Before the bell: Tesla delivers, but shares slide

Tokyo posts gains, but in Hong Kong auto stocks tumble. Sofina wraps up its capital increase.

Wall Street ended higher again yesterday. The S&P 500 (+0.1%) saw only a modest rise, but the Nasdaq (+0.4%) put in a stronger performance. Not so for Tesla (-5.1%). The company delivered 497,099 cars last quarter—better than expected. Yet investors pushed the stock lower, fearing the strong numbers were mainly driven by U.S. buyers rushing to claim subsidies before they expire. Occidental Petroleum (-7.3%) also had a poor day. The group announced it is selling its chemical division OxyChem to its largest shareholder, Berkshire Hathaway (-0.5%), for 9.7 billion dollar. Intel (+3.8%) did better. European markets were upbeat as well, with the Euro Stoxx 50 rising 1.2%. The Bel20 managed only +0.2%, though Sofina (+4.5%) did its best to pull the index higher.

In Tokyo, stocks rose an average 1.3%, but Hong Kong’s market fell 0.9%. Alibaba (+0.3%) held up surprisingly well, while Chinese auto stocks skidded: BYD (-4.5%), Li Auto (-3.1%), and Geely (-2.8%) fell as investors worried Tesla might regain ground in Asia. This morning, eurozone data will reveal confidence levels in the services sector. Sofina will also sell the unused rights from its capital increase via a scrip auction.

Success

Voilà. Sofina’s capital increase is done—or nearly so. This morning, the holding company is expected to announce that more than 90% of subscription rights were exercised. We’ll be close to 100%, but not quite. After all, not every shareholder owns a multiple of 14 shares or has enough cash. Plus, some always forget to subscribe, subscribe incorrectly, or simply don’t know they could. No matter—today Sofina will ensure the increase is fully subscribed. All unused rights will be sold to institutional investors, who are obliged to subscribe today, one day after the first round closed. Trading in the stock will be briefly suspended during the auction. By the end of the day, Sofina can be sure it will have 545 million euro in cash on its bank account next Tuesday—minus the commissions for the banks (KBC, Belfius, BNP Paribas Fortis, and ING) that managed the transaction. Mission accomplished. The fuel tank is refilled.

Conflict of interest?

Not everything Warren Buffett touches—or buys—turns to gold. His oil stocks, for instance. In the long run, he and Charlie may yet be proven right for betting heavily on black gold. But today, that’s not the case. Berkshire Hathaway bought Occidental Petroleum shares en masse at an average of 58.6 dollar in mid-2023, then again at 46 dollar at the end of 2023, at 59.5 dollar in mid-2024, and even earlier this year at 46.8 dollar. Yesterday, the stock closed at 44.23 dollar. Berkshire now owns 28% of the oil group and yesterday announced it would acquire the OxyChem division for 9.7 billion dollar, enabling Occidental to reduce debt. Other shareholders were spooked and sold their stock. Is this not a conflict of interest? Or is Occidental selling because it has no choice? Odd, too, since Buffett isn’t known for investing in companies saddled with heavy debt. Or was this an exception? We’ll discuss it tomorrow in Spamalot.

Did you know…

that many U.S. oil companies trace their roots back to oil tycoon John D. Rockefeller’s empire—but not Occidental Petroleum? Rockefeller’s Standard Oil was broken up in 1911 into companies we now know as Exxon, Chevron, and Mobil. Occidental, by contrast, was founded in Los Angeles in 1920 as something of an industry outsider.

This article was translated from Dutch and was originally published on Spaarvarkens.be.