Twitter takeover still not a done deal, HSBC falls as inflation bites, Taylor Wimpey sees strong demand, ABF to take Primark margin hit

“The fact Twitter’s share price is trading below Elon Musk’s offer price shows that parts of the market remain skeptical over whether this deal will complete,” says Russ Mould, Investment Director at AJ Bell.

“The social media platform is currently trading at $51.92 despite the board agreeing to sell the company for $54.20 per share. This approximate 4% gap is the market’s way of saying there is still some risk to the deal.

“After all, Musk is one of the most unpredictable characters in business today and while his offer to buy the company came out of the blue and was recommended by the board in only a matter of weeks, this is not a done deal until he’s secured all the necessary support from shareholders and the money has been wired from his account.

“Twitter has a lot of passionate users and the company will have to work hard to try and retain them and attract new users if Musk lays out a regime that changes the way the platform operates.

“Suggestions there will be a clamp down on bot accounts would be beneficial to users, but not everyone likes the idea of complete freedom of speech. An unmoderated platform could foster a toxic environment and see users leave in droves.”

Markets

“The FTSE 100 recovered some of Monday’s losses on Tuesday morning despite a substantial fall for one of its real heavyweight stocks, HSBC.

“The bank’s share price fell despite beating expectations as investors focused on slowing growth in Hong Kong and a hike in expected losses associated with bad debts linked to the war in Ukraine and mounting inflation.

“This represents a reversal from the situation a year ago when the promise of a Covid recovery meant the banking sector was able to release some of the cash buffers built up to withstand the pandemic.

“HSBC has also been affected by the slowdown in investment banking – a year ago buoyant markets and surging M&A generated plenty of commission.

“Investors’ interest in HSBC is heavily linked to increased penetration of banking in less mature markets in Asia. With the impact of increased restrictions that growth outlook is clouded which negatively impacts sentiment towards the stock.

“Its decision to maintain operations in Russia may come under increasing scrutiny despite a robust defence alongside today’s update.

“Elsewhere, Taylor Wimpey helped lay the foundations for gains across the housebuilding sector as it flagged persistent high demand in the market despite the cost of living crisis and the recent increase in interest rates.

“For now, soaring house prices are beating the increase in labour and raw material costs and keeping Taylor Wimpey and its peers’ impressive margins and cash generation intact.

“This could turn out to be a tortoise and the hare situation if the property market runs out of steam while costs keep going up. All Taylor Wimpey can do is to continue to make hay while the sun shines. It wouldn’t hurt for the company to fix the roof too, and by maintaining secure finances and investing in land for future growth it is arguably doing so.

“If your brand is all about value then protecting margins is tricky as Primark and its owner Associated British Foods have found.

“Attempts to cut costs to protect profitability haven’t proved sufficient so Primark is now planning ‘selective’ price increases but notably these won’t prove sufficient to prevent a greater reduction in margins than previously forecast in the second half of its financial year.

“Primark has a fine balance to strike as its bargain prices could help it gain market share if consumers trade down thanks to tighter household budgets. However, if it goes too far in lifting prices it could undermine its value proposition.”

These articles are for information purposes only and are not a personal recommendation or advice.