The Weekly Scan November 15, 2021

Welcome to the Weekly Scan. Here’s what we’re following for the week of November 8, 2021.

Ask the audience. Elon Musk sold roughly $5 billion worth of Tesla stock last week, reportedly to cover tax withholdings for stock options. Before doing so, Musk polled Twitter users about whether he should sell 10% of his holdings in the company (most respondents said that he should). Over the course of three days, Musk exercised about 4.5 million stock options (opportunities that let employees buy company stock at a set price). Musk reportedly sold 900,000 shares at prices ranging from $1,135 to about $1,196 on Monday, and his exercise price for stock options is $6.24. Musk will owe capital gains tax on the difference between his exercise price and the current stock price.

• The takeaway:  Musk, the richest person in the world, has often used Twitter to interact with investors—and often angering federal regulators. In 2018, Musk tweeted that he had secured outside funding to take Tesla private at a valuation of $420 a share—about 20% higher than its trading price at the time. The tweet turned out to be false, and the Securities and Exchange Commission (SEC) sued Musk for misleading investors. As a result, Musk stepped down as chairman of Tesla’s board, retaining his position as the CEO, and was forced to pay a $20 million fine. Musk must sell his stock options by August, 2022, or risk letting them expire. At a previous September conference, he said he planned on selling in the fourth quarter of 2021. Musk reportedly still owns 167 million shares of Tesla.

Wall Street Journal

Money please. Inflation jumped 6.2% in October, the sharpest increase in nearly 30 years, according to the Department of Labor’s Bureau of Labor Statistics (BLS). The BLS uses the Consumer Price Index (CPI) to measure price increases paid by urban consumers on goods and services. Inflation has been on the rise for months, ticking up 5.4% in September. Fuel oil and motor fuel prices surged 59% and 50% year-over-year, respectively in October. Car and truck rental costs increased 39%, while used car and truck prices climbed 26% last month.

• The takeaway: Numerous factors have likely contributed to rising inflation. An influx of cash from pandemic stimulus bills, supply chain snags, unpredictable consumer demand, and a squeeze on oil and gas supplies are all contributing factors. Inflation has a real impact on consumers, who are paying more at the pump, the grocery store, and more. Consumers are reportedly taking on more debt to pay for cost of living increases. U.S. household debt reached a record high of $15.24 trillion in the third quarter of 2021, a 1.9% increase from the previous quarter.  

New York Times

Let’s split up.  Industrial conglomerate General Electric (GE) announced last week that it will spin off into three companies in an attempt to shed debt and increase share price. The three new public companies will have distinct focuses: healthcare, energy, and aviation. The healthcare company is set to separate in early 2023, and GE will retain a 19.9% stake in the company. In early 2024, GE Renewable Energy, GE Power, and GE Digital will form the energy company. GE itself will become an aviation company, making jet engines for companies like Boeing and Airbus. Larry Culp, the company’s current CEO, will continue to lead GE. 

• The takeaway: GE was a founding member of the Dow Jones Industrial Index (DJIA) in 1896, and was once its most valuable company. The DJIA, also known as the Dow, is an index of 30 of the largest public companies in the stock market and is considered a trading bellwether. GE has struggled to recover financially since the 2008 financial crisis and was removed from the Dow in 2018, due to its low share price. The same year, Culp replaced former CEO John Flannery. The spin-off reportedly marks Culp’s ongoing efforts to increase shareholder value. The news comes in the same week that Johnson & Johnson announced that it would split into two companies, one for pharmaceuticals and the other for consumer products.

Reuters

Who’s mowing the lawn? More than 10,000 workers at Deere and Co. are striking for better wages.  Deere is one of the largest manufacturers of agricultural and other heavy machinery in the world. Workers, who are part of the United Auto Workers Union, recently voted against a deal that would have raised wages 10% in the first year of a six-year contract, and offered workers a $8,500 signing bonus. One point of contention has been a two-tier compensation system for workers hired after 1997, who received fewer benefits than those who began working at Deere before 1997.

• The takeaway: The strike at Deere and Co. has exacerbated other problems faced by U.S. farmers, many of whom rely on the company for agricultural equipment. Farmers are experiencing weeks-long delays for parts because of the shutdowns, in addition to other supply chain interruptions. Meanwhile, many of the country’s farmers are in the middle of harvest season. 

Bloomberg

 Here’s what we covered in last week’s Scan: 

• Zillow closes down its house-flipping business.
• A cryptocurrency based on the Netflix show “Squid Game” turns out to be a scam.
• The IRS will increase contribution limits for 401(k) and other employer-sponsored plans in 2022. 
• Billionaire Charlie Munger, 97 years old, is designing windowless dorm rooms for students.

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