Wednesday's Headlines: Twitter’s Troubles Continue
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
StoneCo (STNE) +7.2%
Nautilus (NLS) +6.2%
CrowdStrike (CRWD) +3.5%
Lovesac (LOVE) +2.6%
Zillow (Z) +2.4%
Moving Down ⬇️
Zoom Communications (ZM) -16.5%
Baozun (BZUN) -7.6%
Twitter (TWTR) -7.3%
Lemonade (LMND) -3.9%
Here are the stories that you need to know ahead of market-open today, Wednesday the 24th of August.
Twitter’s Troubles Continue 🐦
It’s been another eventful few days in the Twitter-Elon Musk fiasco.
This week, Peiter Zatko, Twitter’s (TWTR) former head of security, filed a whistle-blower complaint that the firm had deceived the public by misrepresenting how it fights spam and hackers. If the accusations are true, this would be a violation of a 2011 privacy agreement between Twitter and the Federal Trade Commission (FTC). In 2019, Facebook was caught similarly red-handed and subsequently fined $5 billion by the FTC.
More worrying for Twitter’s management and shareholders, this revelation could place serious doubts on the acquisition of the company by Elon Musk. Musk attempted to back out of the highly publicized deal in July stating he was dissatisfied with the platform’s ability to detect and remove spam accounts. However, Twitter’s team was quick to disregard these concerns and seem eager to force the deal via lawsuit.
If Zatko’s claims can be substantiated, Musk could have a legitimate reason for terminating the acquisition. The 'Technoking' of Tesla did not release a formal comment, but did tweet a meme of Jiminy Cricket from the movie ‘Pinocchio’ that said, “Give a little whistle”.
Twitter responded to the complaint by stating Zatko had been fired in January due to ineffective leadership and poor performance. A spokesperson suggested that Zatko is attempting to capitalize on the company’s situation with Musk “to capture attention and inflict harm on Twitter”.
In the wake of the news, Twitter’s stock is down 10%.
Nordstrom Bombs Following Slashed Forecast 💣
Luxury department store chain Nordstrom (JWN) is down over 13% pre-market this morning following an underwhelming showing in its second-quarter earnings report yesterday evening. The retailer managed to just about beat on revenue and earnings, but significant cuts to its full-year forecast have weakened shareholder resolve.
Nordstrom reported adjusted earnings per share (EPS) of $0.81 on revenue of $4.1 billion — both just about outpacing respective analyst estimates of $0.80 per share and $3.97 billion. On the positive side of things, net sales grew by 15% year-over-year, with double-digit growth for men’s and women’s clothing, beauty, and footwear driving results.
However, the company now expects annual sales to grow by 5% to 7% for the year — down from a previous mark of 6% to 8%. Expected earnings also took a hit, with Nordstrom now forecasting between $2.30 and $2.60 per share — a far cry from the $3.20 to $3.50 originally expected.
According to CEO Erik Nordstrom, “customer traffic and demand decelerated significantly beginning in late June, predominantly at Nordstrom Rack.” This marked decrease in footfall appears to be the main reason behind Nordstrom’s revised outlook, but the company is also dealing with an excess of inventory that will need to be sold off, likely at a significant markdown.
Prior to market open today, Nordstrom had only been down just over 3% year-to-date, outpacing the broader markets. However, the company is notably down over 70% from all-time highs and will need to act quickly to reverse a worrying downward trend.
Starbox Soars on its Opening Day ⭐️
The Malaysian fintech company Starbox went public yesterday to much fanfare, with the stock soaring more than 1,000% at one point in a volatile opening day. Having priced the shares at just $4 — the low end of its range — the company aimed to raise roughly $20 million from its IPO.
Management could not have anticipated the day ahead, however.
The stock opened at a price of $27 before soaring to a high of $46.21, more than tenfold what the company had priced the original shares at. The hype would quickly subside, with the stock closing the day at $15.40, a figure still much larger than the $4 per share the company took in.
Likely spurred by speculative trading and a market starved of IPOs, the excitement surrounding yesterday tells us little of Starbox the business and instead raises questions about why a tiny company based in Malaysia should receive this much interest from investors. Something seems a bit fishy to me.
Based out of Kuala Lumpur, the company offers technology to allow retailers to offer cash rebate offers. Its IPO is the latest in a recent spell of speculative oddities that include Bed Bath and Beyond’s rally, and Hong-Kong-based AMTD Digital surging to a market cap of over $425 billion, despite having only $25m in annual revenue.
Shady dealings are afoot, be careful out there.