Siemens Energy Plunges

After the company’s announcement that problems at its wind turbine unit could last for years, Siemens Energy shares are gone with the wind. 😱

For background, Siemens Energy was created as a spinoff of German conglomerate Siemens AG’s former gas and power division. And it’s traded separately on exchanges abroad and in the U.S. as an American Depository Receipt (ADR) under ticker symbols $SMEGF and $SMNEY, which combined represent one Siemens ordinary share.

This week it announced that a review of issues as its Siemens Gamesa subsidiary uncovered a “substantial increase in failure rates of wind turbine components.” That news comes about a year after Siemens Energy acquired the remaining stake in this wind turbine unit, which was also publicly listed, for roughly 4 billion euros. While some issues existed at the time, its thesis was that it would be able to better address the renewable energy unit’s operational issues as a 100% owner vs. continuing to operate as a majority owner. 💰

Clearly, that has not panned out as anticipated, with cultural differences plaguing the two companies’ combination. ⚔️

With the additional skeletons being discovered this week, many shareholders question management’s leadership. How can investors rely on the company’s forecasts now if management doesn’t have a clear handle on the situation? Did they not adequately understand the risks before approving last year’s buyout? Many questions remain.

And with executives expecting the new quality issues could impact up to 30% of Siemens Gamesa’s installed onshore fleet, things are unlikely to improve soon. For now, Siemens Gamesa’s board of directors initiated an extended technical review to improve product quality. It’s expected to raise costs by more than 1 billion euros, though the true impact is unlikely to be uncovered for some time. ❤️‍🩹

Ultimately, the scale of these operational problems shocked the market. Siemens Energy shares are down about 37% over the last two days on the news. Meanwhile, Siemens AG, which still owns about 35% of the company, was down just 4% and is sitting just below all-time highs. 🔻

Ultimately, it’s a very messy situation that management needs to get a handle on before their next report in August. We’ll see if the stock’s drop this week is enough to price in the potential longer-term damage or if investors feel the price should be even lower than it is today. 🤷

Japan’s Nippon Takes Over U.S. Steel

After months of bidding, U.S. Steel finally has a buyer. However, the auction’s winner has some parties concerned. 🤔

Japan’s Nippon Steel emerged as the top bidder for the 122-year-old steelmaker, beating out offers from Cleveland-Cliffs, ArcelorMittal, and Nucor. Its $55 per share price represents a 142% premium to where $X shares were trading before Cleveland-Cliffs’ $35-per-share offer kicked off the bidding war.

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McDonald’s Outlines Its Big Bet

McDonald’s has been meandering near all-time highs for most of the last year, bucking the trend of other restaurant chains pinched by inflation. Despite its strong performance, some investors are concerned about how the company plans to continue its run into the future. 🤔

Today, the company revealed its big plans at its investor day. 

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FanDuel Parent Lists On NYSE

The U.S. “degenerate economy” is getting its latest entrant, with FanDuel parent company Flutter Entertainment making its debut on the New York Stock Exchange (NYSE) today. 🤩

With that said, the company did not receive the traditional fanfare it would in a standard initial public offering (IPO). That’s because it was listed on the London Stock Exchange (LSE) in May 2019, and its American depository receipts (ADR) have traded over the counter under the ticker $PDYPY for years.

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AT&T Suffers Major Outage

Those who work at AT&T today did not have a great day, but those who use their services had a pretty good excuse to chill out at work today. That’s because the telecom giant experienced a nationwide cellphone outage that impacted tens of thousands of its customers today. 📵

While the nation’s largest carrier said it restored wireless service to all impacted customers by midday, no reason has been given for the outages. With T-Mobile and Verizon’s networks unaffected, regulators quickly questioned whether AT&T experienced a hack or other cyberattack. 📡

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