Elon’s Nemesis
By Wed, May 13, 2020
Hey Scoopers,
The excitement for the reopening of the economy has subsided, and the market ended the day in the red. — More on that in the “Overall Market” section.
Beyond the overall market, one food delivery stock got a boost from acquisition rumors, while a tech startup turned to a private equity firm to survive the COVID-19 pandemic. — More on that in the “What’s Up?” and “What’s Down?” sections.
Oh, by the way, Elon Musk met its lawmaker nemesis. — More on that in the “Water Cooler” section.
But, first, here is a recap of what happened in the market yesterday:
Market Recap
- U.S. markets: Stock market indices finished the day in the red. Scroll down to the “Overall Market” section to read more.
- Cryptocurrency: Bitcoin’s price continued to hover near the $9,000 level despite the halving event on Monday. It’s surprising to see that the cryptocurrency market is not showing any significant reaction to the much-talked-about halving of the mining rewards.
The market may seem like a bit of a mess right now, but we are seeing some clear winners and losers at the sector and individual stock level. The weight of the evidence suggests that there will be winners on the long side as well as the short side, and then a lot of stocks in the middle that don’t look like they’re going anywhere anytime soon.
One easy way to view that is through our five Bull market barometers, which tell us whether we’re in a bull or bear market.
As a result of that data, we’re focused on the best opportunities on both the long and short side.
We’ll be sharing that information live during our weekly COVID Market Watch Update this Thursday at 4pm EST/1pm PST.
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Not Too Fast
All sectors and the three primary stock market indices finished Tuesday in the red zone. The Bureau of Labour Services announced the latest Consumer Price Index for April. According to the report, “the index for all items less food and energy fell 0.4 percent in April, the largest monthly decline in the history of the series, which dates to 1957.” Combine that with warnings issued from infectious disease experts and other experts about the risks of reopening the economy painted a grim outlook over the hopes for a speedy reopening of the economy. It seems that the earlier excitement about the reopening of the economy was a bit ahead of reality, and the stock market is now adjusting to the new expectations.
The situation is fluid, of course. And, the market may take on a new outlook for the immediate future based on what comes out in the news in the days to come.
Food Delivery Rumors
So, what happened?
Shares of GrubHub (Ticker: GRUB) were up more than 29% on Tuesday. Rumors have it that the mac daddy of food delivery, also known as UberEats, owned by Uber (Ticker: UBER), plans to acquire the company. So far, the news is that Uber has rejected Grub’s all-share purchase offer, and the situation is a bit fuzzy. But, nothing prevented investors from buying the rumor with the hope of selling at a profit once the news is approved, if it ever does.
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Private Equities To The Rescue
So, what happened?
Shares of Eventbrite (Ticker: EB) were down more than 24% on Tuesday. The online event marketplace company is suffering from the global shutdown of in-person events. The company is a recent IPO from Silicon Valley that hasn’t seen much excitement post its IPO. The stock has lost more than 65% of its value since its IPO in 2019, and the COVID-19 pandemic has been all bad news. In response, in a shareholders’ letter, the leadership outlined several changes they have made to cut costs, access cash, and make sure the company can survive the pandemic. Most importantly, the company turned to a private equity firm and raised $225 million.
There is no way to sugarcoat the impact of COVID-19 on the company. However, the improvements the company is making to support online events and improving Eventbrite’s self-serve platform are some of the margin-enhancing enhancements that will serve the company well in the future, if they manage to survive through the COVID-19 pandemic.
Bleep Elon Musk
So what happened here?
On Monday, Elon Musk, CEO of Tesla (Ticker: TSLA) took a stance against the shelter-in-place order in Alameda, California and reopened the company’s factory. The CEO is under so much pressure to ramp up Tesla’s production, and the shelter-in-place order has been a major source of stress for the company and Elon. On Monday, he decided that he’d rather go against the orders of the country’s policy and announced he is ready to get arrested if the country is planning to do so.
No what?
Typically, government officials take a soft and meticulous approach to the sometimes erratic behavior of Elon Musk. After all, he is known as a visionary that plans to take us to Mars. However, this time, Elon met his law-maker nemesis from southern San Diego country.
(Source: Twitter)
This lawmaker’s response on Twitter has some logic to it, despite its colorful language. She is arguing that Elon Musk and his company have been the beneficiaries of billions of dollars of California’s tax-payers’ money, and should not throw a tantrum when it comes to serious matters such as public health.
What’s your take on the topic of reopening the economy? Let us know your takeaway by emailing us at members@tradestocks.com.
About the Author
The authors of this Scoop are the editorial team at Stock Card, led by Hoda Mehr. Hoda Mehr is CEO and Co-founder of Stock Card and the host of Renegade Investors podcast. She runs a community of 40,000 stock market investors and manages Stock Card's successful flagship portfolio, Roll with Our CEO, on Stock Card Portfolio Store. Hoda is an Economist with an MBA from Concordia, John Molson School of Business. She applies behavioral economics, data journalism, and storytelling to all aspects of her work. Before starting Stock Card, Hoda worked as a strategy and insights lead at technology companies including Symantec, Aimia and Sony. Create a free account to do your stock market research easily and mistake-free: Stock Card Stock Card
