Gundlach Will Sell European Stocks Into "Remain" Pop; Bashes SolarCity Deal
By Tyler Durden
With cable trading just shy of 1.49, and well above what many banks had expected was the currency’s maximum “surge” rebound from last week’s lows in the case of a “Bremain” victory, the looming question among trading desks ahead of tonight’s official results is whether the market has fully priced in the brexit favorable outcome. According to at least one person the answer is yes.
Jeffrey Gundlach told Reuters that his firm is considering selling its position in European equities early Friday on a “Bremain” vote that keeps Britain in the European Union. The DoubleLine asset manager said he had purchased beaten-down European stocks a week ago, and said that the firm expects Britain to vote on Thursday to stay in the EU “so you want to sell on the pop. European stocks have been rising, so we are expecting one more push into the vote.”
He may not have to wait until Friday: the pop came this morning when European stocks rose another 2% on the back of a soaring sterling which rose above 1.49 earlier and is now at its highest level since last December, as the market now anticipates a Remain victory with virtual certainty.
Unrelated to Brexit, Gundlach also chimed in on Tesla’s proposed acquisition of SolarCity Corp, which Tesla’s Chief Executive Officer Elon Musk called a “no-brainer.” Gundlach said the Tesla-SolarCity deal is “a complete confidence destroyer” for Tesla Motors Inc shareholders.
“This is a poor idea for Elon Musk,” Gundlach said. “This is damaging to his reputation and to the way he operates.” He added that the Tesla-SolarCity deal wreaks of “bad corporate governance. I feel like there is reputational damage for Musk because he is all about creating good things.”Gundlach had proposed two years ago that Musk cut a deal with competitors in which Tesla would stop making cars and instead supply automakers’ batteries.
He joins famed shortseller Jim Chanos who likewise blasted Tesla’s proposed acquisition of SolarCity, describing it as a “brazen” bailout and “shameful example of corporate governance at its worst.”
“SolarCity, whose bonds were yielding 20 percent yesterday, is a company headed toward financial distress,” Chanos said in an emailed statement on Wednesday. “It is burning hundreds of millions in cash every quarter, a burden that now Tesla shareholders will have to bear, at a total cost of over $8 billion.”
Chanos, whose firm has been betting against Tesla and SolarCity shares, said the combined drop in the market value of the two companies was more than the equity value of the deal itself, “which means that Tesla shareholders think SolarCity shares are essentially worthless.
“Finally,” he added, “it is hard for me to believe that this deal was not being contemplated when Tesla, and Mr. Musk himself, sold shares just a few weeks ago.” Overall, Gundlach said about Musk: “This deal feels like he has lost his Midas touch. I also feel like Musk is trying to do too much.“
Even traditional Tesla cheerleaders such as Morgan Stanley’s Adam Jonas, who …read more
Source: Gundlach Will Sell European Stocks Into "Remain" Pop; Bashes SolarCity Deal
