Evergrande, Lucid, Amazon-iRobot: Trending tickers
Shares of embattled Chinese property developer Evergrande (3333.HK) sank as the company now faces liquidation after failing to successfully restructure. Other Chinese equities like Pinduoduo (PDD) were also under pressure in Monday's trading.
EV maker Lucid Group (LCID) has received a Buy alert from Motley Fool on Monday. The stock climbed on the bullish call.
iRobot Corp. (IRBT) shares declined after Amazon (AMZN) terminated the acquisition deal between the companies, citing no viable path to EU regulatory approval. Amazon will pay a $94 million termination fee. iRobot will also be cutting jobs and its CEO is departing after the failed purchase.
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Editor's note: This article was written by Angel Smith
Video Transcript
[AUDIO LOGO]
- Let's check in on some of the top trending tickers as we count down to the closing bell here. China's largest property developer Evergrande facing liquidation after courts deemed the company incapable of delivering on restructuring plans. Shares of US-listed Chinese companies being dragged down as well in today's trade.
So that was the headline on Evergrande here. So ordered, Julie, to liquidate by this Hong Kong court. Of course, the one time China's biggest property developer by sales. And kind of brings up this really broader question we've asked different strategists about, which is, do you want to put money to work in China? Now is there opportunity there? Or at this point, do you see sort of a giant value trap?
- Well-- and this story is particularly interesting for foreign investors in the-- in China because how the court handles this liquidation is relevant to foreign holders of some of those assets. And so foreign investors are going to be watching this very quickly as well.
But what strikes me as we looked at those other China stocks is it's been a pretty uneven reaction. You know, yes, some of those stocks have been down sharply. But then like an Alibaba, which is an enormous Chinese company, it's not down that much. PDD, Pinduoduo, is up-- is down quite a bit here. And we were trying to sort of figure out what was going on.
There's one analyst over at Citi who says maybe it is some of the chatter around potential import tariffs on Chinese companies. Pinduoduo owns Temu, which has been increasing its business in the United States. It's a-- an e-tailer. So maybe that's part of what's going on. If there is another Trump presidency, we could see that kind of a tariff put in place. That's something he's talked about at least.
- Yeah, I mean, we've had-- recently, we've had market strategists use very strong language about whether you want to put money there, right? I mean, they've used--
- Yeah.
- --words like uninvestable. Now we did hear from-- there was another side that we heard from Dan--
- Yes.
- --Niles last week, which I thought was really interesting as Dan is well-known, well-respected tech Investor. He took the other side of that trade and basically said, listen, if you think China's economy is going to zero, it's uninvestable.
- Right.
- But when he looks at some of these names that we're talking about here like Baidu or Tencent, Alibaba, he sees revenues climbing but stocks falling. So he said that, you know, the question for him isn't whether it's uninvestable. The question for him is basically, you just have to ask yourself an investor, do you think you're being paid to take risk to move--
- Well-- and the other question you have to ask is how much volatility do you have the stomach for in the meantime while you're waiting to get paid potentially. So that's definitely part of the--
- For sure.
- --part of the factor as well. Let's talk about shares of Lucid as well. Those shares spiking higher after Motley Fool issued a buy alert on the EV maker saying that Lucid's valuation could see a substantial rebound. And the shares, a significant gain above current levels.
Listen, we got to couch this. Stuff doesn't always fool-- move on Motley Fool calls, right? And the call did say that this is an exceedingly slim bet that the stock could skyrocket here and go to even 70% of Tesla's value. So it was not a full throated buy recommendation here. But the reaction in the stock has been kind of incredible.
- Yeah, I mean, even with today's pop, it's still down about 25% this year and about 70% over the past 12 months. I mean, what interests me about Lucid-- and it's also can throw in Rivian. You can throw in Tesla. Like, I think everybody is still trying to decide what this EV market broadly looks like this year, what does demand actually look like. And if you just read Tesla's print and listed Tesla's call, I don't think investors took a lot of--
- Yeah.
- --comfort about what that market actually looks like.
- Well, the other big thing to consider here is whenever I see a pop like this, you know where I go. I go to look up short interest. And according to Bloomberg data, 29% of the float of Lucid shares is shorted. That is an extraordinarily high number.
- Yeah.
- So what happens in that case is you see a little bit of buying. And then people who have short the stock close out the shorts. That then exacerbates the buying, pushes it up even more, which is probably at least part of what's going on here today.
- And finally, let's get to the last one here, another day, another deal down the drain. Shares of iRobot, they're down big today as Amazon announces it will not move forward with its acquisition of the vacuum makers. They see no path for regulatory approval. So Amazon, Julie, officially drops the planned acquisition of iRobot, the Roomba maker.
And of course, we knew regulators. And we talked about this. The EU weren't happy with this deal. And then it sounds like the vacuum makers quickly taken these steps-- CEO stepping down, cutting jobs. It looks like about 350 jobs, about 30% of the workforce.
For Amazon, you know, listen, they have the resources to keep building out this kind of footprint in smart home devices. But it does speak to kind of broader issues of the regulatory backdrop we've seen here.
- Yeah, I mean, this is another one that was going on for a while. They first proposed this deal back in August of--
- Yeah.
- --2022. And it's taken until now for them to finally say, forget about it, we're done. They are going to be paying a termination fee to iRobot of $94 million. But to your point, iRobot on its own has been struggling here. And actually, Amazon had cut the purchase price last year for iRobot before now taking this step of abandoning the deal entirely.
So maybe on some level, Amazon feels like the regulators have done it a favor since it was going to take on what had become sort of a struggling asset. But to your point, it does speak to the broader regulatory environment here. It looked like in the EU, maybe they would have accepted some concessions from Amazon. But Amazon got to a point where they didn't want to do the back and forth anymore, it seems.
- Yeah.
- Yeah.
- We have just the man to talk more about this.
- Yes, we do.
