The EU, Covid-19 Relief, eBay, Adevinta and Tesla

The European Union agrees to landmark economic relief, eBay sells one of the internet’s oldest businesses and Tesla aims to impress with earnings this week.
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EU Council President Charles Michel and EU Commission President Ursula von der Leyen
Brussels, Belgium. 22nd June 2020. EU Council President Charles Michel and EU Commission President Ursula von der Leyen participate in a media conference at the conclusion of an EU-China summit. By Alexandros Michailidis

July 21, 2020 – The European Union agrees to landmark economic relief, eBay sells one of the internet’s oldest businesses and Tesla aims to impress with earnings this week.

Today’s word count: 1,333 words (9 minutes)

European Union Leaders Agree on Spending Plan for Recovery

The European Union reached a landmark agreement Tuesday on a €1.8 trillion ($2.06 trillion) spending package to help contain the economic fallout of Covid-19. The deal involves €750 billion in recovery — €390 billion in grants and the rest in loans – and around a €1 trillion multi-year budget for the EU. It’s the first time the bloc has ever issued billions of euros of common debt, but “resorting to new measures” could ultimately “deepen the [EU’s] economic integration,” according to The Wall Street Journal. The deal required approval by the parliaments of member nations.

Why It Matters

Something needed to be done to counter the imminent economic downturn, and the previously enacted a €540 billion emergency package wasn’t going to last forever. The ability to compromise and get a deal done represents a significant step toward a “more genuine fiscal union.” The influx of cash should boost economic recovery and allow nations to increase spending without national debt becoming overwhelming – Italy’s national debt risk could have endangered the Euro without this development. Plus, the new budget plans provide additional help by pumping money into infrastructure and public investment. The European economy is on pace to shrink around 9 percent this year, but the new deal could cap that number.

What They’re Saying

  • Germany: “I think it’s a very important message to the rest of Europe—but also beyond Europe, that this very special entity, this very special construct of 27 member states of the European Union…is actually able to act together and has proven that it is able to act together,” German Chancellor Angela Merkel said.
  • Netherlands: Dutch Prime Minister Mark Rutte expressed concerns the plan “risked turning the EU into a wealth-transfer union that would bolster domestic euroskeptic opposition and could breach current rules.” But he backtracked Tuesday since the EU ensured it was a one-time, limited program.
  • Italy: “We are satisfied we have launched an ambitious recovery plan,” Italian Prime Minister Giuseppe Conte told reporters. “It’s a historic moment for Europe. It’s a historic moment for Italy.”

Read More: (WALL STREET JOURNAL)

EBay to Sell Classified-Ad Business to Norwegian Firm in Multi-Billion Deal

After a five-month search, eBay has found a buyer for its classified-ads business. Norway’s Adevinta, a global digital marketplace specialist, agreed to purchase the division from eBay for $9.2 billion Tuesday to create what CNN called “the world’s largest online classifieds company.”

How Its Broken Down

EBay is getting $2.5 billion in cash. The rest will come in the form of 540 million shares of Adevinta, listed on the Oslo stock exchange. According to Adevinta, eBay will own a 44 percent stake, but only 33 percent of the voting rights.

Why It Matters

EBay has been trying to unload its 25-year-old classified-ads business as activist investors push it to dismantle its once conglomerate-like structure with PayPal and StubHub and “boost value by simplifying the operation.” Classifieds represented the last remaining non-core business after the company sold its StubHub division last year. The division operates mostly internationally and only produced a fraction of eBay’s core marketplace business. Still, the decision to retain a significant stake in the combined entity demonstrates eBay Chief Executive Jamie Iannone is “is betting on ultimately generating a bigger return by maintaining a say in the business with the option of selling down the position at a future date,” according to The Wall Street Journal.

Numbers to Consider

  • $1.1 Billion – The revenue generated by eBay’s classified-ads division last year.
  • $7.6 Billion – The revenue generated by eBay’s marketplace business in 2019.
  • 185 Million – Adevinta’s expected annual operating profits following the deal, although a large portion of the boost is attributed to cost-cutting.

Read More: (SHORT VERSION – THE INFORMATION) (LONG VERSION – WALL STREET JOURNAL)

Elon Musk Aims Tesla at Fourth Straight Profitable Quarter

Tesla stans rise up. Even after the electric vehicle maker’s lone U.S. assembly plant went offline this spring, as California shut down to fight Covid-19, many analysts doubted the second quarter would be profitable. But the Elon Musk operation shocked us all, “delivering a surprising number of new cars and sport-utility vehicles during the three months that ended on June 30.” Now, forecasts predict a much smaller decline, and expectations there’s an increasing buzz Musk will “pull off another Hail Mary performance” and report a profit Wednesday.

Why It Matters

“A positive earnings report would mark the first time that 17-year-old Tesla has reported four consecutive quarters of profit and would qualify it for consideration in the S&P 500. Inclusion in the prestigious benchmark gauge of U.S. equities would drive index funds to include the company’s shares in their holdings,” The Wall Street Journal writes.

Analysts have been wrong about four of Tesla’s six profitable quarters in the last five years. However, the Silicon Valley startup is expected to report a quarterly loss. Though, it would still represent a sharp year-over-year improvement.

Numbers to Consider

  • $228 Million – Tesla’s predicted quarterly loss by analysts surveyed by FactSet.
  • $300 Billion – Tesla’s approximate market value – good enough to help the company overtake Toyota as the world’s most valuable automaker.
  • $1,643 – The value of Tesla shares Monday at close.

Read More: (WALL STREET JOURNAL)

A Quick Look

Coca-Cola Sales Fall with Fewer Products Sold at Bars, Restaurants

  1. Coca-Cola sales fell 28 percent for the latest quarter as the company cited fewer sales of products at bars and restaurants due to the Covid-19 pandemic. About half of Coca-Cola’s business comes from restaurants, bars, movie theaters and sports stadiums worldwide.
  2. The company reported second-quarter sales of $7.15 billion Tuesday, a drop from $10 billion a year earlier. “For the quarter ended June 26, Coca-Cola recorded earnings of $1.78 billion, or 41 cents a share, down from $2.61 billion, or 61 cents a share, in the comparable quarter last year,” The Wall Street Journal writes.

Read More: (WALL STREET JOURNAL)

Worth Your Time

In Reality We Suffer: LinkedIn is the latest company to face the hard-hitting realities of the pandemic. The company announced it was cutting 960 jobs, or roughly 6 percent of its workforce, as it grapples with falling demand for recruitment services. The Microsoft-owned professional networking site said the cuts would be made across the global sales and talent acquisition teams. There are no plans for further layoffs at this time. (WALL STREET JOURNAL)

Let’s Make A Deal: As $600 per week federal unemployment benefits are set to expire in a matter of days, House Minority leader Kevin McCarthy said it’s unlikely a new coronavirus relief bill passes before the end of July. While it won’t be a long wait – McCarthy said the deal could be done in early August – it would mean the disruption of a critical financial lifeline for many Americans. (CNBC)

Tidbits

Joe Biden unveiled a $775 billion plan to fund universal child care and in-home elder care.

Didi Chuxing, the Uber of China, is reportedly preparing for an initial public offering in Hong Kong, citing “growing pressure from investors who want to cash out.”

Longtime Wells Fargo CFO John Shrewsberry is leaving the bank with BNY Mellon CFO Mike Santomassimo stepping in to take the job.

Activists are turning the heat up on Facebook as a new policy-focused nonprofit emerging from the wave of big tech scrutiny is calling for the tech giant’s oversight board to “either step up or step down.”

Uber rival Gett has raised $100 million in a bid to pivot toward the business travel market.

Men’s Warehouse owner Tailored Brands is eliminating around 20 percent of its corporate workforce.

A Couple Cents Content

Catch up on Monday’s Live Show where Justin Oh talks growth stocks, Microsoft, Walmart and gets some input from Hedge Fund Henry. (YOUTUBE)

Depending on how interested you are in Spartan Energy’s acquisition of Fisker:

  • Check out a brief overview. (TIKTOK)
  • Dive deeper on the topic. (YOUTUBE)
  • Evaluate for yourself using Justin Oh’s $SPAQ versus $TSLA excel model (DOWNLOAD)

Watch Justin Oh’s breakdown of Peloton’s stock. (YOUTUBE)

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Thanks for reading!

— Justin Birnbaum

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