Skydance Shares Tumble In Technical Adjustment As Inflation, Interest Rate Jitters Roil Market; Apple Regains $5 Trillion Market Cap
Skydance shares closed down 22% Wednesday to end the session at just over $7 after the company distributed warrants to investors. Apple shares rose but tech stocks and overall markets mostly ended in the red after a worse-than-expected September inflation reading sparked fears of higher interest rates that hit debt-heavy companies particularly hard.
Apple saw its market capitalization cross the $5 billion mark again, a level it first hit last July. The stock is up 26% year to date and nearly 40% over the past 12 months. It closed up 0.5% today at $343. New CEO John Ternus took over as CEO from Tim Cook on September 1 and investors are upbeat on the tech giant, which recently unveiled the foldable iPhone Duo. Apple and Nvidia are the only two companies ever to reach the $5 trillion mark.
Other tech companies from Meta (-3.3%), Amazon and Alphabet (both down 1.7%) to Snap (-6%) and Spotify (-0.6%) went the other direction. Netflix shares drifted lower but ended the session up a hair (+0.16%) after the company unveiled hefty job cuts earlier Wednesday.
In the final step of its giant media merger, Skydance warrants have started trading and, as expected, its stock fell. The warrants, distributed to Skydance shareholders, allow holders to buy shares of stock at a certain price. They trade separately from the Class B common stock, which closed down 22% at $7.06. Skydance warrants, which have a 10-year maturity, can be exercised when the stock hits $12 a share. As of Wednesday, holders of Class B shares were no longer entitled to receive warrants.
The company signaled last week ahead of the October 6 close of the Paramount-Warner Bros. Discovery merger that it would let public investors access the warrants. About 90% of the investor base of the company, including Larry Ellison, the Oracle billionaire and father of Skydance CEO David Ellison, as well as RedBird Capital, Middle East sovereign wealth funds and other backers, did not receive the warrants.
Shares of Oracle fell about 9% amid a broader downturn for stocks of top AI stakeholders. Year to date, Oracle stock is down 33%.
The merged and renamed Paramount and Warner Bros. Discovery had a rocky debut when it started trading under its new symbol, SKYD. The combined company has a massive debt load of nearly $80 billion. Rising interest rates can make debt harder to manage and Wall Streeters are wary of Skydance’s high leverage and ability to find a promised $6 billion in cost synergies.
Investors will be looking for strategic clarify from Skydance, Netflix and others as quarterly earnings season kicks off next week.
U.S. annual inflation accelerated to 3.7% in September, according to the Department of Labor Statistics latest Consumer Price Index. That was higher than anticipated as energy prices continued to spike, driven higher by the Trump administration’s war with Iran. Gas prices surged 34% year-over-year. Rising inflation puts pressure on the Federal Reserve to raise interest rates again after a hike in September.
The Nasdaq market fell by 1.9%, the Russell 2000 by 1.9%, and the S&P 500 shed 1.1%. The Dow Jones Industrial Average lost about 50 points. All ended the day off their lows.
