WSJ : Elon Musk’s Twitter Investment Raises New Regulatory Red Flag

Elon Musk’s Twitter Investment Raises New Regulatory Red Flag
Late disclosure of stake could affect Tesla CEO’s continuing legal skirmish with the SEC, lawyers say

Elon Musk has set the stage for a new fight with the Securities and Exchange Commission, this time over how he disclosed his investment in Twitter Inc. that has made him the company’s largest investor.

The Tesla Inc. chief executive disclosed his 9.2% holdings in a form investors are required to file when they buy more than 5% of a company’s stock, without planning to seek control. But the notice came several days late. It also didn’t include a standard certification that underscores an investor’s passive status.

Mr. Musk didn’t respond to a request for comment on his filing.

The SEC in the past has brought enforcement actions against some people who missed ownership-disclosure deadlines repeatedly. And the issues with his disclosure could hurt Mr. Musk in his continuing legal wrangling with the SEC, according to lawyers.

Mr. Musk last month asked a federal judge to scrap a fraud settlement he reached with securities regulators in 2018, which requires some of his Tesla-related tweets to be preapproved by company lawyers. He argued that the SEC is abusing the social-media policy to continuously investigate his statements, a claim the regulator denies. Mr. Musk’s failure to file the required form on time could hurt his ability to convince the court that regulators are unnecessarily hounding him, lawyers said.

“He is making all these claims the SEC is harassing him and going after him for nothing, and if he goes ahead and violates a pretty straightforward rule, that is certainly not going to help his argument with the judge,” said David Rosenfeld, a former senior SEC enforcement attorney now teaching law at Northern Illinois University.

In a filing Monday, Mr. Musk reported owning almost 73.5 million shares of Twitter, representing a stake valued at $2.9 billion, based on Friday’s closing price. The disclosure says his ownership of Twitter shares exceeded 5% of shares outstanding as of March 14. Investors whose holdings surpass the 5% mark are required to report their stake within 10 calendar days.

Mr. Musk reported the stake in what is known as a 13G report, a filing reserved for passive investors. Shareholders typically include a certification that says they didn’t acquire the securities to change or influence control of the company that issued them. Mr. Musk didn’t include that statement on his form. Instead, he simply wrote: “Not Applicable.”

The SEC also could inquire about Mr. Musk’s self-declared stance as a passive shareholder. He hadn’t disclosed his stake before tweeting dissatisfaction with the company’s content-moderation policies in late March, when he raised the question of whether a new social-media platform was needed. That is the kind of statement activist investors sometimes make when they plan to shake up a company.

On March 25, 11 days after becoming the largest shareholder in Twitter, Mr. Musk tweeted a poll, saying, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” He added in a follow-up tweet: “The consequences of this poll will be important. Please vote carefully.”

Days later, he tweeted that he had been “giving serious thought” to creating a new social media platform, without disclosing specifics.

An SEC spokesman didn’t return an email seeking comment. An attorney for Mr. Musk didn’t return a call seeking comment.

Later Monday, Mr. Musk tweeted to ask, “Do you want an edit button?,” referencing a feature many Twitter users have requested. Twitter CEO Parag Agrawal tweeted back, “The consequences of this poll will be important. Please vote carefully,” in a seeming reference to Mr. Musk’s March 25 tweet.

Howard E. Berkenblit, a partner at law firm Sullivan & Worcester LLP, said regulators could look into those tweets. His statements about Twitter’s speech policies don’t clearly hint at plans to influence or change control of Twitter, Mr. Berkenblit said.

“He is not trying to influence the board or the strategy of the company. That would be his counterargument,” Mr. Berkenblit said. “Like any other shareholder, he is just expressing his opinion. Certainly, the SEC could ask him questions and ask him to defend that.”

>>> US After Hours Summary: ANY +27% sees volatility after terminating merger ag

After Hours Summary: ANY +27% sees volatility after terminating merger agreement; XPOF -6% falls on secondary offering

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: CARS +3.9% (announced CFO transition and reaffirmed Q1 and FY22 guidance), SUPN +3.6% (reaffirmed FY22 guidance)

Companies trading higher in after hours in reaction to news: ANY +26.7% (mutually agreed to terminate merger agreement with Gryphon Digital Mining), RCUS +11.3% (appointed to join S&P SmallCap 600), KSCP +6.5% (announced committed equity facility with B. Riley), TBPH +5.8% (announced results from Study 0170), LEV +5.6% (received order for 50 all-electric school buses from Autobus Campeau), CSTL +4.4% (agreed to acquire AltheaDx), CUK +2.7% (reported that March 28-April 3 was the busiest booking week in company history), BIIB +1.1% (presented new data from multiple sclerosis portfolio at AAN 2022)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: N/A

Companies trading lower in after hours in reaction to news: XPOF -6.1% (announced secondary offering of common stock by selling stockholders), TRIN -4.1% (announced public offering of common stock)

>>> US Gapping down


Gapping down

Select oil/gas related names showing early weakness:

  • TTE -2.5%, BP -1.2%, SHEL -1.1%

Other news:

  • CRIS -35.4% (FDA places clinical hold on TakeAim Leukemia Phase 1/2a study)
  • WVE -7.9% (Update to Ongoing Phase 1b/2a FOCUS-C9 Study Driven by Potent, Durable Reductions of Poly(GP) with Low, Single Doses of WVE-004)
  • OCGN -5.2% (World Health Organization suspends Covaxin's supply through UN agencies, according to India Today)
  • SBUX -2.8% (suspends stock buyback program)
  • ALNY -1.9% (FDA has extended the review timeline of the New Drug Application for vutrisiran to allow for the review of newly added information related to the new secondary packaging and labeling facility)
  • FREY -1.2% (announced the appointment of Oscar Brown to the position of Group Chief Financial Officer at FREYR Battery)

Analyst comments:

  • HOLX -2.4% (downgraded to In-line from Outperform at Evercore ISI)
  • BAX -2% (downgraded to Sell from Neutral at Goldman)
  • CROX -2% (downgraded to Hold from Buy at Loop Capital)
  • DGX -1.5% (downgraded to Neutral from Buy at Citigroup)

>>> US Gapping up


Gapping up
In reaction to earnings/guidance:

  • CAMT +9.6%, PERI +6.6%

Select Chinese ADRs trading higher:

  • BILI +9.7%, JD +5.2%, NIO +5.1%, XPEV +4.7%, BIDU +4.6%, BABA +4.1%, LI +4.1%, MOMO +3.8%, NTES +3.5%, . 

Other news:

  • TWTR +24.1% (Elon Musk discloses 9.2% passive stake)
  • NIU +5% (reports Q1 sales volume increased 9.4% yr/yr)
  • ISAA +3.4% (Hypebeast plans to list on NASDAQ through Merger with Iron Spark I)
  • GATO +2.3% (Provides Bi-Weekly Status Report)
  • IRTC +2.2% (reports Zio Shown to Prevent Hospital Admissions, Aid in Early Detection of AF)
  • VERV +1.8% (reports durable and well-tolerated editing of ANGPTL3 gene out to more than 20 months in non-human primates for potential treatment of atherosclerotic cardiovascular disease)
  • BBIO +1.4% (Presents Updated Results from Phase 2 Open-label Extension Study of Acoramidis in Transthyretin Amyloid Cardiomyopathy)
  • TMHC +1.4% (positive Barrons article)
  • LXRX +1.3% (reports Sotagliflozin Improved Outcomes in Patients With and Without Prior Cardiovascular Disease in New Analysis Presented at the American College of Cardiology's 71st Annual Scientific Session)

Analyst comments:

  • DCP +1.3% (upgraded to Outperform from In-line at Evercore ISI)
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>>> US Early premarket gappers


Early premarket gappers

  • Gapping up:
    • TWTR +24.9%, BILI +11%, GATO +7.7%, CAMT +7.6%, NIO +6.9%, XPEV +6.5%, NIU +5.8%, JD +5.8%, BIDU +5.2%, LI +5.2%, BABA +5%, PERI +4.7%, MOMO +4.3%, NTES +3.9%, DLTR +3.8%, IRTC +2.2%, TMHC +1.7%, BBIO +1.4%, LXRX +1.3%, TSLA +1.3%, KR +1.3%, TPH +0.9%, NVS +0.8%, REGN +0.5%
  • Gapping down:
    • TTE -1.4%, SBUX -1.1%, SHEL -1%, BP -0.9%, BMY -0.6%

>>> Monday Morning Papers Summary

(EU) Monday Morning Papers Summary

LA REPUBBLICA
-Bucha's horror raises the level of European sanctions on Russia. The images have raised the EU’s disdain and could prompt, for the first time, a discussion about terminating natural gas imports from Russia altogether. The fifth package of sanctions is "on the way", announced the President of the European Council Charles Michel. The discussion was already underway and a round of consultations, including on the dispatch of other weapons and aid, will resume today. The EU is considering enforcing more restrictions on Russian banks, a ban on the entry of Russian ships in western ports and a ban of the supply of materials and technological equipment. But Defense Minister Christine Lambrecht from Berlin says it's time to start talking seriously about energy sanctions, including a stop to methane. The Italian government is more prudent, but if the EU examines the stop to supplies, assures Minister Luigi Di Maio, "it will not turn the other way".

FRANKFURTER ALLGEMEINE ZEITUNG
-How did Turkey become a leading manufacturer of modern weapons technology? Out of necessity. President Erdogan proclaimed a "digital mobilization phase" - the Turkish armaments industry is already in the thick of it. In fact, Turkey, although an emerging country according to the classic definition, has an advanced digital technology and software sector, even if it invests only half the EU average in research and development with 1% of economic output. Nevertheless; the state-sponsored electric car Togg will be a rolling computer, the delivery service Getir, which is also active in Germany, would be inconceivable without smart algorithms, shopping platforms such as Hepsiburada and Tendyrol are valued billions of dollars and the state-owned Türk Telekom is launching a 5G system with Chinese help.
-Hungarian Prime Minister Viktor Orbán, won yet another election: it was a victory so huge that you could even “see it from the moon and certainly from Brussels”. The Hungarian Prime Minister immediately used the clear electoral success he achieved on Sunday with his national-conservative party Fidesz to declare ‘war’ on the European institutions, against which he is very fond of campaigning. Fidesz, along with its close-knit Christian Democratic coalition partner KDNP, received more than 53% of the vote. Orbán could once again command a two-thirds majority in parliament thanks to the electoral law, which strongly promotes a majority.


HANDELSBLATT
-Europe must prepare for difficult economic times. The former head of the Bundesbank and outgoing president of the major Swiss bank UBS is concerned about the rapidly rising inflation: "What worries me the most economically at the moment is the very high inflation rate." In the USA, inflation could soon reach double-digit values. He still expects eight percent for the euro zone. In view of such inflation rates, he sees omissions on the part of the central banks: "It is incomprehensible that the European Central Bank, unlike the US Federal Reserve, is taking so much time with the monetary policy change," says Weber. "In my view, a more rapid tightening of monetary policy would be desirable."
-The war in the Ukraine ensures that the western states are pushing ahead with the transition of the energy supply to renewable energies. For private and professional investors, the focus is on an innovative investment concept, which investors can adopt to take advantage from the energy transition and other infrastructure projects: the European Long Term Investment Fund (ELTIF).

IL SOLE 24 ORE
-Saudi Arabia has opened to the possibility of allowing China to pay for oil in Yuan. Beijing and Moscow, even before the invasion of Ukraine, agree to honor the gas that will arrive from a new pipeline in euros. The Russian foreign minister, Sergei Lavrov, also goes to China and India to agree on the means of payment (and currencies) for trade. This is just one of the pieces of the much larger geopolitical battle that the world is witnessing now.
-After 18 months of continuous price increases, the next electricity and gas bills will show a 10.2% cut for electricity and a 10% drop for gas. The decreases were announced by the Energy, Networks and the Environment Authority (ARERA), which indicated the new values ??in the latest quarterly update. "In an objectively extraordinary situation, with an ongoing conflict and unprecedented volatility on the energy markets – said ARERA president Stefano Besseghini – and….the Authority has decided to adopt extraordinary measures to support consumers".
-Germany cannot do without Russian gas, which is worth 55% of the country's gas needs, which drives the economy, supports employment, and feeds the giants of the manufacturing industry and families. This dependence will gradually be reduced until it is zeroed but will last, according to the latest predictions of the Minister of Economy Robert Habeck, at least until the end of 2023, indeed not, until the middle of 2024.

LES ECHOS
-Used-car sellers in France saw a spike in requests for alternatives to gasoline and diesel in March. In new construction, the number of 100% electric cars has almost doubled in one year, and Dacia is benefiting from the enthusiasm for LPG. 100% electric, hybrid, LPG or even super ethanol: in recent months, the increase in prices at the pump has prompted motorists to look more and more to engines that can reduce their fuel budget. The burst of inflation that followed Russia's invasion of Ukraine has precipitated this runaway situation.
-Talks between Russia and Ukraine resume on Monday as both sides reported progress in talks over the weekend. As Ukrainians claim to have uncovered new evidence of war crimes, Moscow has called for an emergency meeting of the UN Security Council. Russian and Ukrainian negotiators will resume talks, today, to try to find an agreement to end the conflict. On Saturday the Ukrainian side affirmed that Moscow had orally accepted all its positions “except with regard to the question of Crimea”. For its part, the Russians confirmed that Kiev has adopted a "more realistic" position to accept a neutral status for the country.

ABC
It took only three days after the outbreak of the war in Ukraine for the latter’s President Volodymyr Zelensky to make the following international appeal: "All those who want to join the defense of security in Europe and the world can come and be side by side with the Ukrainians against the invaders of the 21st century.” The Ukrainian Foreign Minister announced a few days ago that more than 20,000 fighters from 52 different nationalities had enrolled in what Zelensky called the International Legion for Territorial Defense of Ukraine. But according to several sources consulted by this newspaper, these figures must be taken with a grain of salt. “They are part of the propaganda inherent in any war.”

>>> Europe : Brokers Upgrades & Downgrades - 4th of April 2022 V2(+)

>>> Up
* Bayer Raised to Overweight at Barclays; PT 85 euros
* Danske Bank Raised to Market Perform at KBW; PT 130 kroner
* Just Group Raised to Overweight at Barclays; PT 125 pence
* Kingfisher Raised to Buy at Deutsche Bank; PT 335 pence
* Logitech Raised to Buy at Goldman; PT 107 Swiss francs
* Swedbank Raised to Buy at Citi; PT 170 kronor

>>> Down
* Aviva Cut to Equal-Weight at Barclays; PT 480 pence
* CareTech Cut to Hold at HSBC; PT 725 pence
* DNB Bank Cut to Underperform at KBW; PT 200 kroner
* Electrolux Cut to Hold at Handelsbanken
* Essity Cut to Hold at Handelsbanken
* Grand City Properties Cut to Underweight at Barclays
* H&M Cut to Neutral at Bryan Garnier; PT 190 kronor (+)
* PNE AG Cut to Hold at M.M. Warburg; PT 10.60 euros (+)
* Snam Cut to Sell at Citi; PT 4.50 euros
* Team17 Cut to Hold at Stifel; PT 600 pence (+)
* Terna Cut to Neutral at Citi; PT 8 euros
* Wartsila Cut to Hold at Handelsbanken
* Xpediator Cut to Hold at Panmure Gordon; PT 75 pence (+)

>>> Initiation
* ADP Reinstated Underweight at Barclays; PT 98 euros
* Aena Reinstated Equal-Weight at Barclays; PT 145 euros
* Air France-KLM Reinstated Equal-Weight at Barclays
* Embracer Reinstated Neutral at Goldman; PT 85 kronor
* *HEXAGON RATED NEW BUY AT BERENBERG, PT SEK155
* IAG Reinstated Overweight at Barclays; PT 210 pence
* EasyJet Reinstated Equal-Weight at Barclays; PT 705 pence
* Enav Reinstated Overweight at Barclays; PT 4.90 euros
* Fraport Reinstated Underweight at Barclays; PT 54 euros
* Lufthansa Reinstated Underweight at Barclays; PT 5.20 euros
* Noratis Rated New Buy at Bankhaus Metzler; PT 30.20 euros (+)
* Ryanair Reinstated Overweight at Barclays; PT 17.60 euros
* Siemens Gamesa Reinstated Hold at Jefferies; PT 17.30 euros
* Stelrad Group Rated New Buy at Peel Hunt; PT 250 pence
* Zurich Airport Reinstated Overweight at Barclays

>>> Call
* Equities Risk-Reward Doesn’t Look Bearish, JPM Strategists Say
* RBC Says ‘Starts Are Bright’ for AB InBev’s Margins, Lifts PT (+)
* Bayer Upgraded on Asundexian, Strong Crop Science: Barclays
* Barclays Raises Just Group, Cuts Aviva on Bulk Annuities Outlook (+)
* European Wind Stocks Face ‘Tough Equation,’ Jefferies Says
* H&M Cut to Neutral at Bryan Garnier Amid Russia Setback (+)
* Hexagon Gets New Buy at Berenberg on Top-Line Growth Potential
* Logitech Up to Buy at Goldman on Cheap Valuation, Strong Trends (+)
* Morgan Stanley’s Wilson Says ‘Bear Market Rally’ in Stocks Over
* Nordex Guidance Even More Uncertain Post Cyberattack, Citi Says (+)
* Snam, Terna Cut at Citi Following Relative Stock Outperformance
* Swedbank Upgraded at Citi, Preferred to SEB on Gearing to Rates (+)
* Ocado Price Target Cut at Kepler Amid Uncertain Macro Outlook

WSJ : Hypebeast to List Shares in U.S. Through SPAC Merger

Hypebeast to List Shares in U.S. Through SPAC Merger
Tom Brady, Naomi Osaka, Tony Hawk and Jonah Hill are among the deal’s investors

Hypebeast Ltd. 150 +39.51% is bringing its stock to the U.S. through a merger with a special-purpose acquisition company that will value the lifestyle and culture company at more than $530 million after the investment, according to people familiar with the matter.

Part lifestyle website, part e-commerce company, Hypebeast will merge with Iron Spark I Inc., and the deal will include a $13.3 million private investment in public equity from celebrities that include football player Tom Brady, tennis star Naomi Osaka, professional skateboarder Tony Hawk and actor Jonah Hill, among others.

After the merger, the stock will be dual-listed on the Hong Kong stock exchange and Nasdaq Inc. Hypebeast, which started as a sneaker blog by now-Chief Executive Kevin Ma in 2005, has been listed in Hong Kong since 2016.

The deal comes during a lull in the SPAC market. Starting in mid-2020, blank-check companies surged in popularity. At times in 2021, more new listings happened through shell companies than traditional initial public offerings of stock. Over the past year, however, their popularity receded as regulators took a harder look at whether SPACs skirt investor protections. Last week, the Securities and Exchange Commission advanced rules that could make it harder for SPACs to raise money from investors and execute mergers.

So far this year, the value of SPAC mergers has exceeded $35 billion, compared with nearly $231 billion at this point last year, according to Dealogic.

SPACs tend to be popular alternatives to traditional IPOs in part because they allow early-stage companies to make projections about their growth and financials that aren’t allowed in traditional offerings.

Hypebeast differs from many companies going public via SPACs in that it is already profitable. For the six months ended in September, Hypebeast posted a net profit of roughly $8 million, according to a regulatory filing.