Diamonds and Dogs

5/25/16

Spin off and merger ALERT! Today's diamond, Computer Sciences (CSC), is jumping 37% to a new high thanks to HP Enterprises ( HPE) decision to spin off and merge its business-services division with Computer Sciences in a deal valued at $8.5 billion. The merger will give Hewlett's IT services business synergies of about $1 billion in the first year and expects to see a $33 billion gain in annual revenue from the spinoff. As the result of this merger Barclay's upgraded Computer Science to "Overweight" from "equal weight" with a price target of $54 from $35.

The Chinese ecommerce giant, Alibaba (BABA) is trading lower by 5% thanks to a SEC accounting probe. Not many stocks trading lower today, but one way to get a stock lower is to question their accounting practices. Alibaba did not indicate when the SEC started their investigation, but the company said it's cooperating with the investigation, which is also probing accounting related to the company's investment in logistics firm Cainiao Network as well as there policies and practices applicable to related party transactions in general. With companies like Amazon, and Ebay out there, it shouldn't be that hard for the accountants of Alibaba to get things right. Alibaba shareholders are probably lucky the stock isn't down more.