Musk’s tweet sends Tesla shares lower

Tesla slides after Elon Musk mocks SEC on Twitter

https://stockwinners.com/blog/
Musk’s tweet sends Tesla shares lower

Shares of Tesla (TSLA) dropped in Friday’s trading after Elon Musk, the company’s CEO, mocked the Securities and Exchange Commission in a tweet, calling the agency the “Shortseller Enrichment Commission.”

Last weekend Musk reached an agreement with the SEC to settle fraud charges, and that charge is currently pending approval from a federal judge.

MUSK MOCKS SEC

On Thursday, Musk tweeted, in apparent reference to the SEC, “Just want to [sic] that the Shortseller Enrichment Commission is doing incredible work. And the name change is so on point!”

Musk’s tweet came just hours after Musk and the SEC were told by U.S. District Court Judge Alison Nathan, who must approve the deal, to explain why the settlement is “fair and reasonable” by October 11, Bloomberg reported.

Separately, Musk took aim at BlackRock (BLK) and other large fund managers for fueling short sellers.

Musk alleged in a tweet that BlackRock and other firms pocket “excessive profit from short lending while pretending to charge low rates for ‘passive’ index tracking.”

SEC SETTLEMENT

This past weekend, the SEC announced that Musk agreed to settle the securities fraud charge brought against him last week.

The settlement requires that Musk will step down as Tesla’s chairman and will be ineligible to be re-elected chairman for three years.

Additionally, Tesla will appoint two new independent directors to its board and both the CEO and company will each pay $20M penalties to settle allegations that Musk misled investors in August by tweeting that he was considering taking Tesla private and had secured funding for the effort.

According to the SEC’s complaint, Musk’s misleading tweets caused Tesla’s stock price to jump by over 6% on August 7, and led to “significant market disruption.”

Additionally, the SEC is requiring that Musk get approval from the company’s lawyer before tweeting anymore company news, which reports had said could clamp down on Musk’s “headline-grabbing, unpredictable approach to promoting Tesla’s brand.”

Recode’s Teddy Schleifer reported via Twitter after the “Shortseller Enrichment Commission” tweet that the SEC agreement on Musk’s tweets “does not take effect for 90 days from the settlement date, per source. So he still has ~80 days to tweet whatever he wants.”

The SEC declined to comment on Musk’s tweet, Schleifer said.

Additionally, Fox Business Network’s Charlie Gasparino also tweeted, saying that the “@SEC_Enforcement continues to investigate @Tesla over possible misstatements on production/profitability targets-sources focus is on stated targets for Model 3/co profitability.

SEC sources say case is tougher case than @elonmusk ‘funding secured’ tweet.”

PRICE ACTION

In Friday morning trading, shares of Tesla are down 4.2% to $270.17.


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Engility Holdings sold for $2.5 billion

SAIC to acquire Engility in all-stock deal valued at $2.5B

Engility Holdings sold for $2.5 billion, Stockwinners
Engility Holdings sold for $2.5 billion, Stockwinners

SAIC (SAIC) and Engility Holdings (EGL) announced that they have entered into a definitive agreement under which SAIC will acquire Engility in an all-stock transaction valued at $2.5B, $2.25B net of the present value of tax assets, creating the second largest independent technology integrator in government services with $6.5B of pro-forma last 12 months’ revenue.

The combination of these two complementary businesses will accelerate SAIC’s growth strategy into key markets, enhance its competitive position and provide significant financial benefits.

The transaction will create market sub-segment scale in strategic business areas of national interest, such as defense, federal civilian agencies, intelligence, and space.

In addition, it expands the capabilities of both companies, bringing additional systems engineering, mission, and IT capabilities to a broader base of customers.

Under the terms of the merger agreement, Engility stockholders will receive a fixed exchange ratio of 0.450 shares of SAIC common stock for each share of Engility stock in an all-stock transaction.

Based on an SAIC per share closing price of $89.86 on September 7, 2018, the transaction is valued at $40.44 per share of Engility common stock or $2.5B in the aggregate, including the repayment of $900M in Engility’s debt.

SAIC has obtained a financing commitment letter from Citigroup Global Markets Inc. for a new seven-year senior secured $1.05B term loan facility under our existing credit agreement.

The proceeds will be used to repay Engility’s existing debt and associated fees. SAIC expects no immediate change to its quarterly cash dividend as a result of this transaction.

The transaction is expected to close by the end of the fiscal fourth quarter ending February 1, 2019, following customary closing conditions, including regulatory and SAIC and Engility shareholder approvals.

The transaction has been unanimously approved by both boards.

The businesses will continue to operate separately until the transaction closes. The combined company will retain the SAIC name and continue to be headquartered in Reston, Virginia.

Following closing, Tony Moraco will continue as CEO and as an SAIC board member. SAIC will expand its board to include two additional members from Engility’s board.


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Ocean Rig sold for $2.7B

Transocean to acquire Ocean Rig for $2.7B including debt

 

Ocean Rig sold for $2.7B, Stockwinners
Ocean Rig sold for $2.7B, Stockwinners

Transocean (RIG) and Ocean Rig UDW Inc. (ORIG) announced that they have entered into a definitive merger agreement under which Transocean will acquire Ocean Rig in a cash and stock transaction valued at approximately $2.7B, inclusive of Ocean Rig’s net debt..

The transaction consideration is comprised of 1.6128 newly issued shares of Transocean plus $12.75 in cash for each share of Ocean Rig’s common stock, for a total implied value of $32.28 per Ocean Rig share, based on the closing price on August 31, 2018.

This represents a 20.4% premium to Ocean Rig’s ten-day volume weighted average share price.

The transaction has been unanimously approved by the board of directors of each company.

Transocean intends to fund the cash portion of the transaction consideration through a combination of cash on hand and fully committed financing provided by Citi.

The merger is not subject to any financing condition. Upon completion of the merger, Transocean’s and Ocean Rig’s shareholders will own approximately 79% and approximately 21%, respectively, of the combined company.

No changes to Transocean’s board of directors, executive management team, or corporate structure are anticipated as a result of the acquisition.

The Company will remain headquartered in Steinhausen, Switzerland, with significant operating presence in Houston, Texas, Aberdeen, Scotland and Stavanger, Norway.

The transaction, which is expected to be completed during the first quarter of 2019, is subject to the approval of both Transocean and Ocean Rig shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals.

The merger is not subject to any financing condition.

Also, consistent with the Company’s strategy of recycling less competitive rigs, Transocean will retire two of its floaters, the ultra-deepwater drillship C.R. Luigs and the midwater floater Songa Delta.

The rigs will be classified as held for sale and will be recycled in an environmentally responsible manner. Both floaters are currently stacked.

Transocean anticipates re-ranking the combined fleet, which may result in additional rigs being recycled.


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KMG Chemicals sold for $1.6B

Cabot Microelectronics to acquire KMG Chemicals for $1.6B

KMG Chemicals sold for $1.6B, Stockwinners
KMG Chemicals sold for $1.6B, Stockwinners

Cabot Microelectronics (CCMP) and KMG Chemicals (KMG), a global provider of specialty chemicals and performance materials, have entered into a definitive agreement under which Cabot Microelectronics will acquire KMG in a cash and stock transaction with a total enterprise value of approximately $1.6B.

Under the terms of the agreement, KMG shareholders will be entitled to receive, per KMG share, $55.65 in cash and 0.2000 of a share of Cabot Microelectronics common stock, which represents an implied per share value of $79.50 based on the volume weighted average closing price of Cabot Microelectronics common stock over the 20-day trading period ended on August 13.

The transaction has been unanimously approved by the board of both companies and is expected to close near the end of calendar year 2018.

The combined company is expected to have annual revenues of approximately $1B and approximately $320M in EBITDA, including synergies, extending and strengthening Cabot Microelectronics’ position.

The transaction is subject to the satisfaction of customary closing conditions, including HSR clearance and approval by KMG shareholders.

Cabot Microelectronics expects to finance the cash portion of the transaction consideration through a combination of existing cash and additional debt supported by commitments from its key lenders.


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Tesla’s going private is questioned by analysts

Tesla consolidates as analysts debate if Musk should take carmaker private

Shares of Tesla (TSLA) jumped yesterday after CEO Elon Musk said he would like to see the company go private, but have since stepped into negative territory as analysts debate the idea.

 

https://stockwinners.com/blog/
Tesla’s going private is questioned by analysts, Stockwinners
While Jefferies analyst Philippe Houchois believes going private “feels like the right thing to do,” his peer at Morgan Stanley questions the feasibility of Musk actually being able to achieve that goal.

TAKING TESLA PRIVATE

Yesterday, Tesla CEO Elon Musk tweeted that he is considering taking the electric carmaker private.

 

In an email to the company’s employees, the executive explained: “Earlier today, I announced that I’m considering taking Tesla private at a price of $420/share. […] As a public company, we are subject to wild swings in our stock price that can be a major distraction for everyone working at Tesla, all of whom are shareholders. Being public also subjects us to the quarterly earnings cycle that puts enormous pressure on Tesla to make decisions that may be right for a given quarter, but not necessarily right for the long-term. Finally, as the most shorted stock in the history of the stock market, being public means that there are large numbers of people who have the incentive to attack the company.”
Tesla gets a boost from Bud. See Stockwinners.com
Tesla’s going private is questioned by analysts

Meanwhile, members of Tesla’s board said on Wednesday that they have “met several times over the last week” and are “taking the appropriate next steps to evaluate” Musk’s desire to take the company private. Their talks with Musk, which started last week, included “discussions as to how being private could better serve Tesla’s long-term interests, and also addressed the funding for this to occur,” the board members stated in a press release.

‘RIGHT THING TO DO’:

Commenting on the news, Jefferies’ Houchois told investors in a research note that the move “feels right” even if Musk is downplaying how supportive public markets have been. With Tesla unable to take on more debt, the analyst wonders who may fund the potential deal and end up as a new large shareholder. While the second quarter de-stressed the near-term outlook, Houchois pointed out that Tesla did not reassure about sustained demand for Model 3 at high prices and that profitability can support organic funding of investments in future products and manufacturing capacity.

He continues to think Tesla will need additional capital to fund these or risk being caught with a narrow and ageing product range within 2 years. Noting that his discounted cash flow fair value points to $300 per share, the analyst raised his price target on the stock to $360 from $250, “bridging the gap” to the $420 potential going private bid. The analyst reiterated a Hold rating on Tesla.

BUT WILL IT BE FEASIBLE?:

While Morgan Stanley analyst Adam Jonas sympathizes with Elon Musk’s argument that Tesla could be better off as a private company, he questions the feasibility of the CEO actually being able to achieve that goal.
Taking the company private would assume either that the company is on the verge of generating self-sustaining cash flows or that it can tap into a range of strategic sources of capital not previously at its disposal, said Jonas, who sees strategic value at Tesla, but thinks the “LBO math required to support [a price of] $420 is extremely aggressive.”
Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year
The benefits of being private are outweighed by the risks of added financial leverage, which could be even more strategically limiting, added Jonas, who reiterated an Equal Weight rating and a $291 price target on Tesla shares.
Meanwhile, his peer at JPMorgan raised his price target for Tesla to $308 from $195 to reflect the possibility of the company going private. However, analyst Ryan Brinkman told investors that he still believes that Tesla’s valuation based on fundamentals alone “is worth no more than $195” per share.
The analyst added that he is not as certain as CEO Elon Musk on Tesla going private, and assigns only a 50% probability to such a scenario, while reiterating an Underweight rating on the shares.

PRICE ACTION:

In Wednesday afternoon trading, shares of Tesla have dropped 1.6% to $373.63.


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The Philly Fed rises to 25.7 in July

The Philly Fed bounce to 25.7

 

The Philly Fed rises to 25.7 in July , Stockwinners
The Philly Fed rises to 25.7 in July , Stockwinners

The Philly Fed bounce to 25.7 from a 19-month low of 19.9 in June and a 1-year high of 34.4 in May was accompanied by an ISM-adjusted Philly Fed rise to 59.7 from 59.4 in June and a 45-year high of 62.5 in May, versus the same 59.7 in April.

The Federal Reserve Bank of Philadelphia reports that regional manufacturing activity continued to expand in July. All the broad indicators remained positive, with the general activity and new orders indexes improving this month. The survey’s price indexes suggest widespread increases for purchased inputs, and more firms reported price increases for their own manufactured goods. Expectations for the next six months continued to moderate but remain positive overall.

Monday’s Empire State headline slipped to 22.6 in July from an 8-month high of 25.0 in June but a lower 20.1 in May, while the ISM-adjusted measure fell more sharply, to 54.6 from a 12-year high of 57.9 in June and 56.9 in May.

The U.S. state of New York has been known by many nicknames, most notably as the Empire State, adopted as late as the 19th century. This nickname has been incorporated into the names of several state buildings and events, and is commonly believed to refer to the state’s wealth and resources.

For later July surveys, analysts expect a Richmond Fed drop to 17.0 from 20.0, a Dallas Fed drop to 30.0 from 36.5, a Chicago PMI decline to 60.0 from 64.1 in June, an ISM drop to 59.0 from 60.2, and an ISM-NMI drop to 58.0 from 59.1

The mix should allow the ISM-adjusted average of the major surveys to slip back to 58 from the 59 cycle-high set in May and June, versus the same 58 readings in six of eight months through April.

Producer sentiment is enjoying a lift from fiscal stimulus, the mining and factory resurgence, and a stronger global economy that has translated to strength in trade in the face of limited capacity constraints and little near-term inflation risk.


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Arconic higher following report of private equity interest

Arconic higher following report of private equity interest

Arconic higher following report of private equity interest, Stockwinners
Arconic higher following report of private equity interest, Stockwinners

Shares of Arconic (ARNC) are rising following a report that the aluminum producer has received interest from private equity firms including Apollo Global Management (APO).

PE  INTEREST

Arconic has received takeover interest from private-equity firms, including Apollo Global, The Wall Street Journal reported Friday.

A deal for the aerospace parts maker, which currently has a market value of $8.3B, could be worth over $10B, but no buyout agreement is imminent, the report said.

The company, which also holds $6.4B in debt, has a tumultuous recent history, facing an activist investor campaign from Elliott Management after being separated from the aluminum business now known as Alcoa (AA) in 2016.

The campaign led to the resignation of former Arconic Chief Executive Officer Klaus Kleinfeld and an overhaul of the company’s board.

In addition, the company came under scrutiny after investigators discovered its aluminum composite panels contributed to the spread of a fire last year at London’s Grenfell Tower that killed 80 people.

At the time, Arconic said it had no control over how its products were used in the building.

‘PLAUSIBLE LBO CANDIDATE’

Following the WSJ report, Morgan Stanley analyst Rajeev Lalwani said two things stand out to make Arconic a “plausible” leveraged buyout candidate: Its low EV/EBITDA multiple, which creates potentially favorable entry and exit points, and its cash flow profile, which has room for improvement.

The analyst stated that a more lean and efficient approach could support considerably better cash generation.

While the reported private equity interest “adds a level of intrigue,” Lalwani still believes headwinds within it rings and disks business, working capital and CapEx issues and volatility associated with aluminum prices will be the key driver of shares in the near-term.

Given the aforementioned execution concerns, Lalwani kept an Equal Weight rating and $20 price target on Arconic shares.

‘VERY VIABLE LBO CANDIDATE’

Credit Suisse analyst Curt Woodworth said he views Arconic as a “very viable” leveraged buyout candidate given its “highly depressed” multiples, operational and financial mismanagement, and “very strong” positions in automotive and aerospace end markets.

The analyst believes the issues at Firth Rixson are “very fixable” as the company is a new entrant into the disks market and said Arconic could be worth $24-$26 per share in a buyout. Woodworth has an Outperform rating on the shares with a $28 price target.

WHAT’S NOTABLE

On Monday, Arconic announced it had signed a new long-term contract with Boeing (BA) to supply aluminum sheet and plate for all models produced by Boeing Commercial Airplanes.

The multiyear contract, which extends and adds to the companies’ 2014 contract, is the largest to date and captures growth in the build rate increases of the Boeing 737 program.

PRICE ACTION

Arconic rose about 10%, or $1.73, to $19.12 in morning.


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GE to spin off several divisions

  • GE Healthcare to become standalone company

  • GE plans to fully separate Baker Hughes

GE introduces new company AiRXOS, Stockwinners
GE to spin off several of its divisions

GE (GE) announced the results of its strategic review.

GE will focus on Aviation, Power and Renewable Energy, creating a simpler, stronger, leading high-tech Industrial company.

In addition to the pending combination of its Transportation business with Wabtec, GE plans to separate GE Healthcare into a standalone company, pursue an orderly separation from BHGE (BHGE) over the next two to three years, make its corporate structure leaner and substantially reduce debt.

GE’s Board of Directors unanimously approved the plans announced today.

GE is making fundamental changes to how it will run the company.

The new GE Operating System will result in a smaller corporate headquarters focused primarily on strategy, capital allocation, talent and governance.

It will result in better execution, increased speed and is expected to generate at least $500 million in corporate savings by the end of 2020.

Under the new GE Operating System, most resources and services traditionally held at the headquarters level will be realigned to the businesses. GE is targeting an Industrial net debt-to-EBITDA ratio of less than 2.5 times and a long-term A credit rating.

GE also plans to reduce Industrial net debt by approximately $25 billion by 2020 and maintain more than $15 billion of cash on the balance sheet.

GE expects to maintain its current quarterly dividend, subject to Board approval, until GE Healthcare is established as an independent entity.

At that time, the new GE Healthcare Board of Directors will determine GE Healthcare’s dividend policy, which GE expects to reflect healthcare industry practices.

Also at that time, the GE Board expects to adjust the GE dividend with a target dividend policy in line with industrial peers. Kieran Murphy, president and CEO of GE Healthcare, will continue to lead GE Healthcare as a standalone company, maintaining the GE brand.

GE expects to generate cash from the disposition of approximately 20% of its interest in the Healthcare business and to distribute the remaining 80% to GE shareholders through a tax-free distribution.

The structure, sequence and timing of these transactions will be determined and announced at a later date, but are expected to be completed over the next 12 to 18 months.

GE Healthcare will conduct business as usual throughout this process, continuing to serve its partners and customers.

GE plans to fully separate its 62.5% interest in BHGE in an orderly manner over the next two to three years. BHGE’s full stream offering brings together equipment, services and digital solutions to help its customers be more productive-a unique and powerful value proposition in a changing market.

The separation will provide BHGE with enhanced agility and the ability to focus on leading in the oil and gas industry.

Shares of the former DJIA component closed at $12.75.


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Tariffs kill jobs

European Union raises tariffs on Harley-Davidson to 31% from 6%

Harley-Davidson to move productions overseas to avoid tariffs

Harley-Davidson moves some productions out of U.S., Stockwinners
Harley-Davidson moves some productions out of U.S., Stockwinners

The European Union has enacted tariffs on various U.S.-manufactured products, including Harley-Davidson motorcycles (HOG).

These tariffs, which became effective June 22, 2018, were imposed in response to the tariffs the U.S. imposed on steel and aluminum exported from the EU to the U.S. Consequently, EU tariffs on Harley-Davidson motorcycles exported from the U.S. have increased from 6% to 31%.

Harley-Davidson expects these tariffs will result in an incremental cost of approximately $2,200 per average motorcycle exported from the U.S. to the EU.

Harley-Davidson believes the tremendous cost increase, if passed onto its dealers and retail customers, would have an immediate and lasting detrimental impact to its business in the region, reducing customer access to Harley-Davidson products and negatively impacting the sustainability of its dealers’ businesses.

Therefore, Harley-Davidson will not raise its manufacturer’s suggested retail prices or wholesale prices to its dealers to cover the costs of the retaliatory tariffs. In the near-term, the company will bear the significant impact resulting from these tariffs, and the company estimates the incremental cost for the remainder of 2018 to be approximately $30M-$45M.

On a full-year basis, the company estimates the aggregate annual impact due to the EU tariffs to be approximately $90M-$100M.

To address the substantial cost of this tariff burden long-term, Harley-Davidson will be implementing a plan to shift production of motorcycles for EU destinations from the U.S. to its international facilities to avoid the tariff burden. Harley-Davidson expects ramping-up production in international plants will require incremental investment and could take at least 9 to 18 months to be fully complete.

Harley-Davidson maintains a strong commitment to U.S.-based manufacturing which is valued by riders globally.

Increasing international production to alleviate the EU tariff burden is not the company’s preference, but represents the only sustainable option to make its motorcycles accessible to customers in the EU and maintain a viable business in Europe. Europe is a critical market for Harley-Davidson.

In 2017, nearly 40,000 riders bought new Harley-Davidson motorcycles in Europe, and the revenue generated from the EU countries is second only to the U.S.

Harley didn’t specify which international plants will boost output for EU markets. The company operates manufacturing facilities in Brazil, India and Australia, and is beginning production in Thailand this year.

HOG closed at $44.21, it last traded at $42.50.


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Rockwell Automation to make $1B investment in PTC

Rockwell Automation to make $1B equity investment in PTC

Rockwell Automation to make $1B equity investment in PTC, Stockwinners
Rockwell Automation to make $1B equity investment in PTC

PTC (PTC) and Rockwell Automation (ROK) announced that they have entered into a definitive agreement for a strategic partnership that is expected to accelerate growth for both companies and enable them to be the partner of choice for customers around the world who want to transform their physical operations with digital technology.

As part of the partnership, Rockwell Automation will make a $1B equity investment in PTC, and Rockwell Automation’s Chairman and CEO, Blake Moret, will join PTC’s board of directors effective with the closing of the equity transaction.

Under the terms of the agreement relating to the equity investment, Rockwell Automation will make a $1 billion equity investment in PTC by acquiring 10,582,010 newly issued shares at a price of $94.50, representing an approximate 8.4% ownership interest in PTC based on PTC’s current outstanding shares pro forma for the share issuance to Rockwell Automation.

The price per share represents an 8.6% premium to PTC’s closing stock price on June 8, 2018, the last trading day prior to today’s announcement.

Rockwell Automation intends to fund the investment through a combination of cash on hand and commercial paper borrowings.

Rockwell Automation will account for its ownership interest in PTC as an Available for Sale security, reported at fair value.

As separately announced today, Rockwell Automation is increasing its share repurchase target for fiscal year 2018 to $1.5 billion.

This represents a $300 million increase to its previous plans to repurchase $1.2 billion of its stock in fiscal year 2018.

The investment transaction is subject to customary closing conditions and regulatory approvals, and is expected to close within 60 days.

PTC Inc. develops and delivers software products and solutions worldwide.


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GE creates new company to develop unmanned traffic management

GE creates  AiRXOS to develop unmanned traffic management 

GE introduces new company AiRXOS, Stockwinners
GE introduces new company AiRXOS

GE (GE) introduced AiRXOS a new company helping to accelerate the safe, efficient, scalable integration of air and ground space for manned and unmanned vehicles.

AiRXOS helps government agencies, regional aviation authorities and private sector operators manage and meet the increasing demand for sophisticated and safe Unmanned Aircraft Systems operations. AiRXOS is a wholly-owned subsidiary of GE.

The Department of Transportation recently announced the UAS IPP to help government agencies, municipalities, regional aviation authorities and private sector operators manage and meet the increasing demand for sophisticated and safe UAS operations.

Of the ten pilot programs, AiRXOS was selected as a partner for three: The City of San Diego, the City of Memphis, and the Choctaw Nation of Oklahoma. AiRXOS will work with these program partners in safely demonstrating capabilities such as operations over urban settings, night operations, beyond visual line of sight, as well as developing overall UTM systems.

Drive Ohio’s UAS Center announced an investment of $5.9M for UTM research that will include both air and ground vehicles and will complement Drive Ohio’s current efforts for autonomous and connected vehicle testing along the U.S. 33 Smart Mobility Corridor. AiRXOS has been selected as a partner, along with Gryphon Sensors, CAL Analytics, and Ohio State University’s College of Engineering to implement a UTM solution for the U.S. 33 Smart Mobility Corridor. AiRXOS has also formed a collaboration with NUAIR Alliance for an unmanned testing and rating initiative that will combine NUAIR’s new National Unmanned Systems Testing and Rating capability with AiRXOS’ Autonomous Service Platform.

While NUSTAR will objectively measure UAS performance and test systems against industry consensus standards, AiRXOS will automate the processes used by commercial operators, pilots, organizations, and drone manufacturers to engage in commercial flight operations.

To support this effort, AiRXOS plans to open an office in the Syracuse, New York Tech Garden offices. To keep pace with innovation, NASA’s Technical Capability Level testing and the expansion of the Low Altitude Authorization and Notification Capability service program continue to move the industry forward.

AiRXOS is a TCL partner and has recently applied for a LAANC application in support of bringing a broad range of UAS operations safely to scale.

GE closed at $13.64.


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Tesla higher on Model 3 production

Tesla jumps after Musk keeps dual role, voices optimism on Model 3 output

https://stockwinners.com/blog/
Tesla jumps after Musk keeps dual role, voices optimism on Model 3 output

Shares of Tesla (TSLA) are higher as much as 4% on Wednesday morning following the company’s annual meeting in California.

At the meeting, shareholders rejected two proposals, including one that would have separated the roles of chairman and chief executive officer. Additionally, Elon Musk said the company will likely reach its goal of producing 5,000 Model 3 sedans “by the end of this month.”

SHAREHOLDERS REJECT SEPARATION OF CHAIRMAN, CEO ROLES

Tesla shareholders rejected two proposals that would have changed the company’s board, including one that would have removed CEO Elon Musk from the chairman role.

According to a CNBC report, Jiang Zhao, a shareholder who owns 12 shares of Tesla stock, brought forward the proposal to have an independent chairman, as he believes it is necessary to prevent conflicts of interest.

In May, proxy advisory firm ISS recommend that investors split the role of chairman and CEO, saying shareholders would “benefit from the strongest form of independent board oversight in the form of an independent chair.”

Shareholders also rejected a proposal to remove three Tesla board members up for re-election this year, which was brought by the CtW Investment Group.

CtW, which works with pension funds for unions, said in a letter last month that board members Antonio Gracias and Elon’s brother Kimbal Musk were too close to the CEO to ensure needed independence, while 21st Century Fox (FOX, FOXA) CEO James Murdoch lacked relevant experience.

According to Bloomberg, which viewed a copy of the letter, CtW said that “instead of recognizing the need for independent and effective board leadership, Tesla has re-nominated three directors who exemplify the company’s failure to evolve.”

‘QUITE LIKELY’ TO MEET MODEL 3 OUTPUT GOAL

At the meeting, Musk said that the carmaker’s goal of making 5,000 Model 3 vehicles per week by the end of June was “quite likely” as the car maker’s production lines were now demonstrating the ability to build 3,500 vehicles a week, Reuters reported. “This is the most excruciating hellish several months I’ve ever had… but I think we’re getting there,” Musk said.

Tesla Model 3 named Popular Mechanics' Car of the Year
Tesla Model 3 named Popular Mechanics’ Car of the Year

OTHER ANNOUNCEMENTS

Robin Ren, Tesla’s head of worldwide sales, announced at the meeting that the company intends to build its first factory outside of the U.S. in Shanghai, China, CNBC reported.

Unlike Tesla’s first U.S. factories, the company’s new “Dreadnought” factories should produce both batteries and assemble vehicles in one place.

Additionally, according to Business Insider, Musk said the company plans to reveal the Model Y next March and will likely go into production in early 2020. The report also said that the Semi will go into production in 2020 and that it will be slightly different than what was revealed in 2017 because the company has made improvements.

The Tesla Roadster will follow the same timeline for production and will have a SpaceX option package available, BI also said.

WHAT’S NOTABLE

Musk has said that Tesla plans to be profitable and cash flow positive in Q3 and Q4, tweeting in April that there is “obviously no need to raise money.”

Musk previously said that the company was not planning to raise any capital before the end of 2019. He reiterated that during the shareholder meeting and said he is still confident that Tesla will become profitable in Q3 or Q4, BI reported.

Tesla originally sought to build 5,000 Model 3 vehicles a week by the end of 2017, but later revised its target to making 5,000 Model 3 cars by the end of the second quarter.

ANALYST COMMENTARY

Citi analyst Itay Michaeli told investors this morning that while he appreciates the bull case of ramping Model 3 deliveries and Tesla achieving profitability in the second half of the year, thereby easing cash concerns and cementing the carmaker’s electric vehicle lead, he “can’t get there on risk/reward at this point.” Michaeli cut his price target for Tesla to $313 from $347 and maintained a Neutral rating on the shares.

Baird analyst Ben Kallo, who remains bullish on Tesla, said the body language at the meeting was positive, noted that shareholders approved the board of directors by a significant margin and expects management to achieve positive GAAP net income and positive cash flow in Q3 and Q4. Kallo keeps his Buy rating and $411 price target on Tesla.

PRICE ACTION

Tesla is up about 5% in early trading to $305.76.


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BAE Systems receives contract for submarines

BAE Systems receives contract for payload tubes for Virginia-class submarines 

BAE Systems receives contract for submarines, Stockwinners
BAE Systems receives contract for submarines

BAE Systems (BAESY) has received a contract to produce payload tubes for two of the U.S. Navy’s new Virginia-class submarines to support increased firepower on the Block V version of the attack subs.

Under the contract with General Dynamics Electric Boat, a builder of the Virginia class, BAE Systems will deliver two sets, each consisting of four tubes, for the Virginia Payload Modules on the SSN 804 and SSN 805.

The Virginia Payload Module extends the length of the Block V submarines over previous versions of the Virginia-class by adding an additional mid-body section to create more payload space for greater firepower.

Each large-diameter payload tube can store and launch up to seven Tomahawk cruise missiles.

The VPM offers exceptional flexibility as well for the integration of future payload types, such as unmanned systems or next-generation weapons.

BAE Systems, which is also providing payload tubes for the SSN 803 under a previously awarded VPM contract, has a long history of supporting the Navy’s submarine fleet as the leading provider of propulsors and other submarine systems.

The company was selected to provide propulsors, spare hardware, and tailcones for Block IV Virginia-class vessels and stands ready to provide the same support for the Block V subs.

Under this most recent contract, BAE Systems will also develop the processes and tooling necessary for the Block V payload tube production.

Work will be performed at the company’s facility in Louisville, Kentucky, with deliveries scheduled to begin in 2020.

BAESY last traded at $35.39


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SoftBank to invest $2.25B in GM

SoftBank Vision Fund to invest $2.25B in GM Cruise 

 

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SoftBank Vision Fund to invest $2.25B in GM Cruise 

General Motors (GM) announced that the SoftBank Vision Fund will invest $2.25B in GM Cruise Holdings, further strengthening the company’s plans to commercialize AV technology at large scale.

GM will also invest $1.1B in GM Cruise upon closing of the transaction.

“Our Cruise and GM teams together have made tremendous progress over the last two years,” said GM Chairman and CEO Mary Barra.

“Teaming up with SoftBank adds an additional strong partner as we pursue our vision of zero crashes, zero emissions and zero congestion.”

“GM has made significant progress toward realizing the dream of completely automated driving to dramatically reduce fatalities, emissions and congestion,” said Michael Ronen, managing partner, SoftBank Investment Advisers.

“The GM Cruise approach of a fully integrated hardware and software stack gives it a unique competitive advantage. We are very impressed by the advances made by the Cruise and GM teams, and are thrilled to help them lead a historic transformation of the automobile industry.”

The SoftBank Vision Fund investment will be made in two tranches.

At the closing of the transaction, the Vision Fund will invest the first tranche of $900M. At the time that Cruise AVs are ready for commercial deployment, the Vision Fund will complete the second tranche of $1.35B, subject to regulatory approval.

Together, this will result in the SoftBank Vision Fund owning a 19.6-percent equity stake in GM Cruise and will afford GM increased flexibility with respect to capital allocation.

The GM and SoftBank Vision Fund investments are expected to provide the capital necessary to reach commercialization at scale beginning in 2019.

GM (GM) Chairman and CEO Mary Barra confirmed the automaker’s plans to launch an autonomous ride-hailing vehicle in 2019.

President Dan Ammann noted that talks with SoftBank occurred over the course of several months. He said GM wasn’t looking for a partner, but found one that was “uniquely aligned” with it.

Ammann added that the Cruise team has grown to over 800 since the acquisition two years ago. He said the decision to report GM Cruise as a standalone segment is intended to enhance transparency around this part of the business.

ANALYST COMMENTS

Evercore ISI analyst George Galliers upgraded General Motors (GM) to Outperform from In Line after SoftBank’s (SFTBF) Vision Fund agreed to invest in the company’s Cruise autonomous driving unit in a deal that values the unit at $11.5B.

Galliers said he had been assigning no value to the Cruise assets before the announcement.

Under his new sum-of-the-parts valuation, Galliers applies a 6.0x multiple on GM’s core, attributes a value of about $8 per share for the Cruise assets and about 60c per share for GM’s stake in Lyft before applying a 25% discount to both of the latter. He raised his price target on GM shares to $50 from $47.


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Carbon-free aluminum smelting process now a reality

Alcoa, Rio Tinto, Apple  announce ‘world’s first’ carbon-free aluminum smelting process 

carbon-free aluminum smelting process; Stockwinners
carbon-free aluminum smelting process; 

Alcoa (AA) and Rio Tinto (RIO) announced what the companies called “a revolutionary process to make aluminum that produces oxygen and eliminates all direct greenhouse gas emissions from the traditional smelting process.”

carbon-free aluminum smelting process, Stockwinners
carbon-free aluminum smelting process, Stockwinners

To advance larger scale development and commercialization of the new process, Alcoa and Rio Tinto are forming Elysis, a joint venture company to further develop the new process with a technology package planned for sale beginning in 2024.

carbon-free aluminum smelting process, Stockwinners
carbon-free aluminum smelting process, Stockwinners

Apple (AAPL) is also investing in the venture. Apple said that its involvement with the new process started in 2015, when Apple engineers came across the new technology at Alcoa in Pittsburgh when looking for a cleaner way to mass-produce aluminum. They were able to get Rio Tinto on board, and three years later, the three companies have formed a joint venture.

Elysis, which will be headquartered in Montreal with a research facility in Quebec’s Saguenay-Lac-Saint-Jean region, will develop and license the technology so it can be used to retrofit existing smelters or build new facilities. Canada and Quebec are each investing C$60M in Elysis.

The provincial government of Quebec will have a 3.5% equity stake in the joint venture with the remaining ownership split evenly between Alcoa and Rio Tinto. Apple is providing an investment of C$13M.

The company helped facilitate the collaboration between Alcoa and Rio Tinto on the carbon-free smelting process, and Apple has agreed to provide technical support to the JV partners.

Aluminum has been mass produced the same way since 1886, when it was pioneered by Alcoa’s founder, Charles Hall. The process involves applying a strong electrical current to alumina, which removes oxygen. Both Hall’s original experiments and today’s largest smelters use a carbon material that burns during the process, producing greenhouse gases.

Alcoa and Rio Tinto will invest C$55M cash over the next three years and contribute specific intellectual property and patents.

The patent-protected technology, developed by Alcoa, is currently producing metal at the Alcoa Technical Center, near Pittsburgh in the United States, where the process has been operating at different scales since 2009.

The joint venture intends to invest up to C$40M in the United States, which would include funding to support the supply chain for the proprietary anode and cathode materials.


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