Top News  Shutterstock The major stock market averages closed mixed for the week following a choppy day of trading Friday. The week saw the stock market bounced around by the volatile trading in bitcoin and potential Fed taper talk before retracing those moves. The S&P 500 and Dow ended the week lower while the big rebound in tech shares Thursday pushed the Nasdaq into the green despite the selloff earlier in the week. The 10-year Treasury yield ended the week roughly where it began at 1.63%, but it was an eventful roundtrip, with the yield topping 1.69% after the latest Fed minutes showed some members looking to discuss reducing asset purchases at upcoming meetings.    | TOGETHER WITH  |
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| | Top News Shutterstock The major stock market averages closed mixed for the week following a choppy day of trading Friday. The week saw the stock market bounced around by the volatile trading in bitcoin and potential Fed taper talk before retracing those moves. The S&P 500 and Dow ended the week lower while the big rebound in tech shares Thursday pushed the Nasdaq into the green despite the selloff earlier in the week. The 10-year Treasury yield ended the week roughly where it began at 1.63%, but it was an eventful roundtrip, with the yield topping 1.69% after the latest Fed minutes showed some members looking to discuss reducing asset purchases at upcoming meetings. | |
| M&A On Monday, AT&T (T) announced a deal to merge WarnerMedia with Discovery's (DISCA) media assets, which would create a more formidable competitor to Netflix (NFLX) and Disney (DIS). Under the terms of the agreement, AT&T would receive $43B in a combination of cash, debt securities, and WarnerMedia's retention of certain debt, while AT&T's shareholders would receive stock representing 71% of the new standalone company (Discovery shareholders would own the rest).
Plenty to click through: The "pure play" content company will own one of the deepest libraries in the world with nearly 200K hours of programming. It would also bring together over 100 of the most cherished, popular and trusted brands in the world under one global portfolio. Among them: HBO, Warner Bros., Discovery, DC Comics, CNN, Cartoon Network, HGTV, Food Network, the Turner Networks, TNT, TBS, Eurosport, Magnolia, TLC, Animal Planet, ID and many more.
Citi is positive on the deal from AT&T's perspective, maintaining a Buy rating and a $34 price target. "It puts the company in a better position to grow the core communications busines, especially with wireless performance on the upswing," analysts Michael Rollins and Jason Bazinet added, though the guided post-deal dividend cut is an "obvious disappointment." Shares fell a cumulative 15% from the $33 level after the transaction was announced, but ended the week back near $30.
Go deeper: Those investors well attuned to the John Malone-a-verse could see the Discovery player and cable titan's fingerprints all over the deal. For one thing, the tie-up is being accomplished via a Reverse Morris Trust, a complex (but tax-efficient) approach to combining the entities via all stock that's frequently used by Malone. In fact, years ago he used the approach to spin off a 54% stake tax-free in DirecTV - now up for sale by AT&T. "After over 30 years of being involved in developing Discovery as a global information and entertainment company, the opportunity to combine with WarnerMedia to create the ultimate consumer offering in its space is compelling," Malone said in a statement. (242 comments)
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| Trending Early in the week, Tesla (TSLA) shares were the weakest among the Big Six megacaps, sinking back below their 200-day simple moving average. Pressure came from a few directions, related to and unrelated to its core business of selling cars, as well as growth names falling out of favor. The biggest news though was the disclosure of a large short position on the stock by Michael Burry, who is famous for his calls on the housing bubble in The Big Short.
More details: Burry's Scion Asset Management holds 8,001 put contracts, bearish options on 800,100 Tesla shares, although there were no information on strike price or expiry in the regulatory filing. Burry had disclosed a Tesla short in December in a since-deleted tweet and has expressed his concern about the valuation. Burry was one of the catalysts for the retail investor interest in GameStop (GME), although he closed out his long position before the big squeeze. The disclosure adds some more credence to the theory that Tesla shares have come too far too fast after a year of cash from fiscal and monetary stimulus chasing returns in Big Tech and momentum names.
"Tesla is currently trading at an enterprise value multiple of about 11x based on its expected 2021 revenues, hardly a bargain, but Tesla will continue to report impressive growth figures for the next 3-4 years and possibly beyond," wrote Seeking Alpha contributor The Outsider, warning about buying on the current pullback. "This justifies to some extent its premium valuation, but even when compared to technology companies this valuation seems to already incorporate much of the future growth."
Crypto controversy: Tesla shares have also seen volatility as CEO Elon Musk battles with supporters arguably as passionate as his own devoted customers and investors: the crypto crowd. Musk, who had been praised for accepting Bitcoin (BTC-USD) for transactions and seen Tesla stock rally on the announcement, found himself in the crosshairs after reversing that decision and suspending the purchases on concerns about the amount of energy used in mining. He recently ended up in a Twitter war with cryptocurrency fans that led to speculation Tesla may shed its Bitcoin holdings, but he then clarified that he wouldn't sell out. (88 comments) |
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