The stock market appeared poised to give back some ground on Monday, pausing after a huge rally that lasted just about the entire month of November and continued into last week. After seeing bond yields fall sharply, some new speculation arose over the weekend that financial markets might have gotten ahead of themselves with their enthusiasm. Even so, declines in key market benchmarks were limited to about 0.5% to 1%, just a fraction of their gains recently.
Even amid a gloomy market environment, a pair of stocks got news that sent them higher. Hawaiian Holdings (HA) was by far the better performer of the two, as the airline stock nearly tripled on news of a possible acquisition. Yet even though Uber Technologies (UBER -0.70%) saw a much smaller rise and at least for now remains firmly on the ground, some shareholders see future applications that could take its business into the air as well. Here are all the details.
Airlines from the 49th and 50th states seek to join forces
Shares of Hawaiian Holdings were up 175% in premarket trading on Monday morning. The parent company of Hawaiian Airlines got a huge boost from a rival carrier's takeover bid.
Alaska Air Group (ALK -1.78%) announced over the weekend that it had reached an agreement to buy Hawaiian Holdings in a deal worth $1.9 billion, including the assumption of $900 million of Hawaiian's debt. Under the terms of the proposed acquisition, Hawaiian Holdings shareholders would receive $18 per share for their stock. That's a massive premium from the $4.86 per share closing price for Hawaiian's stock on Friday.
For its part, Alaska sees plenty of potential benefits from the deal. Acquiring Hawaiian would dramatically increase Alaska's reach across the Pacific, giving it the chance to make the Hawaiian capital of Honolulu a key hub for serving U.S. and international travelers. Even paying such a high premium, Alaska still believes that the deal would add to its earnings within two years after closing. Synergies could approach a quarter-billion dollars over time.
Hawaiian Holdings lost value along with many other airlines over the past year, as even the rise in travel demand wasn't able to offset factors like fuel costs. The stock even got kicked out of a small-cap stock index earlier this fall. However, Alaska's interest could spur a recovery -- even though many analysts fear that regulators might seek to block the deal on anticompetitive grounds.
Uber gets an invitation
Meanwhile, Uber Technologies posted a 5% gain early Monday for a different reason. Rather than getting booted out of an index, Uber finally got its invitation to join the premier S&P 500 index.
S&P Dow Jones Indices announced late Friday after the close of trading that it had selected Uber as one of the stocks that would get included in the S&P 500 as part of its quarterly rebalancing. Ironically, Alaska Air was one of the stocks that got the boot to make room for Uber, as it got demoted all the way down to the S&P SmallCap 600.
The moves all reflect S&P Dow Jones Indices' desire to make the S&P 500 as representative of the broader large-cap market space as possible. Many had foreseen that Uber would join the index after it released its most recent quarterly results, because the ride-hailing service provider posted its second straight profitable quarter to bring its trailing-12-month earnings into positive territory. That was just about the last hurdle holding the company back, given its market capitalization well above $100 billion.
The index inclusion won't change Uber's fundamental business, but it will give the stock more visibility and potentially open up new capital-raising opportunities. And even though the company sold its Uber Elevate aerial ridesharing program back in 2020, Uber might well eventually seek once again to join airlines like Hawaiian and Alaska Air in the skies in some capacity.