Twitter Deal In Jeopardy After Musk Walks
"Twitter Inc. shares fell in premarket trading after Elon Musk walked away from his US$44 billion deal to buy the company, setting the scene for a disruptive legal battle.
Shares fell 5.3 per cent to US$34.95 as of 7:45 a.m. in premarket trading Monday, on track to erase about US$1.4 billion in market value, after Musk backed out of an agreement to buy the social-media giant and take it private.
Twitter shares have been trading well below the US$54.20-per-share offer Musk made in April. The billionaire alleges that Twitter misrepresented user data, with the number of spam bots on the platform much higher than the company has disclosed. The stock has also been falling along with the tech sector amid rising interest rates.
With a US$1 billion breakup fee on the line, traders are bracing for more chaos as Twitter takes Musk to court.
Twitter Chairman Bret Taylor said the company will pursue legal action in order to close the transaction “on the price and terms agreed by Mr. Musk.”" - read more on BNN here
Breaking Thoughts: For those speculating on a deal closing soon, this was terrible news, however many people online seem to believe this is a strategy for Musk to get Twitter ($TWTR) at a better deal price. Even a Bloomberg poll had 34% of respondents online claim that was the reason.
Of course we cannot know for sure, but it sets up an interesting play as shares of Twitter without any deal would likely have traded down along with the rest of tech likely to the mid $20s or lower. At the same time if the deal goes through via lawsuit, at $54.20 there is significant upside from here, finally there could be a middle ground where Musk and Twitter agree to a lower price (but one still much higher than Twitters value with no deal). Alot of volatility ahead is the only thing that can be said with any confidence.
Rogers Outage Lowers Odds of Shaw Deal Approval
"A widespread Rogers Communications Inc. outage that caused trouble for 911 services, retailers and transit operators Friday had many warning the incident is a sign that monopolistic telecommunications companies need more competition.
"The outage is illuminating the general lack of competition in telecommunications in Canada," said Vass Bednar, executive director of McMaster University's master of public policy program.
The country's telecom sector is dominated by three large carriers — Rogers, BCE Inc. and Telus Corp. — and their hold on the industry has long been a concern of academics, who have called for regulators to increase competition for mobile and internet services in Canada.
The Competition Bureau is currently fighting Rogers' plans to purchase Shaw Communications Inc. for $26 billion despite the planned sale of its Freedom Mobile business to Quebecor Inc. because the regulator feels the deal would only bolster Rogers' monopoly and not create a viable fourth carrier.
When the outage began Friday, Rogers, Shaw and the Competition Bureau had just wrapped a two-day mediation period that ended with no resolution." - read more on BNN here
Breaking Thoughts: Given the outage and the fact that the regulator had not yet approved the deal, it seems unthinkable that any regulator -no matter how corrupt or friendly to the industry giants- would allow the 2nd and 4th largest telcos to merge after this debacle.
Shares of Shaw (TSX: SRJ.B) are down about 10% from last week's highs and are far below Rogers' offer of $40.50.
Major Earnings This Week
Tuesday July 12:
Pepsi (PEP): Expected Q2 earnings of $1.74 per share
Wednesday July 13:
Delta Air Lines (DAL): Expected Q2 earnings of $1.64 per share
Fastenal (FAST): Expected Q2 earnings of $0.50 per share
Thursday July 14:
JPMorgan Chase (JPM): Expected Q2 earnings of $2.91 per share
Morgan Stanley (MS): Expected Q2 earnings of $1.54 per share
Charles Schwab (SCHW): Expected Q2 earnings of $0.92 per share
Taiwan Semiconductor (TSM): Expected Q2 earnings of $1.49 per share
Friday July 15:
Blackrock (BLK): Expected Q2 earnings of $8.12 per share
Citigroup (C): Expected Q2 earnings of $1.69 per share
State Street (STT): Expected Q2 earnings of $1.76 per share
Wells Fargo (WFC): Expected Q2 earnings of $0.86 per share
Major IPOs Expected This Week
None
See you next week!
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The Market News Reel for this week! Get the most important market news & updates for the week ahead! Major headlines, excerpts from news sources are shown above. "Breaking Thoughts" section is purely our opinion.