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Tesla, now strongly linked to bitcoin, drops in value as cryptocurrency plummets – CBC.ca

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Shares in Tesla Inc., were set to plunge into the red for the year on Tuesday, hit by a broad sell-off of high-flying technology stocks and the fall of bitcoin, in which the electric car maker recently invested $1.5 billion US.

Early Tuesday morning, Tesla was down over six per cent in U.S. premarket deals after an 8.5 per cent drop during the previous session.

The firm led by Elon Musk has had a stellar ride since 2020, which it began at about $85 per share, before reaching the $900 mark on Jan. 25.

Currently trading at about $673 in pre-market transactions, the stock has lost 25 per cent from its peak, which is above the 20 per cent level that technically defines a bear market.

Bitcoin plummeted as much as 17 per cent on Tuesday as investors grew nervous at sky-high valuations, triggering the liquidation of leveraged bets and sparking a sell-off across cryptocurrency markets.

The world’s biggest cryptocurrency was facing its biggest daily drop in a month, falling to as low as $45,000.

The drop took its losses to over a fifth from a record high of $58,354 hit on Sunday and underscored the volatility of the emerging asset — though it is still up around 60 per cent this year.

“The kinds of rallies we’ve been seeing aren’t sustainable and just invite pullbacks like this,” said Craig Erlam, senior market analyst at OANDA. “It was an extremely overbought market.”

Representation of the bitcoin virtual currency standing on a computer motherboard is seen in this illustration from Feb. 2, 2018. (Dado Ruvic/Illustration/Reuters)

Ether — the world’s second largest cryptocurrency by market capitalization, which often moves in tandem with bitcoin — also dropped more than 20 per cent to $1,410, down over 30 per cent from last week’s record peak.

Bitcoin’s high volatility, critics say, is among reasons that it has so far failed to gain widespread traction as a means of payment — an expectation that has in part fuelled its rally.

Tesla investment could backfire, trader says

A Germany-based trader said he was “taking chips off the table” on Tesla as its $1.5 billion investment in the cryptocurrency could “backfire now.”

Among the factors contributing to the rise of the stocks is surging retail and institutional demand for “environmental, social, and governance” (ESG) friendly investments.

“There is a lot of reasons — purely from a sustainability angle — to hold Tesla. It is part of that transformation towards a more sustainable business model,” Valentijn van Nieuwenhuijzen, chief investment officer at asset manager NN IP told Reuters on Friday.

However, Musk’s decision to invest in bitcoin could weigh on Tesla’s ESG rating, he said.

The billionaire has been criticized for lauding bitcoin prior to Tesla’s purchase of the cryptocurrency.

His role in encouraging a retail frenzy in the shares of U.S. video game chain GameStop and driving up the price of the meme-based digital currency dogecoin have also come under fire while being acclaimed by a large fan base.

Analysts at Barclays noted that there had been a drop of conversations about the electric car makers in Reddit’s WallStreetBets forum, which could explain some of the loss of appetite for the stock.

“With only 2-3 total submissions on each of the past several days, we remain below the trend in attention that has come along with big returns jumps in the past,” the analysts said in a note.

Other analysts have also cautioned against investing in the stock which remains one of the most expensive on the S&P 500 index at 163 times its 12-month forward earnings.

While investing in bets against the company’s stock have backfired spectacularly in the past, short interest in Tesla shares still stood at 5.5 per cent, according to Refinitiv data.

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Credit Suisse stops custodian service for some U.S. cannabis stocks

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By Shariq Khan and Matt Scuffham

(Reuters) – Credit Suisse Group AG has told customers in recent months it will no longer execute transactions in shares of cannabis companies with U.S. operations or hold them on behalf of clients, a cannabis company executive and other industry sources told Reuters on Wednesday.

The Swiss lender was among a handful of banks that had been willing to buy and sell marijuana-related stocks for clients in the United States and hold those shares as a custodian.

Credit Suisse declined to comment.

Cannabis remains illegal under U.S. federal law, even though many states have legalized its use. This represents a legal risk for investment banks working for companies that produce or trade the drug.

Credit Suisse’s compliance and risk management procedures have come under scrutiny from investors and analysts after it lost at least $4.7 billion from the collapse of Archegos, an investment firm dedicated to managing the fortune of hedge fund veteran Bill Hwang, as well as the suspension of funds linked to insolvent supply chain finance company Greensill.

The MSOS exchange-traded fund, which tracks U.S. marijuana stocks, has fallen by more than a fifth since early February. Several market players said they believed Credit Suisse’s actions played a role in the selloff.

“(When) Credit Suisse pulled custodian (services) on cannabis stocks, a number of large investors in the space lost their ability to custodian the stocks,” said Abner Kurtin, Chief Executive Officer of newly-floated marijuana grower Ascend Wellness Holdings Inc.

“That led to a significant selloff.”

A custodian bank holds customers’ securities for safekeeping, to prevent them from being stolen or lost, while also collecting dividends and handling other corporate actions. It plays an important role in helping many investors to hold shares in companies.

The weed industry has boomed over the last three years, as Canada and a succession of U.S. states, including most recently New York and New Jersey, legalized recreational use.

Credit Suisse shares are down over 20% so far this year, and the bank has said it is cutting its prime brokerage business, which caters to hedge fund clients, by about a third.

 

(Reporting by Shariq Khan and Matt Scuffham; Writing by Patrick Graham; Editing by Howard Goller)

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Sun Life’s misses first-quarter profit estimates

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Sun Life

TORONTO (Reuters) – Sun Life Financial Inc on Wednesday missed analyst estimates for first-quarter core profit, which rose from a year earlier due to business growth and earnings in its asset management and Canadian units.

Underlying profit was C$850 million ($693 million), or 1.45 Canadian cents a share, in the three months ended March 31, from C$770 million, or C$1.31, a year earlier. Analysts had expected C$1.46 a share.

Reported net income jumped to C$937 million, or C$1.59 a share, from C$391 million, or 67 Canadian cents, a year earlier.

($1 = 1.2266 Canadian dollars)

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Manulife, Sun Life post improved first-quarter core profits on business growth, investments

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Manulife

TORONTO (Reuters) – Manulife Financial and Sun Life Financial Inc on Wednesday reported increased core profits from a year ago, driven in part by business growth and improved earnings across all major business units.

But while Manulife beat analyst expectations for the quarter ended March 31, Sun Life missed estimates.

Payouts globally have risen due to claims related to the coronavirus pandemic, but strength in stock markets has helped soften some of that impact. Earnings of Canada‘s top two insurers were affected by steepening yield curves in North America.

While it tempered Sun Life’s results, the No. 2 insurer still saw reported profit more than double from a year ago as a result of favourable equity markets and interest rate changes.

Sun Life also took an after-tax restructuring charge of C$57 million related to changes it is making to its workspace, the company said.

Manulife reported core earnings of C$1.6 billion ($1.3 billion), or 82 Canadian cents a share, in the three months ended March 31, from C$1 billion, or 51 Canadian cents, a year earlier. Analysts had expected 77 Canadian cents.

Reported net income attributable to shareholders declined to C$783 million, or 38 Canadian cents, from C$1.3 billion, or 64 Canadian cents, a year earlier.

Sun Life reported underlying profit of C$850 million ($693 million), or 1.45 Canadian cents a share, in the three months ended March 31, from C$770 million, or C$1.31, a year earlier.

Analysts had expected C$870.8 million or C$1.46 a share.

Reported net income jumped to C$937 million, or C$1.59 a share, from C$391 million, or 67 Canadian cents, a year earlier.

($1 = 1.2277 Canadian dollars)

 

(Reporting By Nichola Saminather; Editing by Chris Reese and David Gregorio)

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