Oct 06, 2022 TradeUP Thursday Latest news and bulletin updates
Market Trends
Dow Jones 30,206(-0.45%)
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NASDAQ 11,129(-0.29%)
(Opening price as of 10/06/2022 compared to last close)
Weekly Highlights
#1
Job openings plunged by 10% in August
#2
OPEC+ to raise oil prices with supply cut
#3
Peloton to cut 12% of workforce in 4th round of layoffs this year
#4
Credit Suisse reportedly eyes outside money for investment bank spinoff
Share Your Thoughts:
Why is Musk buying Twitter again?
On Tuesday, Musk sent a letter to Twitter announcing that he would resume his buyout deal at the original price of $54.20/share. At first, he bought a 9.2% stake in Twitter on March 14th (and has since become Twitter’s largest shareholder). On April 25th, Musk made his initial offer to buy Twitter. He subsequently tried to withdraw from this deal by calling attention to Twitter bots, possibly due to limitations in financing. Later, on July 9th, Musk announced his intent to terminate the buyout agreement. Twitter shares rose 22% on Wednesday, closing at $52/share.
Musk and Twitter have fought with each other—in and out of court— for the past several months. It’s surprising for Musk to bring up his original offer right now, especially at an unreduced price. However, some possible explanations for this decision can be uncovered from the Wall Street Journal’s Tuesday reports.
Billionaire, activist, and investor Carl Icahn has reportedly held a $500+ million stake in Twitter over the past few months and has made a sizable profit after its share price shot up after news of Musk’s intent to resume the buyout. Icahn is a fundamental analyst, and investors like him would further investigate the outcome of the Musk-Twitter trial. When Musk bailed on his offer in July, most people concluded that he would end up with a $10 billion breakup fee for backing out of the deal. However, investors like Icahn likely consulted various lawyers to analyze the probability of Musk walking out of the original deal. They may have reached the conclusion that the court would order Musk to complete his deal at its original price.
Musk took an extended break from tweeting, which could be another sign that he will probably be ordered by the court to fulfill the original deal. Even though his 5-day trial against Twitter is scheduled to begin on October 17th, the court and the legal teams from both sides have been in constant communication. It’s possible that Musk’s legal team has reached the conclusion that the court’s verdict will be unfavorable.
Icahn and Musk’s teams may have both reached this conclusion, but will Musk actually complete the purchase deal?
In Musk’s letter, he writes, “provided that the Delaware Chancery Court enter an immediate stay of the action, Twitter vs. Musk, et al. (C.A. No. 202-0613-KSJM), and adjourn the trial and all other proceedings related thereto pending such closing or further order of the court,” which means that once the trial ends, he will resume the purchase deal. Hence it is possible that Musk is playing a waiting game and published this letter just to end the hearing. Meanwhile, Twitter’s legal team will likely urge the court to expedite its procedure, and demand interest payments on any postponement of the purchase. Musk and Twitter’s battle in court might not end just yet.
Do you think Musk will finally close his deal with Twitter?
A.Yes, he will close the deal at the original price of $54.20/share
B.No, some other issues might come up during the procedure
C.Too early to call
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Inside Scoop
#1. Job openings plunged by 10% in August
• US job openings dropped the most in nearly 2.5 years in August, falling 1.1mm to 10.053mm, suggesting that the labor market is starting to cool with higher interest rates dampening demand and taming inflation.
• The Fed has used multiple euphemisms to describe the potential impact on jobs, from economic “pain” to “unfortunate costs” and a “softening labor market.” Powell said in the September FOMC meeting that job openings need to drop significantly to cool inflation.
#2. OPEC+ to raise oil prices with supply cut
• OPEC+ agreed on Wednesday to reduce oil production by 2mm barrels per day starting in November, which represents about 2% of global oil production.
• Biden administration described the supply cut as a “shortsighted” decision and hinted that Congress would soon seek to rein in OPEC’s influence over energy price.
#3. Peloton to cut 12% of workforce in 4th round of layoffs this year
• The fitness equipment maker is cutting another 500 jobs after multiple layoff rounds this year.
• McCarthy said the company now must prove its recent spate of strategy changes, including equipment rentals and partnerships with Amazon and Hilton, can help it grow.
#4. Credit Suisse reportedly eyes outside money for investment bank spinoff
• Bloomberg reported that the bank is considering a boutique model for advisory and dealmaking. It is trying to bring in an outside investor to inject money into a spinoff of its advisory and investment banking businesses.
• The bank is also reportedly exploring a sale of the Mandarin Oriental Savoy in Zurich, which could be worth around 400mm Swiss francs.
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