is kinda like a combined stock/corporate-debt offering, where NextEra is issuing new shares, while also offering a return on buying corporate debt (the 6.926% annual distribution).
Da, da, da, da, da? WTF does any of this mean?
Yeah, this announcement is denser than a collapsed neutron star. If you’d like to read the official NextEra Energy press release — or if you need some light reading to help you get to sleep — click here.
So basically, NextEra Energy is selling new stock and raising capital to pay down debts. That’s really all this is. And it’s good timing too. NextEra is hitting up the market for cash right before interest rates get untenable for corporate borrowing.
All in all, it’s a pretty smart move for NextEra Energy.
But unfortunately, Great Ones, y’all can’t get in on buying the $50 “equity unit” to collect that 6.926% annual distribution … unless one of you happens to be Citigroup, Goldman Sachs or Mizuho. And if you are, hit me up … we should talk! I’ve got some ideas…
Since NEE is a Great Stuff Picks holding, the big question here is: What does this mean for NEE stockholders?
Well, Great Ones, what happens when a company sells new stock? We get share dilution, right? And that’s just a fancy way of saying “when there’s more of something, it gets cheaper.”
As such, our Great Stuff Picks NEE shares are dropping today on the news … which is expected. The stock shed about 3% or so, give or take … which, in light of how the rest of the market is doing, isn’t all that bad.
Overall, NEE is down roughly 5.5% year to date — which is far better than the S&P 500’s 18% plunge.
What’s more, our Great Stuff Picks NEE position is up nearly 23% since we recommended it back in October 2020. (And that 23% gain doesn’t even include NextEra’s $0.43-per-share quarterly dividend!)
The bottom line here is that NextEra selling these “equity units” means very little to investors right now. Sure, there’s some trepidation surrounding the company issuing new stock. But it’s not enough of a concern to consider selling NEE stock at this point.
The shares are outperforming the broader market, the company is paying dividends and NextEra is the market leader when it comes to providing alternative clean energy to the nation’s power grid.
What’s not to like?
Keep holding NEE stock, Great Ones. And if you don’t already own NextEra shares, or you want to add more, today’s dip is a prime opportunity to buy.
And yes, that is an official buy reiteration on NEE … which means, come Monday, I’ll be buying NEE stock and once again putting my money where my mouth is.
Hold up! Heeey…
For investors who be thinkin’ we soft, we don’t play — we gonna rock it ’til the wheels fall off.
Hold up! Heeey…
For my Great Ones who be actin’ too bold, take a seat — hope you’re ready for the next episode.
We could be stepping into a new phase of energy … unlike anything we’ve seen before.
All thanks to a little-known company that has developed a new tech to access the largest untapped energy source on the planet.
It has nothing to do with oil, gas, solar, hydro or nuclear power.
Adobe Is $#!tting Bricks
Adobe (Nasdaq: ADBE) … bricks … yeah, we’re running with it.
The software company can’t win for losing, as if this week wasn’t already a bad time to be an ADBE investor.
Adobe just reported earnings, and hey, earnings beat by a hair … and revenue actually rose from $3.94 billion to $4.43 billion! But that’s where the positivity ends because analysts being analysts expected $4.44 billion.
Looking forward, since that’s all that anyone really cares about anyway, Adobe expects current-quarter revenue to reach $4.52 billion, but those pesky analysts wanted $4.60 billion. The nerve!
Adobe’s also dropping $20 billion on Figma, which makes cloud-based collaboration software for design teams. And wouldn’t you know, what a coincidence, that software directly competes with Adobe’s XD program. Could that possibly be a reason for the sudden interest? Gee, I don’t know, Scoob…
If you can’t beat ‘em, buy ‘em. It’s the Big Tech way.
OK, maybe it’s not as terrifying as The Ring’s “seven days,” but I bet Ford (NYSE: F) dealers were making that face as they picked up the phone this morning.
Word from the Blue Oval HQ says that Ford dealerships have six weeks to decide on whether or not they want to continue selling EVs.
Or what? A creep crawls out of the well and through their TVs?
No … I don’t think so … at least I hope not?
Anyway, Ford dealers have until Halloween to decide on either becoming a Model e Certified or a Model e Certified Elite dealership … or discontinue selling Model e vehicles effective January 1, 2024.
Basically, you either get with the EV program and install chargers for the public to use, or you don’t get to sell EVs. Them’s the breaks (and the brakes too).
Now, I know that many Ford dealers — particularly in, umm, less-EV-enthusiastic parts of the country — will just take the L, not sell EVs for years on end and probably get hosed in the process.
So what do we do?
We watch. Unless you’re a Ford investor, then hope the company’s not cutting off its nose to spite its face by trying to be Tesla.
Aluminum — The Weakest Link
Is that … R.E.M.? I think?
Ding ding! Points for you, Great Ones. No points for you, Arconic (NYSE: ARNC) investors.
The aluminum company just lowered its revenue guidance range to between $9.2 billion and $9.5 billion — down from its previous range of $9.6 billion to $10 billion.
Free cash flow estimates also dropped from $300 million to $200 million. That difference is a lotta coin, no matter the cojones on the canmaker.
Arconic’s CEO Tim Myers didn’t really go for the “soothe investors” tactic when announcing the reduced estimates either:
Production disruptions? What’s your function?
You want to talk cost pressures, declining demand, problems in Europe and then — oof, the H word — hyperinflation! That’s like 20% less cool than regular ol’ inflation.
The aluminum market tastes like fear. Hyperinflation — it pulls us near. And Arconic investors are now wondering if Arconic’s problems are chronic.
The weakest link, indeed.
Regulators … Mount Up!
Antitrust regulators. They regulate any stealing of this property. Or at least they’re supposed to…
Microsoft was rollin’ in its ride, chillin’ all alone … just hit the east side of Reddit’s WSB.
But U.K. regulators had another idea altogether. Competition watchdogs — I wonder if they’re shepherds or bloodhounds? — just announced that they’re expanding the probe into Microsoft’s $69 billion buyout of Activision.
Expanding? Probe? I’m not even touching this one.
The so-called “Phase 2” investigation has begun, though how exactly this is different than Phase 1 is unclear, other than that things are getting so intense that they needed a whole new phase to fit it all in.
According to the announcement, Microsoft “failed to offer remedies that would mitigate” the Competition and Markets Authority’s concerns … whatever that implies.
Don’t forget that American regulators are still mounting up their investigations into the deal, leaving Microsoft (and its flight-simulating friends) in a holding pattern until anything substantial comes out of said investigations.
What do you think, Great Ones?
Are any of you invested in Microsoft/Activision?
What are your thoughts on NextEra’s funky offering?
Maybe you just want to rant about G-Funk needing a return to the spotlight?
Head on over to our inbox to share your side of the conversation: GreatStuffToday@BanyanHill.com.
In the meantime, here’s where you can find our other junk — erm, I mean where you can check out some more Greatness:
Editor, Great Stuff