Happily Never After

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What's going on?

Once upon a time (a.k.a Thursday) two princes among German companies had relatively happy endings to recent trying tales – but one ugly duckling was consigned to oblivion.

What does this mean?

Pharmaceutical and life sciences giant Bayer bought US agricultural biotechnology firm Monsanto for $63 billion back in 2018 – but it also took on legal liabilities relating to Monsanto’s weed killer Roundup, which allegedly caused cancer. After paying $80 million to settle some initial lawsuits, 125,000 more quickly piled up. This week, Bayer finally agreed to pay $12 billion to settle three quarters of those claims.

On Thursday, meanwhile, airline Lufthansa’s biggest shareholder gave his blessing to the German government’s $10 billion rescue package, having previously threatened to vote against a deal which sees Germany take a 20% stake in the company.

Why should I care?

For markets: Verily, to be sure is to be happy.

It’s fair to say investors dislike uncertainty: for one thing, it reduces their confidence in their forecasts and leaves companies at the mercy of forces outside of their control. That might explain why Bayer’s stock initially rose on Thursday: while the company’s shelling out a lot, at least putting a figure on the furor is something. Similarly, Lufthansa’s 7% rise likely reflects investors’ increased certainty that the airline will go to the ball.

The bigger picture: What big teeth you have!

There was no fairytale ending for payments processor Wirecard – which admitted it was missing $2 billion on Monday and filed for insolvency on Thursday. After all, companies that lose so much cash they can’t meet their financial obligations quickly fall prey to wolfish creditors. Traders who briefly thought Wirecard might bounce back were roasted alive: the company’s stock fell a further 70% (tweet this).

Originally posted as part of the Finimize daily email.

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