Tesla Shares Continue To Dive Since Announcement To Purchase Moneypit SolarCity

by 2 years ago

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“Shameful example of corporate governance at its worst” — Jim Chanos, ripping Elon Musk over Tesla’s proposal to acquire SolarCity. Remember, Musk is the CEO of Tesla, but he also cofounded SolarCity and his first cousin just so happens to serve as SolarCity’s CEO. Conflict of interest much?

MARKET SNAPSHOT

Big Picture

  • U.S. markets closed slightly lower as the entire world awaits the highly-anticipated Brexit vote set for this evening. Meanwhile, investors seemingly couldn’t care less about Janet Yellen’s testimony about the state of the economy

Alternatives to Watch

  • The British pound hit its 2016 peak as investors appear to be pricing in the “remain” scenario, which also caused gold to fall along with bond prices, an overall bid of confidence for the global economy

CORPORATE PRIMER

Tesla May Be Saving Energy

…But it sure isn’t saving money—putting Elon Musk in quite the pickle. Shares of the groundbreaking auto company collapsed over 10% yesterday after Tesla offered to purchase solar panel designer SolarCity for $2.8 billion. As you can tell by Chanos’ quote, Wall Street analysts and investors are questioning Elon Musk’s eyebrow-raising offer. The reasons: fears that the two companies won’t merge well, and that Tesla (which isn’t profitable) is in no position to acquire a company like SolarCity, which, financially speaking, is an absolute disaster. Musk, in typical Musk fashion, dreams of a centralized company for clean-energy proponents, combining the green-ness of electric vehicles with the green-ness of solar panels—but does anyone care about the bottom line anymore?

Bed Bath & Below

…Earnings estimates. Bed Bath & Beyond shares fell more than 5% yesterday evening after the retailer reported dismal first-quarter earnings. Everyone’s favorite home goods store brought in a mere $122.6 million last quarter, compared to almost $160 million last year—and at $43.81, BBBY is currently trading near one-year lows. Needless to say, the Street ain’t pleased. Side note: Barnes and Noble also reported pretty disappointing earnings (but the stock has been so beaten up shares actually rallied nearly 5% after hours). Why are we mentioning this? Let’s just say both companies were hurt by the same culprit (hint: it starts with “A” and ends with “mazon”).

Someone’s Got to Do It

…Why not Twilio? The company that gives Uber the technology to connect to users is going public today, and the cash money is right on schedule. Shares are priced at $15, which is above the $12-14 range the company had anticipated, meaning it raised $1.2 billion dollars. That’s nothing to shake a stick at, especially given the profoundly disappointing year we’ve had for IPOs—right on track to be the slowest since ‘09. While one offering isn’t about to turn the IPO market around, it sure boosts confidence at a time when there isn’t much of it to be found.

WORLD MACRO

Today Is the Day

…That’s right, the Brexit vote has finally arrived. In mere hours, registered U.K. voters will head to the polls to answer an age-old question: should I stay or should I go? Sneak preview: as it stands, midnight hour polls have the “remain” camp with a slight lead. Accordingly, the British Pound has rallied in international markets to reach its highest value in five months and the bookies—that’s right, the chaps used for betting on races and sports games—are reflecting the current macroeconomic conditions with lowered odds that Brexit occurs. Whether you support the “leave” or “remain” team, we can all agree that today’s vote will impact this crazy little thing called the free market for some time to come. Place your bets.

OTHER STORIES

  • Goldman to lay off 98 New York employees
  • McDonald’s gets bids for its sale of China and Hong Kong stores
  • Vice media CEO deciding between IPO or selling company
  • Amazon’s redesigned Kindle is thinner, lighter and comes in white

ECONOMIC CALENDAR

A FASCINATING SPECIES

Chances are that you’re sick of reading pieces about how millennials are super into social justice, are living at home longer or like craft beer. Tell us something you don’t know, you ask? Check out the latest data to debunk some myths about millennials, who have surpassed baby boomers as the largest living generation:

  • First, some pretty interesting context: there are 75.4 million millennials in the U.S., and an insane 27 million of these are customers of Credit Karma, a website that keeps you up to date on your credit score.
  • Fueled by the massive potential of its data, Credit Karma decided to do some digging to find out what really makes millennials tick. Number one: 75% of millennials said the financial crisis shaped their beliefs about personal finance management.
  • Okay, so that’s not so shocking, but what is surprising is that 52% have started saving for retirement, and 89% started saving before the ripe old age of 28 (side note: millennials are those in the 18-34 range).
  • Why so much saving? It might be because 62% of millennials have no faith in social security.
  • Lastly, 88% of those who said homebuying today wasn’t for them said that they hoped to be able to do so in the future. Don’t worry, baby boomers: the American Dream is still alive and well.

INTERVIEW QUESTION OF THE DAY

What factors can lead to the dilution of EPS in an acquisition? (Answer 2)

BUSINESS TERM OF THE DAY

Debenture — A type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer.

FOOD FOR THOUGHT

The 2016 J.D. Power U.S. survey of vehicle quality was topped by—wait for it—Kia Motors. That’s right, the Korean car manufacturer outperformed European and U.S. carmakers to become the first non-luxury brand to top the list in almost 30 years.


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