Taking Stock - Tesla CEO Elon Musk goes to trial Monday

In today's taking stock we discuss, Tesla CEO Elon Musk who is expected in court on Monday to defend his $2.6 billion acquisition of SolarCity.

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MARKET COMMENTARY

SOUTH AFRICAN MARKET COMMENTARY

Shares on the Johannesburg Stock Exchange rebounded on Friday, making up for all this week's losses, helped by hopes for a ramp up in COVID-19 vaccines. Acting health minister Mmamoloko Kubayi-Ngubane said the country plans to start inoculating people aged between 35 and 49 years old from Aug. 1. The benchmark all-share index closed up 1.75% to 66,386 points while the blue-chip index of top 40 companies ended up 1.89% to 60,222 points.

 

EUROPEAN MARKET COMMENTARY

European stocks closed higher Friday, bouncing back from a sharp sell-off in the previous session amid concerns about the economic recovery. The pan-European Stoxx 600 closed up 1.3% but was barely higher for the week. The index had slid nearly 2% on Thursday, with retailers dropping 3.2%. Mining stocks led the gains on Friday, up 4%, with most sectors and major bourses in the black. Travel shares also rose, climbing 1.3% on news that the UK is easing some of its quarantine rules.

 

US MARKET COMMENTARY

All three major US averages notched record closes on Friday, rebounding from the previous session’s losses over concerns of a slowdown in global economic growth. Friday’s comeback brought all three majors averages into the green for the week. The Dow rose 0.2% for the week. The S&P 500 and Nasdaq gained 0.4% and 0.4% since Monday, respectively. Bank of America jumped about 3.3%, leading a bounce in financial shares. Shares of General Motors gained 4.8% after Wedbush said the stock is a buy and could jump more than 50% as investors realize the extent of its tech and electric vehicle evolution.

 

ASIAN MARKET COMMENTARY

Stocks in Asia-Pacific rose early trade today, with shares in Japan leading gains regionally. In economic news, China’s central bank announced Friday a 50 basis points cut in its reserve requirement ratio for all banks, effective from July. The RRR represents the amount of money that banks must hold in their coffers as a proportion of their total deposits. A lowering of that required amount will increase the supply of money that banks can lend to businesses and individuals.

 

CURRENCY MARKET COMMENTARY

The rand firmed against the dollar after a soft opening on Friday as investors took heart from a strong pick-up in commodity prices which increased risk appetite. At the close, the rand was 0.96% firmer as it traded around R14.20 to the greenback. Strong exports of commodities and manufactured items have seen the country's trade balance average a surplus of 50 billion rand a month for 2021, brokerage Anchor Capital said in a note.

 

COMMODITIES MARKET COMMENTARY

Gold prices inched higher this morning, on persisting concerns around Covid-19, with investors awaiting US inflation data due this week and Federal Reserve Chair Jerome Powell’s testimony. The market will keep a close eye on Tuesday’s consumer price index data and Powell’s appearance before Congress on Wednesday and Thursday to get cues on policy tightening by the central bank. Oil prices were little changed in early Asian trade today as an impasse in talks among key producers to raise output in coming months kept supplies tight, offsetting concerns about coronavirus' impact on the global economy.

LOCAL COMPANIES

Prosus (PRX) 0.0%

Shareholders of technology investor Prosus on Friday approved a deal with parent Naspers of South Africa that will move most of the economic value of the intertwined companies to Amsterdam. Under the deal, announced on May 11, Prosus — which has a 28.9% stake in Chinese internet giant Tencent — will launch an offer to buy up to 45.4% of Naspers’ shares, issuing new Prosus shares to pay for them. Approval, which came with 90% of the votes in favour of the deal, was already virtually assured from the Prosus side as Naspers has kept a controlling stake in Prosus since spinning the company off in a 2019 initial public offering. In an offer period that will run July 11-August 13, Naspers shareholders who wish to tender their shares to the Prosus offer will receive 2.27 new Prosus shares, a slight premium to Naspers’ current stock price. Prosus shareholders will also benefit, executives say, as the Naspers shares they are buying trade at a deep discount to the value of their underlying assets. Both companies are worth less than the $200 billion stake in Tencent that is held by Prosus. The deal is intended in part to reduce that valuation discrepancy, and to move more of Naspers out of South Africa where it has an outsized weighting on the Johannesburg Stock Exchange. Once the deal is complete, Prosus will have an interest of roughly 60% in the underlying assets and Naspers roughly 40%. Naspers will retain control of Prosus via special voting rights, and they will continue to share a single board.

 

Transaction Capital (TCP) -1.5%

Transaction Capital is pleased to announce the successful completion of the Bookbuild, which was multiple times oversubscribed. The Placing Shares were issued at a price of R35.50 per share, a 4.7% and 4.4% discount to the pre-launch 30 business day volume weighted average price of R37.25 and the close price of R37.15 respectively, as at market close on 8 July 2021, which is in compliance with section 5.52(d) of the Listings Requirements of the JSE. The 33 093 389 Placing Shares being issued represent in aggregate 4.9% of the Company’s issued ordinary share capital prior to the Placing. The Placing raised gross proceeds of R1.17 billion for the Company. As described in the announcement released on 8 July 2021 regarding the opening of the Bookbuild, the capital raised through the Bookbuild will be used in part to finance the acquisition of a controlling stake in WeBuyCars, following regulatory approval, with the balance being used to fund investment opportunities identified both through the divisions of the Group as well as our TC Ventures strategy. In addition, this capital will further enhance our financial flexibility and strategic agility to execute on opportunities resulting from market dynamics pursuant to the COVID-19pandemic.

INTERNATIONAL COMPANIES

Tesla (TSLA) +0.6%

Tesla CEO Elon Musk is expected in court on Monday, and the stakes are high — if he loses, he could have to pay upwards of $2 billion from his considerable personal wealth. Musk will be the first witness in a trial to defend his role in Tesla’s $2.6 billion acquisition of SolarCity. Shareholders have sued Musk and members of the Tesla board, alleging that the 2016 deal amounted to a SolarCity bailout. They also allege that it unfairly enriched the Musk family, who were among the largest shareholders, and that Musk and others failed to disclose all pertinent details and breached their fiduciary responsibilities. Musk has insisted he was “fully recused” from negotiations over the deal. Last year, the board members named in the suit settled with the Tesla shareholders for $60 million with no admission of wrongdoing. Musk, the second-richest person in the world, was the only defendant who chose to take the fight to court. There’s no jury to persuade in this matter. His fate will be determined by the Delaware Chancery Court’s judge, Vice-Chancellor Joseph Slights III.

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Research Team

Media, Sasfin Wealth

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