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Canaccord Genuity on Apple, Sears, and Yelp


Taiwan rejects Apple, Sears will spinoff home and hardware stores, and Yelp lockup ends creating short aqueeze.

The following are excerpts from Canaccord Genuity analysts' commentaries.

Taiwan Semiconductor (TSM) Says "Thanks, But No Thanks."

(AAPL) and Qualcomm (QCOM) have both been rejected in separate attempts to invest in Taiwan Semiconductor Manufacturing Co as they look to secure exclusive access to smartphone chips. Both proposals, which were over $1 billion, were seeking dedicated production according to sources close to the matter.

A deal with TSMC would also give Apple an alternative supplier to Samsung, who currently builds the main chip used in the iPod and iPad. Qualcomm is looking to boost its supply as shortages have began to have a negative impact on earnings. TSMC has said that it wants the flexibility to switch its production between different products and customers, which include Broadcom (BRCM) and Nvidia (NVDA) in addition to Apple. CFO Laura Ho said TSMC wants to retain control of its plants, is not interested in selling itself and currently does not require cash for investments. She went on to say that dedicating one facility to a single product or customer could become a risk if a product, client or technology changes.

With TSMC seeming to be out of the picture, it looks like Apple will have to play nice with Samsung as a supplier for now, despite their ongoing patent disputes.

Sears (SHLD) Is Going Home

Sears Holdings has received approval from its board to proceed with the spinoff its Hometown and certain hardware stores on September 7. The plan is to spin off a company that will be publicly traded and control 1,200 small, but typically profitable stores that sell all Sears products.

Hometown stores are usually independently owned and sell appliances, electronics and lawn and garden equipment. Hardware stores will sell Sears's Kenmore appliances, Craftsman tools and DieHard batteries. Sears shareholders will receive one transferrable subscription right for each share as of the September 7 record date. The number of rights to purchase a Sears Hometown will be determined at a later date and the exercise price will be $15 for each share.

According to Credit Suisse, Hometown stores accounted for about $2.6 billion of Sears's $41 billion revenue last year, but made up nearly 25% of its earnings. CFO Rob Schriesheim expects the transaction to generate $446 million in gross proceeds for Sears.

Yelp (YELP) in Short Squeeze

Over 50 million shares of Yelp became available for trading after their post-IPO lockup on Wednesday, and after falling by more than 30% in the past three weeks, shares rallied as bearish investors looked close their short positions. With many of 2012's tech IPOs getting smacked down on their first free trading days (Facebook (FB) down 6.9% on August 16 and Groupon (GRPN) down 8.9% on June 1), investors were unloading and shorting shares of Yelp in advance of the lockup expiration.

As of Tuesday, 29% of Yelp shares were shorted according to Markit. The end result? A short squeeze as short sellers were forced to buy back shares, pushing the price higher. As the stock climbed, more short sellers were required to buy back their positions at even higher prices helping push Yelp deep into the green and above its IPO price.

Editor's note: For more information on Canaccord Genuity, click here.
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No positions in stocks mentioned.
Canaccord Financial and its affiliated companies may have a Corporate Finance or other relationship with the companies mentioned and may trade in any of the Designated  Investments mentioned herein either for their own account or the accounts of their customers, in good faith and in the normal course of market making. The authors have not received, and will not receive, compensation that is directly based upon or linked to one or more specific Corporate Finance activities, or to coverage herein.
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