Bayer Faces Investor: In a surprising turn of events, Bayer finds itself under the spotlight as investors raise questions about the timing of a $5.75 billion bond issuance amidst a string of setbacks. The German conglomerate faced major challenges, including a halted drug trial and adverse legal rulings over its Roundup weed-killer. Bond investors are contemplating whether Bayer should reconsider the terms of the deal or even withdraw it altogether.
The bond was priced last Thursday, and concerns among investors grew after the company faced a substantial setback in a late-stage trial for a new anti-clotting drug. This development, coupled with two separate legal rulings ordering substantial payouts over Roundup, left investors wondering if Bayer management was transparent about the challenges before proceeding with the bond issuance.
According to Andrew Brady, Head of Basic Industries Research at CreditSights, many investors are expressing frustration and questioning whether Bayer rushed the deal ahead of the adverse news. In response to the growing unease among bondholders, Bayer’s bankers engaged in a call with top investors on Monday to address concerns and provide clarity on the potential impact of recent events on the company’s earnings.
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During the call, investors sought assurance regarding the company’s ability to handle the Roundup litigation, to which Bayer responded by emphasizing its reserves and the unforeseeable nature of the jury verdicts. While it is uncommon for investment-grade bonds to be pulled after pricing, the circumstances surrounding Bayer’s recent challenges have triggered heightened scrutiny.
The bond, priced with maturities ranging from three to 30 years, marked the 10th largest investment-grade bond deal by an industrial company this year. Despite attracting over $22 billion in orders, the recent setbacks have taken a toll on the credit spreads of some bonds, with premiums widening between 5 and 23 basis points compared to the pricing last Thursday.
In the world of corporate bonds, setbacks and legal challenges can prompt investors to scrutinize the transparency and decision-making of the issuing company. While the full impact on Bayer’s financial health remains to be seen, the recent events have underscored the intricacies and uncertainties that investors navigate in the corporate bond market, where unexpected developments can influence market sentiment and investor confidence.
Our Reader’s Queries
Who are the investors in Bayer?
Contrary to popular belief, hedge funds do not own Bayer. The company’s biggest stakeholder is BlackRock, Inc., which owns 4.9% of the company’s shares. The second largest shareholder is The Vanguard Group, Inc., with a 3.8% ownership of common stock. Massachusetts Financial Services Company also holds a significant portion of the company’s stock, with about 3.0% ownership.
Why is Bayer stock dropping?
Bayer’s stock price has hit rock bottom, dropping to its lowest point since 2005. This comes after a clinical trial examining the effectiveness of the anti-coagulant drug asundexian was terminated early due to its lack of efficacy.
Which companies are owned by Bayer?
Since 1978, Alka-Seltzer has been under the ownership of Bayer. This was made possible when Bayer acquired Miles Laboratories, along with its subsidiaries Miles Canada and Cutter Laboratories. This acquisition brought with it a range of product lines, including Alka-Seltzer, Flintstones vitamins, One-A-Day vitamins, and Cutter insect repellent.
What is the issue with Bayer glyphosate?
The controversy surrounding glyphosate stems from its classification as a probable human carcinogen by the International Agency for Research on Cancer in 2015. This declaration led to numerous lawsuits, with many directed towards Bayer, who acquired Roundup manufacturer Monsanto Co. for $63 billion in 2018.