Bayer, Carnival, Silver Viper - Rough weather on the high seas!

Bayer - The naughty daughter

A federal judge has rejected Bayer AG's proposed USD 648 million settlement in a class-action lawsuit filed by cities and other plaintiffs alleging PCB contamination. In a decision issued on November 25, the US District Judge in Los Angeles said the agreement appeared "too broad in scope" because it could shield Bayer from future claims and would require the plaintiffs to indemnify Bayer against such claims. Bayer acquired Monsanto for USD 63 billion in 2018 and said in a statement that it would work with plaintiffs to resolve their concerns. Los Angeles County and the cities of San Diego, Baltimore and Portland are among the plaintiffs, who are now from 36 states. The payout was to include USD 550 million for Class Members and up to USD 98 million for attorneys' fees and disbursements. For the time being, the proceedings continue.

Already in June, Bayer announced plans to pay approximately USD12 billion to settle litigation relating to Monsanto's herbicide Roundup. Bayer has now stated that Roundup is safe and well-tolerated by humans. A further problem exists with polychlorinated biphenyls (PCBs). They were once used extensively to insulate electrical appliances and were also used in products such as carbonless paper, sealants, flooring and paints. The US government banned PCBs in 1979 after they were linked to cancer and other health problems. Monsanto produced PCBs from 1935 to 1977, and now the Company is trying to close the story once and for all.

Bayer is still swirling in the US wave of lawsuits, and in 2020, is one of the weakest stocks in the DAX. The Company has a market value of only about EUR 47 billion, at its height, it used to be over EUR 130 billion. When Bayer will be able to escape from the clutches of justice remains questionable. In any case, the Monsanto takeover will go down in the history books as one of the most significant value destructions of all time. For Bayer, this is a disservice done by a management team that is completely detached from the Company.

Carnival Corp. - Goodbye cruises

The recent explosion of coronavirus infections means the expectation that cruises will commence are premature. Carnival, together with Royal Caribbean and Norwegian Cruise Lines, is one of the big 3 players in this sector, which has been lying idle since the beginning of the year. The pre-sold cruises for February and March are cancelled again. One can now only hope for free travel in the summer.

The stocks of the badly shaken industry crashed again. Carnival's annual loss amounts to an impressive 60%. The share recovered by 60% from its November low, but the volatility demonstrates the pitfall of the percentage calculation. The long term investor is sitting on massive losses, the short term oriented and courageous speculator, armed with the hope of a vaccine, can calmly realize again and hope for the next sell-off of the stock. Fundamentally, all significant lines are already on the verge of over-indebtedness, and various government aid packages have been applied for.

Given the 99 percent drop in sales, the third quarter was an absolute catastrophe, and the figures for the fourth quarter could hardly be better. The fiscal year ended now on November 30, and Carnival will probably report the worst figures in its long history. However, the stock market threw out a lifebelt, as Carnival reported a sale of shares worth USD 1.5 billion on November 10. They took advantage of the rally after the US election, in which the shares rose from USD 14 to over USD 20.

The new money will now delay the risk of bankruptcy, but not for too long. Only on the assumption of rapid global approval of a vaccine and a quick market launch could the tide turn; otherwise, the pandemic will continue well into 2021. That may be too long for Carnival. Management sold shares yesterday after reaching a 6-month high.

Silver Viper - First-class projects, tax effects

"Tax Loss Selling" is the keyword of the last days. In the course of the somewhat lighter precious metal prices, many mines and explorers also went down. Canadian investors are taking advantage of the tax benefits to offset their annual profits with incurred losses, in turn creating liquidity resources for re-entry after the turn of the year. The promising Silver Viper also entered the correction mill with a 50 percent loss - but the projects are still 1A in character.

The former Pan American Silver project "La Virginia" not only has first-class historical exploration, but the drill bit has recently uncovered discoveries and great potential in new zones such as El Rubi. The gold-silver project is located in northern Sonora, the leading gold-producing state of Mexico.

With a total of 188 drill holes and peak values of 7.63 grams of gold and 363 grams of silver per tonne, the area is truly inspiring as the structures are relatively near surface. Much of the project has not yet been mapped or drilled, which certainly offers some surprises. As of September 30, the balance sheet carried USD 4.3 million in cash, enough to continue into the new year, as Silver Viper currently has an excellent track record of discoveries at La Virginia and the new El Rubi zone.

Management and institutional investors own 83% of the shares, leaving only a small free float of 17%. Nearly halved in value since the summer, the Company has a capitalization of only CAD 36 million. It should therefore come as no surprise that after the tax-induced sales, a stronger catch-up movement is starting in December.