“The market has changed dramatically since April,” Daniel Ives, strategist at Wedbush Securities, told me. Musk took steps late Friday to end his deal to buy Twitter, claiming the company was in “material violation of multiple provisions” of the original deal. For weeks, Musk has raised concerns, without apparent evidence, that there are more bots and spam accounts on the platform than Twitter has publicly stated. Analysts speculated that the fight was an attempt to create a pretext to get out of a deal that now looked overpriced. Musk’s offer represented a 54% premium over Twitter’s price before Musk began increasing his stake in late January, and a 38% premium before his holdings were disclosed in April. In early July, Twitter shares were trading as low as $38.23, down nearly 12% year-to-date and nearly 30% below Musk’s offer price. On the radar: Twitter stock would probably be much worse if Musk hadn’t made his play. Investors have abandoned fast-growing tech stocks – which are less attractive when interest rates rise – and social media companies have been hit hard. Facebook’s Meta has seen its shares fall nearly 50% year-to-date. Snapchat is 68% lower. Then there’s Tesla ( TSLA ) stock, which Musk planned to rely on in part to finance the deal. It has also fallen sharply, down 30% since early April. “The Twitter fiasco made a big difference to Tesla stock, and that’s Musk’s golden child,” Ives said. Musk doesn’t call his volatility buyer’s remorse. But Ives thinks it’s clear it was a major factor. What happens next: The stage is set for a long and dramatic legal battle. Twitter has said it plans to force Musk to close the sale — and it’s not hard to see why. Twitter stock fell more than 5% in premarket trading on Monday. With the takeover tied up in court, Ives thinks it could drop another 30% to $25.
Covid fears and new tech crackdown hit Chinese stocks
Chinese shares fell on Monday as the threat of new Covid restrictions and a renewed regulatory assault on big tech companies dented investor confidence. The latest: Casinos in the gaming hub of Macau have been ordered to close for the first time since February 2020 due to the Covid outbreak, sending shares of operating companies tumbling, my CNN Business colleague Laura He reports. Fears of another lockdown in Shanghai also weighed on the broader China market. Adding to the dismal mood, China’s tech stocks fell after the country’s antitrust regulator imposed new fines on a batch of A-list companies, fueling fears that Beijing is not going to go easier on the country’s internet giants. Top government officials had recently signaled relief from President Xi Jinping’s crackdown on technology and pledged support in the internet sector. The change in rhetoric has fueled hopes that Beijing will support private businesses as it tries to prop up the country’s economy. But on Sunday, the State Administration for Market Regulation said it had fined tech companies including Tencent, Alibaba and Lenovo, alleging they had not properly reported merger and acquisition activity. Alibaba shares sank 6% in Hong Kong on Monday. Tencent fell 3%. The Hang Seng Technical Index fell about 4%. My thought bubble: There was a resurgence of enthusiasm for Chinese stocks last month as investors bet the worst of the Covid restrictions had passed and sought to take advantage of attractive prices. The Institute of International Finance reported inflows of $9.1 billion into Chinese stocks in June. Emerging markets outside of China saw outflows of $19.6 billion as recession worries prevailed. But to assume that Xi’s policy of eliminating the transmission of Covid was over was always going to be a risky bet. Thus it was predicted that the government’s frozen relationship with the private sector had thawed.
Will a critical Russian gas pipeline ever come back online?
Ever since the West hit Russia with bruising sanctions after its invasion of Ukraine, a scary question has been raised: What if Russia shuts off natural gas to Europe, a nightmare scenario that would put enormous pressure on its economy area? That possibility is under fresh scrutiny as maintenance on the Nord Stream 1 pipeline from Russia to Germany begins on Monday. Officials and market watchers have raised concerns about whether natural gas flows will resume once the repair period ends in 10 days. “While this was a routine process that attracted little attention, there is a fear this time that Russia will not resume gas shipments thereafter,” Commerzbank analysts said in a note to clients. Remember: Last month, Germany — Europe’s largest economy — said it was in a “gas crisis” after Gazprom, Russia’s state-owned natural gas company, cut flows through the Nord Stream 1 pipeline by 60 percent. Gazprom blamed the move on the West’s decision to withhold vital turbines due to sanctions, but it was seen by politicians in Europe as a shot across the bow. “Anything can happen. Gas may flow again, even more than before. There may be nothing,” Robert Habeck, Germany’s economy minister, said on Sunday. “Honestly we always have to prepare for the worst and work a little bit for the best.” Europe is struggling to wean itself off Russian energy, but reducing dependence on natural gas is particularly difficult. The region received 45% of its natural gas imports from Russia last year, and is currently rushing to refill storage facilities ahead of winter. Benchmark natural gas prices in Europe rose to their highest level since March last week. They could continue to rise in the coming days, increasing pressure on governments to develop emergency plans. “The concerns are likely to push the gas price further until it becomes clear what will happen to gas supplies once the maintenance work is completed,” Commerzbank said.
Next
New York Federal Reserve Bank President John Williams speaks at a conference on the transition from Libor at 2 p.m. ET. Coming up tomorrow: PepsiCo ( PEP ) reports earnings ahead of a series of bank results later this week.
