Wall Street Breakfast Podcast: US Steel Explores Alternatives


Distribution Warehouse With Galvanized Steel Rolls

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U.S. Steel (X) explores strategic alternatives after rejecting Cleveland-Cliffs (CLF) offer. (00:23) Tesla (TSLA) trims prices of some Model Y versions in China. (01:33) Maui wildfires impact Hawaiian Holdings (HA), Host Hotels & Resorts (HST), and Hawaiian Electric (HE). (02:33)

This is an abridged transcript of the podcast.

U.S. Steel (X) said it started a formal review process after rejecting a $7.25 billion cash and stock takeover offer from Cleveland-Cliffs (CLF).

According to a statement on Sunday, Cleveland-Cliffs said it made an offer to U.S. Steel’s board on July 28 consisting of $17.50 in cash and 1.023 shares of Cliffs stock.

The offer, which as of the close of Friday values U.S. Steel at $32.53 per share, represents a 43% premium to U.S. Steel’s (X) closing price on Friday.

The bid was rejected as being “unreasonable’ by U.S. Steel’s board on Sunday.

According to a statement, U.S. Steel said it began a review process after receiving multiple offers that ranged from the acquisition of certain production assets to proposals for the entire company.

Cleveland-Cliffs (CLF) said it remains prepared to engage immediately in “substantive discussions” with U.S. Steel to work towards a mutually acceptable definitive agreement and is ready to commit all necessary resources to finalize documentation. A combined Cliffs and U.S. Steel s expected to generate synergies of about $500 million.

The United Steelworkers union affirmed in writing to Cliffs hat it endorses the transaction.

Tesla has dropped the prices for its Model Y Long Range and Performance versions in China amid the ongoing electric vehicle price war.

The starting prices for both models were cut by CNY 14K (~$1,932) each, with the Model Y long-range’s price down 4.5% to CNY 299.9K (~$41,486) and the Model Y Performance’s price down 3.8% to CNY 349.9K (~$48,295).

The EV giant will also offer insurance subsidies of CNY 8K (~$1,104) in China for buyers of Model 3 entry-level and rear-wheel-drive versions in inventory between August 14 and September 30.

Tesla (TSLA)has cut prices several times since last year amid competition and economic uncertainty that has hit sales. The automaker’s China-made EV sales fell 31% M/M in July, marking the lowest level for 2023.

Last month, CEO Elon Musk had warned that further cuts could be expected if market conditions become unstable. Bank of America’s John Murphy pointed out that Tesla’s (TSLA)price cuts have created a “negative price spiral” that has already adversely impacted margins.

The impact of the devastating wildfires in Maui is still being calculated, with the death toll reaching 96 over the weekend as rescue efforts continue. The destruction of tourist and residential areas is also having an impact on certain stocks.

In the airline sector, Hawaiian Holdings (HA) fell by 8.5% over the last week due in part to the airline having the highest exposure of flights to Maui. TD Cowen warned the recovery in Maui could take years due to the length of time it will take to process insurance claims and the extra time it takes to get building materials to the remote location.

In the hotel REIT sector, Host Hotels & Resorts (HST) dropped 2.22% on Friday and closed at a six-week low. Of concern to investors, Host Hotels & Resorts (HST) has three hotels on Maui…and Hawaii as a whole accounted for 11% of 2022 EBITDA.

In the utilities sector, Hawaiian Electric Industries (HE) shed 13.2% over the last week due to the impact of the wildfires on Maui. The drop in HE’s share price pushed up the dividend yield to 4.44%.

Other headlines to look out for on Seeking Alpha:

Starboard Value boosts stakes in Wix.com, Humana, trims Salesforce

Student loan repayments to start up in October – Will it spark a recession?

Pharma under threat from bill to expand drug price negotiations

On our catalyst watch for the day-

The three-day EnerCom Denver energy investment conference will begin in Denver, Colorado. The schedule includes a broad group of producers; midstream and oilfield service companies; emerging energy-related technology; as well as panels on M&A. A partial list of participants includes Amplify Energy (AMPY), Baytex Energy (BTE), Earthstone Energy (ESTE).

Hedge funds are due to be filed by the end of the day.

U.S. stocks on Friday ended mixed while Treasury yields were higher.

The S&P 500 (SP500) and the Nasdaq (COMP.IND) posted their second straight week of losses.

The Nasdaq (COMP.IND) was the biggest laggard among the three Wall Street major averages on Friday, falling 0.68%.

The S&P 500 (SP500) declined 0.11%. The Dow (DJI) finished with slight gains by 0.30%.

For the week, the Nasdaq was down 1.90% and the S&P was down 0.31%. The Dow advanced 0.54%.

Of the 11 S&P sectors, seven closed in positive territory, led by Energy. Tech topped the losers.

Treasury yields were higher after the PPI data. The 10-year yield (US10Y) was up 9 basis points to 4.17%, while the 2-year yield (US2Y) was up 8 basis points to 4.90%.

Now let’s take a look at the markets as of 6 am. Ahead of the opening bell today, Dow, S&P and Nasdaq futures are pointing higher. The Dow is up 0.16%, the S&P 500 is up 0.25% and the Nasdaq is up 0.37%. Crude oil is down 0.35% at less than $83 a barrel. Bitcoin is flat.

In the world markets, the FTSE 100 is down 0.3% and the DAX is up 0.5%



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