Tuesday's Headlines: Tesla Goes on Trial
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Baozun (BZUN) +10.2%
Stitch Fix (SFIX) +7.4%
Farfetch (FTCH) +6.3%
Shopify (SHOP) +5.8%
MercadoLibre (MELI) +5.7%
Moving Down ⬇️
Ford Motor Company (F) -5.3%
Ericsson (ERIC) -4.3%
StoneCo (STNE) -3.1%
BlackLine (BL) -3.0%
Bumble (BMBL) -2.9%
Tesla Goes on Trial 👨⚖️
Tesla and its enigmatic founder Elon Musk are poised to head to court in a trial accusing the company of securities fraud. The accusation relates to a now infamous tweet from Musk in 2018 where he put out to the world:
“Am considering taking Tesla private at $420. Funding secured.”
The class-action lawsuit claims that this was an entirely false claim and that it subsequently cost investors billions of dollars through resultant swings in the price of Tesla stock. Musk has countered by claiming that the considerations mentioned in the tweet were very real, and that he believed he had the backing of the Saudi Arabian sovereign-wealth fund.
The deal — valued at a cool $72 billion — obviously never took place, and now Musk and co. are forced to deal with the fallout. The presiding judge has already ruled that the tweets were false and that Musk’s actions were reckless. However, it’s now up to a jury to decide if Musk actually knew they were untrue, and if the tweets about taking Tesla private significantly impacted investors.
Tesla and Musk have both already paid $20 million to settle civil charges arising from the same tweets in 2018, with Musk also stepping down from his role as company chairman as a result. Ironically, all eyes will now be on the courts to see if any decision affects Tesla’s already-volatile share price.
Ryan Cohen Builds Stake in Alibaba, Looking for Buybacks 💰
It is being reported that famed activist investor Ryan Cohen has built a stake in Alibaba worth “hundreds of millions of dollars”. The man at the center of the meme-stock craze — who garners a strong following amongst retail investors — has been writing to the board of the Chinese tech giant to push it towards accelerating its share buyback program, believing it is currently undervalued.
Cohen first wrote to the board back in August claiming that Alibaba could achieve double-digit sales and 20% free cash flow growth over the next five years. The company subsequently expanded its share repurchase program by $15 billion in November, while Cohen believes management can tack another $20 billion on top of this. Considering Cohen’s relatively minuscule stake in the ~$300 billion company, it’s hard to believe that he was in any way behind the decision.
Shares of Alibaba are down more than 60% from their all-time highs set in late 2020 after China’s regulators restricted the economy with its zero-COVID policy. It has also clamped down hard on the region’s tech giants and founders, most notably Alibaba’s co-founder Jack Ma and his planned IPO of Ant Group. That being said, there have been green shoots in the region as of late with many Chinese stocks seeing a resurgence. Alibaba is up 85% since its October lows.
Microsoft Set to Receive Antitrust Warning 🚨
The European Union (EU) is preparing to send an antitrust warning to Microsoft over its planned $69 billion acquisition of video game maker Activision. A charge sheet, called a statement of objections, is expected to be sent to Microsoft in the coming weeks, according to a Reuters report.
Microsoft has stated that it is working with the EU to address any marketplace concerns and that the goal of the deal is to bring more games to more people. The EU has an April 11 deadline to finish its review of the Activision deal, and Microsoft is expected to send potential remedies to try to appease the regulator. However, the authority is not expected to be amenable to the concessions until it sounds out its charge sheet.
This comes after the U.S. Federal Trade Commission sued to block the deal last month, saying it would let Microsoft suppress competition for its Xbox videogame consoles and its subscription gaming business.