Tesla Inc. shares
TSLA, -0.92%
slid 5.8% in premarket trades Thursday, after the electric-car maker said it is planning to offer about $2 billion of common stock in an underwritten deal. The company said Chief Executive Elon Musk will participate in the offering by purchasing up to $10 million in new shares. Board member Larry Ellison will also participate by buying up to $1 million in stock. Proceeds of the deal are slated to be used to bolster the company's balance sheet and for general corporate purposes. Goldman Sachs and Morgan Stanley are underwriting the deal and have a 30-day option to acquire another $300 million in stock. Shares have gained 149% in the last 12 months, while the S&P 500
SPX, +0.65%
has gained 23%. Read all of MarketWatch's recent coverage of Tesla and CEO Elon Musk.
PepsiCo (PEP) gave investors a good number of things to digest on its earnings day Thursday. Another solid quarter of demand for many of its food and beverages around the world, but a mixed outlook that may be below some aggressive targets held by the Wall Street community.
Total revenue: $20.6 billion vs. estimates for $20.25 billion
Operating income: $2.7 billion vs. estimates for $2.73 billion
Diluted EPS: $1.45 vs. estimates for $1.44
Organic sales growth: +4.3% vs. estimates for increase of 3.7%
Core EPS guidance 2020: $5.88 vs. estimates for $5.95
Other: Company announced a 7% dividend increase
The beverage and snacks giant notched organic volume gains across all segments except for Latin America. Core operating profits — which excludes the impact of currency fluctuations and is a measure watched closely by analysts — fell in four out of seven segments. The language in PepsiCo’s earnings release suggests profits were held back by “certain operating cost increases” that perhaps offset strong work by executives to cut costs. PepsiCo also invested more aggressively in advertising, specifically in the North America beverage business to combat Coke’s strength in Diet Coke.
PepsiCo shares rose slightly in pre-market trading.
FILE - In this July 9, 2015, file photo, Pepsi bottles are on display at a supermarket in Haverhill, Mass. PepsiCo reports financial results on Monday, April 18, 2016. (AP Photo/Elise Amendola, File)
All in, a decent quarter for PepsiCo. What remains to be seen is how investors will balance that with a mixed outlook. PepsiCo guided to 2020 organic sales growth of 4%, below a long-running annual target of 4% to 4.5%. Core EPS guidance of $5.88 was short of some sell-side estimates. PepsiCo management does have a history of guiding conservatively, however, another factor investors must weigh right now.
Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Watch The First Trade each day here at 9:00 a.m. ET or on Verizon FIOS channel 604. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
"The relationship between Mr Staley and Mr Epstein was the subject of an enquiry from the Financial Conduct Authority to which the Company responded," Barclays said. "The FCA ... subsequently commenced an investigation, which is ongoing, into Mr Staley's characterization to the company of his relationship with Mr Epstein and the subsequent description of that relationship in the company's response to the FCA."
The focus of the investigation is whether that relationship was properly disclosed to the bank and regulators.
The FCA and another UK regulator, the Bank of England's Prudential Regulation Authority, confirmed in a statement that they are investigating the Barclays CEO. They provided no further detail.
Shares in the bank were trading 3% lower in London on Thursday morning.
Staley has been running Barclays since late 2015. Prior to that he worked for more than 30 years at JPMorgan(JPM), where he served as head of its investment banking division. JPMorgan declined to comment.
In its statement, Barclays said Staley had developed a professional relationship earlier in his career with Epstein, who died in jail last year while awaiting trial on sex trafficking charges. The bank said Staley had told the board that he had had no contact with Epstein since becoming Barclays CEO in December 2015.
"Based on a review, conducted with the support of external counsel, of the information available to us and representations made by Mr Staley, the board ... believes that Mr Staley has been sufficiently transparent with the company as regards the nature and extent of his relationship with Mr Epstein. Accordingly, Mr Staley retains the full confidence of the board, and is being unanimously recommended for re-election at the Annual General Meeting."
A Wall Street veteran, Staley has remained committed to growing investment banking at Barclays, even as European peers scale back in this area in favor of wealth management.
But some shareholders have criticized his bid to compete with the likes of Goldman Sachs(GS), Morgan Stanley(MSPRA) and his former employer, which has delivered disappointing returns.
Staley is not the first high profile individual to face scrutiny over his relationship with Epstein.
Britain's Prince Andrew stepped back from public life, and his charities have been shunned by businesses, since details of his close association with the late financier emerged. One of Epstein's accusers, Virginia Roberts Giuffre, has alleged in court filings that she was forced into sexual encounters with the prince while underage. Prince Andrew has denied the allegations.
TOKYO (Reuters) - SoftBank (9984.T) CEO Masayoshi Son threw cold water on Wednesday on the idea of cutting his firm’s $150 billion stake in e-commerce giant Alibaba (BABA.N), after prominent activist investor Elliott Management called for big buybacks.
FILE PHOTO: Japan's SoftBank Group Corp Chief Executive Masayoshi Son attends a news conference in Tokyo, Japan, November 5, 2018. REUTERS/Kim Kyung-Hoon/File Photo
The emergence of New York-based Elliott as a SoftBank shareholder has renewed focus on the company’s 26% stake in China’s Alibaba, the Japanese firm’s biggest asset and Son’s most successful tech bet to date.
Elliott, one of the world’s best known activist investors, has amassed a holding of almost $3 billion in SoftBank. It is now pushing for changes, including $20 billion in stock buybacks, sources have said. But Son indicated that he is in no rush to sell down the Alibaba shares - raising questions about how SoftBank could fund any potential buybacks.
“I believe Alibaba has lots of room to grow. I’m in no hurry to sell shares,” he told a news conference on Wednesday.
SoftBank is already highly leveraged and struggling to attract outside money to a second tech fund. Son’s reluctance to sell down the holding in Alibaba leaves little scope for buybacks on the scale Elliott wants, analysts said.
“From a shareholder perspective you should sell it and invest in the things that are going to generate returns,” said Kirk Boodry, an analyst at Redex Holdings who writes on research platform Smartkarma.
If SoftBank thinks its returns cannot outperform Alibaba, “it seems weird to be in the venture capital business,” he said.
SoftBank did little to dispel investor concerns about its strategy on Wednesday, reporting that quarterly profit was virtually wiped out by a second straight quarter of losses at the $100 billion Vision Fund.
“These results validate our concerns that most other things that (SoftBank) does outside of Alibaba have led to distractions or value destruction,” Jefferies analyst Atul Goyal wrote in a note.
The stake in the e-commerce giant is worth around $150 billion - more than the market capitalization of SoftBank itself, which is $110 billion.
Son’s group has few other such assets it could use. Others include a two-thirds ownership in Japanese wireless unit SoftBank Corp (9434.T), although SoftBank Group is reliant on dividends from the telecom unit for cash flow.
The unit has pledged to pay out 85% of its net income as dividends.
SoftBank Group had 3.8 trillion yen ($35 billion) in cash and cash equivalents on its books at the end of December.
However, use of that is constrained by SoftBank’s own financial policy - in an effort to reassure investors - including a pledge to maintain enough cash to cover bond redemptions for at least two years.
SoftBank’s weighted average cost of debt is among the highest of all companies on Japan’s Nikkei 225 Stock Average .N255, according to Refinitiv data.
Son did sell down part of the Alibaba stake ahead of the 2016 acquisition of chip designer Arm, using a derivative transaction to capture upside from the subsequent rise in Alibaba’s share price - a move that was a surprise at the time and could well augur further surprises.
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While Son said on Wednesday he was aligned with Elliott’s concerns, he made it clear any changes would be on his own terms.
“I’m SoftBank’s biggest shareholder so I care about the stock price and also want to raise corporate value,” he said.
“However the method should be left to us, the management.”
Reporting by Sam Nussey; Editing by David Dolan and Susan Fenton
The Japanese tech conglomerate on Wednesday reported operating income of 2.59 billion yen ($23.6 million) for the three months ended in December, a plunge of 99% compared to the same period a year earlier.
SoftBank(SFTBF) founder and CEO Masayoshi Son's closely watched $100 billion Vision Fund was the biggest driver of those losses. The Vision Fund and a related fund reported an operating loss of 225 billion yen ($2 billion) for the quarter, blaming unrealized losses in WeWork and Uber(UBER) for the hit.
Son confirmed at Wednesday's earnings presentation that the fund's recent poor performance — and the accompanying deluge of bad news — has spooked potential investors in his next mega tech fund.
Last year, SoftBank announced it had signed memorandums of understanding with more than a dozen companies to form Vision Fund 2. The company said at the time that it expected to raise $108 billion from companies such as Apple(AAPL), Microsoft(MSFT), Foxconn Technology(HNHPF) and Standard Chartered(SCBFF).
But WeWork's failed IPO and Uber's declining share price "have caused concern amongst potential investors in SoftBank Vision Fund 2," Son said through an interpreter. SoftBank spent roughly $10 billion bailing out WeWork after a disastrous attempt at going public last fall. Uber's stock, meanwhile, has lost 8% of its value since its public debut in May.
"At the moment, I think that our next fund size should be a little bit smaller, because we have caused concerns and anxiety to a lot of people," Son said.
Asked whether Vision Fund 2 could be funded entirely with SoftBank money, Son switched to English, saying: "We can make investment by ourselves. But we have partners who want to work with us, so we'd like to be flexible."
Jefferies analyst Atul Goyal said that Son and other executives need to spend more time harnessing value from other assets.
SoftBank management "spends almost all of its time on (the Vision Fund) and investment securities," Goyal wrote in a note on Tuesday, before the earnings report.
Until SoftBank gives "due importance" to assets such as its stakes in Alibaba(BABA) and chip company ARM, its stock will remain undervalued, Goyal said.
Son believes SoftBank shares trade at a discount of more than 50%, saying on Wednesday that they should be priced at 12,097 yen ($110).
SoftBank is also starting to feel some outside pressure. Earlier this month, activist investor Elliott Management revealed that it has built a "substantial" stake in the company, and is pushing for changes to improve its performance.
Son said that he had meetings with Elliott about two weeks ago, describing the discussion as "open" and "good." SoftBank and Elliott are aligned on several issues, such as a share buyback and upping the number of independent board members, he said.
SoftBank's board is comprised of 11 members, of which only two are classified as independent.
Elliott Management and many analysts who cover SoftBank also want better transparency on the Vision Fund.
The fund, which is mostly operated by London-based SoftBank Investment Advisors, is "regulated under UK law, so we of course follow all regulations for the fund's operations," Son said. "But we'd also like to offer more efforts for enhanced governance and transparency."
Pushed for specifics on how Vision Fund investments are performing, Son said "almost 30 companies in the portfolio recorded a gain, and 30 or so companies recorded a loss, including non-listed companies." He declined to give details on private companies, citing confidentiality agreements.
Among the eight companies in the fund's portfolio that have gone public, five have recorded gains, and three have booked losses as of the end of the December. The biggest winner was cancer diagnostics firm Guardant Health(GH), which gained $1.9 billion for the Vision Fund, and the biggest loser was Uber(UBER), which recorded a loss of $1.06 billion through the end of last year.
The earnings report comes less than 24 hours after a US court approved the $26 billion merger of T-Mobile(TMUS) and Sprint(S), the US carrier SoftBank acquired nearly a decade ago.
Shares in SoftBank rallied on the Sprint news, closing up 12% in Tokyo, ahead of the company's earnings report.
Sprint "has been a major distraction for (SoftBank) since 2012," Goyal said, adding that the merger and all the years Son spent trying to turn around Sprint has "brought little in terms of results."
Offloading Sprint would remove some $44 billion of debt from SoftBank's books.
The deal between T-Mobile and Sprint was stopped in its tracks after an appeal by a group of states, led by California and New York senators.
Reuters reports that a federal judge approved the deal, rejecting the claim that the proposed action would violate antitrust laws and raise prices.
During the trial in December, the carriers said that a joint venture would help the companies challenge Verizon and AT&T, becoming the third-largest carrier with competitive prices and internet speeds. Joining forces would mean T-Mobile’s low-band spectrum and Sprint’s mid-band spectrum will allow for a faster roll-out of 5G network.
The opposition claimed the deal will actually reduce competition and will lead to job losses. US Senator Richard Blumental said the merger will create “another telecommunications behemoth in an already dangerously consolidated market”.
However, the final decision was made by US District Court Judge Victor Marrero, clearing the way for the $26 billion merger. He claimed there wasn’t enough evidence of the deal leading to higher prices and lower-quality wireless services, but both Cali and NY senators promised to appeal and “fight”. A final decision on the deal is expected in July 2020.
