Author: Reuters

By Jody Godoy

(Reuters) – Elon Musk has claimed that Delaware, home to much of corporate America, is trying to prevent businesses from heeding his call to leave the state, where a court invalidated his $56 billion Tesla pay package.

Since the Delaware Court of Chancery ruled to rescind Musk’s record pay package on Jan. 31, the Tesla CEO has posted on social media about reincorporating the electric vehicle maker in Texas, where it has its headquarters, and encouraging others to follow.

“Move your company out of Delaware before they lock the doors, as they just did with Tripadvisor,” Musk tweeted on Monday.

Here are the facts behind the billionaire’s claim.

WHAT IS HAPPENING WITH TESLA?

Musk said on the X social media platform on Feb. 1 that Tesla would “move immediately to hold a shareholder vote” to reincorporate the company in Texas.

It is not clear that Tesla’s board will recommend such a vote, or that it would garner the necessary support from shareholders. Many are retail investors who, research shows, typically fail to vote their shares.

DOES DELAWARE BLOCK COMPANIES FROM LEAVING?

The vast majority of large publicly traded companies incorporate in Delaware, even when they have no physical presence in the state, in part because of the predictable court system, which has specialist judges and non-jury trials.

Delaware has actually made it easier to reincorporate elsewhere. State law had required a unanimous shareholder approval. Since a change in 2022, companies can leave Delaware with the approval of a majority of shareholders.

But Delaware’s Chancery Court is now considering how closely to scrutinize moves that arguably benefit a controlling shareholder.

WHAT DOES TRIPADVISOR HAVE TO DO WITH IT?

A shareholder lawsuit against TripAdvisor’s board seeks to block the online travel guide company’s planned reincorporation in Nevada.

The shareholders argue the move was designed to let Gregory Maffei, head of TripAdvisor’s parent company, avoid accountability for potential self-dealing. Nevada sets a lower bar for such transactions, they argued.

At a November hearing in Delaware Chancery Court, Vice Chancellor Travis Laster seemed open to scrutinizing whether the move was fair to minority shareholders. But he expressed “discomfort” with the idea of blocking it.

“The idea that Delaware is going to block people from leaving, I think, is pretty strained,” the judge said, according to a transcript of a hearing in the case.

An attorney for the TripAdvisor shareholders told the judge that only a “small subset” of Delaware companies could have moves scruntinized – those with controlling shareholders heading to a state with fewer legal protections for minority shareholders.

In a non-controlled company, “the stockholder vote would carry the day,” the attorney, Andrew Blumberg, said.

COULD THE CASE AFFECT TESLA?

Musk does not have a controlling stake in Tesla, though he was found to have controlled the process that led to his 2018 pay package.

The shareholders who voted to approve the package lacked information about the process, the judge in that case ruled.

Texas does not shield corporate leaders in the same way as Nevada – meaning it could be harder for Tesla shareholders to argue a move there is designed to let Musk escape liability.

Still, a ruling expected this month in the TripAdvisor case could have implications, as it will show how closely Delaware judges will review out-of-state moves to determine if they are fair to minority shareholders.

(Reporting by Jody Godoy in New York; Editing by Tom Hals and Matthew Lewis)

By Purvi Agarwal

(Reuters) – Canada’s main stock index rose on Wednesday, boosted by gains in technology and financial stocks, as it recovered from the previous session’s broad sell-off triggered by hotter-than-expected U.S. inflation data.

At 10:30 a.m. ET (15:30 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 196.45 points, or 0.95%, at 20,781.42.

Wall Street futures also opened higher, recovering from a selloff in the previous session after a hot inflation report. [.N]

“We saw a correction in the market yesterday. The merchants keep hoping that inflation will come down. Then that’ll force central bankers to cut interest rates. And when it doesn’t come down, the market gets upset”, said Colin Cieszynski, chief market strategist at SIA Wealth Management.

On TSX, information technology stocks led sectoral advances, up 1.9%, rebounding from their 2.3% loss in the previous session.

IT gains were led by crypto miners Hut 8 and Bitfarms after Bitcoin hit a two-year high and breached $1 trillion in market cap.

Heavy-weight financials also rose 1.5% and were on track for their best day since Dec. 13 last year.

Insurance company Intact Financial and lender goeasy advanced 5.8% and 4.8% to become the top performers amongst financial stocks.

All sectors partially erased losses from the previous session, with the materials sector the only outlier with a 0.3% decline, tracking metal prices lower. [MET/L] [GOL/]

Canada’s largest insurer Manulife Financial and gold miners like Dundee Precious Metals and Kinross Gold among others are set to report their quarterly results after the bell on Wednesday.

Shares of gold miner Centerra Gold jumped 6.4% to the index’s top after the company announced its fourth-quarter results.

(Reporting by Purvi Agarwal in Bengaluru; Editing by Ravi Prakash Kumar)

LONDON (Reuters) -The total value invested in bitcoin surpassed $1 trillion on Wednesday for the first time since November 2021 as inflows to U.S. spot bitcoin exchange traded funds continued to support prices.

Bitcoin’s price reached $51,902 on Wednesday, its latest 25-month high and a rise of 4.7% on the day, taking the token’s market cap to $1.017 trillion according to price platform Coingecko.

The all-time high for bitcoin’s market cap was $1.28 trillion hit in November 2021, according to Coingecko.

The world’s largest cryptocurrency has risen around 20% since the start of February, already set for its biggest monthly rise since October.

Investments in bitcoin make up for more than half of the $2.01 trillion parked in the overall cryptocurrency market which includes ether and other digital coins.

Strong inflows to new U.S. listed ETFs have driven some of the price action in recent weeks, say analysts, and capital flows into the 11 U.S. spot bitcoin ETFs increased to $1.64 billion in the week to Wednesday, LSEG Lipper data showed.

The previous five trading sessions saw inflows of $409 million to the products, which received regulatory approval and began trading in January.

“Whether this pace will be sustained remains to be seen but in crypto, price often drives flow,” said analysts at crypto liquidity provider B2C2.

“One has to imagine that if there are more days like the last few, large inflows will be met by further price rises for spot (bitcoin).”

CRYPTO-LINKED STOCKS JUMP

Shares of U.S.-listed cryptocurrency companies also gained before the bell on Wednesday, with exchange Coinbase climbing 13%, while miners Riot Platforms and CleanSpark gained nearly 11% and 17%, respectively.

Bitcoin had hit an all-time high of $69,000 in November 2021, before struggling for much of 2022 and the first part of 2023, weighed down by monetary tightening by global central banks, and a slew of high profile failures at crypto companies, including leading exchange FTX.

But in the last few months, hopes of a soft landing for the economy and the launch of spot bitcoin ETFs have helped sentiment. The ETFs have been touted as a game-changer for the industry, already known for its appeal to retail traders, since investors can now have exposure to bitcoin without directly holding the asset.

Second-largest token ether, which underpins the ethereum network, was last up 4.8% at $2,761 its highest since May 2022.

(Reporting by Alun John in London and Medha Singh and Niket Nishant in Bengaluru; Editing by Chizu Nomiyama)

By Tim Hepher

PARIS (Reuters) – The head of Europe’s Airbus has told staff that recent unexpected charges in its Space business are “not acceptable”, in a candid assessment of a business facing what he described as an internal crisis, people familiar with the matter said.

In November, Airbus took a 300-million-euro ($320 million)charge on unidentified satellite programmes, said by industry sources to include the commercial telecoms OneSat family.

CEO Guillaume Faury told staff in a January review of 2023 that Defence and Space “performed strongly in many areas, but faced a major setback in the Space business which tarnished the overall performance”, according to extracts seen by Reuters.

Some major satellite developments have recorded unexpected charges, Faury said, adding: “Put simply, mishaps of this magnitude and suddenness are just not acceptable at Airbus”.

A spokesperson for Europe’s largest aerospace group, which reports earnings on Thursday, declined comment on staff memos.

Faury said the episode demonstrated that risks had to be managed in the right way and urged the whole group to learn from what he described as an internal “crisis” in Space.

“We no longer ‘say what we do, and do what we say’. As a listed company and a global leader in aerospace and defence, this is something we simply cannot afford.”

A recent reorganisation of Defence and Space, splitting the unit into three parts – Air Power, Space Systems and Connected Intelligence – will strengthen accountability and help manage risks, and is already showing initial results, Faury said.

The company has separately told staff that Jean-Marc Nasr, executive vice president of Space Systems, will be replaced in March as head of Space Systems by Alain Faure, head of Airbus Operations, industry sources said, confirming French reports.

“Thank you for your unwavering commitment to the company, including in the recent difficulties. It is what it is,” Faury said in hand-written comments addressed to Nasr in the memo, they said.

Nasr could not immediately be reached for comment. Airbus declined comment on management changes.

Since January, Faury has focused increasingly on reviewing Airbus’s strategy in Defence and Space after the company appointed Christian Scherer as head of its core jetmaking business, a job previously held by Faury alongside his CEO role.

Some analysts say the decision to refocus Faury’s role, as well as competition from Elon Musk’s SpaceX launchers and a new generation of low-cost satellites, have raised questions over the European company’s future in the space business.

Faury’s January letter to staff, however, said that “a high-performing Defence and Space division is a stronger Airbus than one without a Defence and Space business”.

Agency Partners analyst Sash Tusa wrote in a preview of 2023 Airbus results that outperformance in the core commercial jetmaking division would be eroded by weakness in Space, where he cited “seemingly structural problems of competitiveness”.

($1 = 0.9339 euros)

(Reporting by Tim Hepher; Editing by Mark Potter)

By Samrhitha A

(Reuters) – Lyft’s forecast error that sent shares into a tizzy overnight may invite regulatory or legal scrutiny, analysts and experts said on Wednesday, overshadowing its solid quarter and forecast.

An error in its earnings statement caused a brief 67% surge in shares before a clarification from Chief Financial Officer Erin Brewer in a conference call with analysts.

Lyft said incorrectly that a key margin metric was expected to rise by 500 basis points this year, but Brewer later corrected that forecast to an increase of 50 basis points.

About 48 million shares traded after-hours Tuesday, more than triple the usual daily regular-session volume in the stock.

“The SEC will probably review the situation given the scale of the share price movement upon release of the original results and Lyft could potentially be fined,” said Dan Coatsworth, an investment analyst at AJ Bell.

Analysts said the surge could have included significant short covering from hedge funds. Lyft had short interest of $566.1 million, or 13.1% of its free float shares, as of Feb. 12, according to data and analytics firm Ortex.

Still, shares were up 24% in Wednesday premarket activity, setting on course to add more than $1 billion to its market value if premarket gains hold.

Whether the company could face legal liability is unclear, experts said.

“Since the error relates to a forecast, it’s likely that liability under securities regulations will not attach unless it can be proved that it was made with knowledge that it was wrong or with some intent to mislead,” said Bobby Reddy, professor of corporate law and governance at the University of Cambridge.

CEO David Risher’s push for aggressive restructuring has helped the company cut total costs last year by 12% compared with a 28% increase in expenses in 2022.

Lyft was trading at 20.27 times its 12-month forward earnings estimates compared with Uber’s 49.75.

Shares of rival Uber gained more than 8% after the company said it would buy back up to $7 billion worth of company shares for the first time ever.

Thousands of drivers for ride-sharing platforms Uber, Lyft and food delivery app DoorDash are expected to go on strike across the United States on Valentine’s Day for fair pay, drivers’ groups said earlier this week.

(Reporting by Samrhitha Arunasalam and Medha Singh in Bengaluru; Editing by Arun Koyyur)

By David Shepardson

WASHINGTON (Reuters) – The U.S. government has reimbursed auto dealers for about $135 million in advance point-of-sale consumer electric vehicle tax credit payments since the start of the year through Feb. 6, the Treasury said on Wednesday.

Prior to 2024, U.S. auto buyers could only take advantage of the $7,500 new electric vehicle credit or $4,000 used EV credit when they filed tax returns the following year.

Starting Jan. 1, consumers can transfer the credits to a car dealer at the time of sale, effectively lowering the vehicle’s purchase price.

The Internal Revenue Service has received more than 25,000 time of sale reports, including more than 19,500 – or 78% – with advance payment requests and approximately $135 million has been paid to dealers since Jan. 1, Treasury said in disclosing the previously unreported figures.

“One month into implementation of this provision, there is strong demand for this new upfront discount, which will continue momentum in growing this industry in the United States,” Deputy Treasury Secretary Wally Adeyemo said in a statement.

The advance payment requests include 17,500 for new EVs and 2,000 for used vehicles. More than 11,000 U.S. auto dealers have registered for the program, including more than 8,000 registered for advanced payments.

In January, many EVs lost eligibility for tax credits after new battery sourcing rules took effect, including the Nissan Leaf, some Tesla Model 3s, Chevrolet Blazer EV, Cadillac Lyriq, Ford Mach-E and Ford E-Transit.

The Treasury issued guidelines in December aimed at weaning the U.S. electric vehicle supply chain away from China. The number of EV models qualifying for U.S. EV tax credits fell on Jan. 1 to 19 from 43, but since then Volkswagen regained eligibility for versions of its ID.4 EV.

Consumers must attest they meet income limits to qualify for the tax credit at time of purchase or they will need to repay the government when filing their taxes. For new vehicles, the adjusted gross income limit is $300,000 for married couples and $150,000 for individuals.

The August 2022 Inflation Reduction Act law reformed the EV tax credit, requiring vehicles to be assembled in North America to qualify for any tax credits, eliminating nearly 70% of eligible models.

It also created a used EV tax credit, lifted 200,000-vehicle manufacturer caps on credits, imposed income and vehicle price restrictions and extended credits to leased vehicles.

(Reporting by David Shepardson; Editing by Lincoln Feast.)

By Christian Kraemer and Rene Wagner

BERLIN (Reuters) – The German government will slash its economic growth forecast for this year to just 0.2% in a report due to be published next week, according to a source with knowledge of the matter.

Factors contributing to the depressed figure — significantly down from October’s forecast of 1.3% — included low growth in the global economy and a German constitutional court ruling that blew a hole in the country’s budget, according to the source.

An economy ministry spokesperson said on Tuesday evening they could not comment on the numbers, adding the government would provide comment when the official report was published.

The ministry warned in a separate monthly report on Wednesday that the expected recovery of Europe’s largest economy could be further delayed by geopolitical tensions, including in the Red Sea, as well as a series of strikes domestically.

The gloomy prospects for Germany’s economy in 2024 come after the country’s economy shrank by 0.3% in 2023 under the pressure of high inflation, rising interest rates and a weak global economy.

Both the Ifo and IfW economic institutes lowered their most recent 2024 forecasts but were more optimistic than the government: Ifo is now predicting economic growth of 0.7%, from a previous 0.9%, and the IfW is forecasting 0.9% from 1.3% earlier. They plan to present new forecasts in March.

In contrast, the German business association BDI had issued a low forecast in mid-January for growth of 0.3%, warning that the economy was at a “standstill”.

A new forecast for 2025 is not expected in the report next week. The government, which forecast economic growth of 1.5% in October, should give an update on that figure this spring.

German Finance Minister Christian Lindner said on Sunday that the coalition government planned to present a concept to strengthen Germany’s position as an industrial location this spring, after multiple warnings from both him and Economy Minister Robert Habeck that the country was losing its competitiveness on a global scale.

(Reporting by Christian Kraemer and Rene Wagner, Writing by Miranda Murray and Victoria Waldersee; Editing by Lisa Shumaker and Toby Chopra)

By Raphael Satter

WASHINGTON (Reuters) – State-backed hackers from Russia, China, and Iran have been using tools from Microsoft-backed OpenAI to hone their skills and trick their targets, according to a report published on Wednesday.

Microsoft said in its report it had tracked hacking groups affiliated with Russian military intelligence, Iran’s Revolutionary Guard, and the Chinese and North Korean governments as they tried to perfect their hacking campaigns using large language models. Those computer programs, often called artificial intelligence, draw on massive amounts of text to generate human-sounding responses.

The company announced the find as it rolled out a blanket ban on state-backed hacking groups using its AI products.

“Independent of whether there’s any violation of the law or any violation of terms of service, we just don’t want those actors that we’ve identified – that we track and know are threat actors of various kinds – we don’t want them to have access to this technology,” Microsoft Vice President for Customer Security Tom Burt told Reuters in an interview ahead of the report’s release.

Russian, North Korean and Iranian diplomatic officials didn’t immediately return messages seeking comment on the allegations.

China’s U.S. embassy spokesperson Liu Pengyu said it opposed “groundless smears and accusations against China” and advocated for the “safe, reliable and controllable” deployment of AI technology to “enhance the common well-being of all mankind.”

The allegation that state-backed hackers have been caught using AI tools to help boost their spying capabilities is likely to underline concerns about the rapid proliferation of the technology and its potential for abuse. Senior cybersecurity officials in the West have been warning since last year that rogue actors were abusing such tools, although specifics have, until now, been thin on the ground.

“This is one of the first, if not the first, instances of a AI company coming out and discussing publicly how cybersecurity threat actors use AI technologies,” said Bob Rotsted, who leads cybersecurity threat intelligence at OpenAI.

OpenAI and Microsoft described the hackers’ use of their AI tools as “early-stage” and “incremental.” Burt said neither had seen cyber spies make any breakthroughs.

“We really saw them just using this technology like any other user,” he said.

The report described hacking groups using the large language models differently.

Hackers alleged to working on behalf of Russia military spy agency, widely known as the GRU, used the models to research “various satellite and radar technologies that may pertain to conventional military operations in Ukraine,” Microsoft said.

Microsoft said North Korean hackers used the models to generate content “that would likely be for use in spear-phishing campaigns” against regional experts. Iranian hackers also leaned on the models to write more convincing emails, Microsoft said, at one point using them to draft a message attempting to lure “prominent feminists” to a booby trapped website.

The software giant said Chinese state-backed hackers were also experimenting with large language models, for example to ask questions about rival intelligence agencies, cybersecurity issues, and “notable individuals.”

Neither Burt nor Rotsted would be drawn on the volume of activity or how many accounts had been suspended. And Burt defended the zero-tolerance ban on hacking groups – which doesn’t extend to Microsoft offerings such as its search engine, Bing – by pointing to the novelty of AI and the concern over its deployment.

“This technology is both new and incredibly powerful,” he said.

(Reporting by Raphael Satter; Additional reporting by Christopher Bing in Washington and Michelle Nichols at the United Nations)

By Samrhitha A

(Reuters) – Lyft shares surged more than 21% on Wednesday before the bell after the ride-hailing company said cost cuts would help it generate positive free cash flow for the first time in 2024 and posted market-beating quarterly profit.

Its results were overshadowed by an error on a key margin metric in the earnings statement that led to a 67% surge in its shares before a clarification from Chief Financial Officer Erin Brewer in a conference call with analysts.

“Since the error relates to a forecast, it’s likely that liability under securities regulations will not attach unless it can be proved that it was made with knowledge that it was wrong or with some intent to mislead,” said Bobby Reddy, Professor of Corporate Law and Governance at the University of Cambridge.

Analysts said the surge could have included significant short covering from hedge funds. Lyft had short interest of $566.1 million, or 13.1% of its free float shares, as of Feb. 12, according to data and analytics firm Ortex.

Still, the stock jump set Lyft on course to add roughly $1 billion to its market value, based on its share price of $14.70, if premarket gains held.

CEO David Risher’s push for aggressive restructuring has helped the company cut total costs last year by 12% compared with a 28% increase in expenses in 2022.

“David Risher took over as CEO less than a year ago, and he’s clearly changed gears at the company, cutting costs sharply while still maintaining market share,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Lyft was trading at 20.27 times its 12-month forward earnings estimates compared with Uber’s 49.75.

Shares of rival Uber were also up more than 2%.

(Reporting by Samrhitha Arunasalam and Medha Singh in Bengaluru; Editing by Arun Koyyur)

By Shivansh Tiwary and Rajesh Kumar Singh

(Reuters) -Shares of JetBlue Airways surged on Tuesday after activist investor Carl Icahn said he took a stake of nearly 10% in the low-cost carrier.

JetBlue’s shares were up 14.7% in late morning after Icahn said his company had been in discussion with the airline about possible board representation.

Icahn, in a filing, called shares of JetBlue undervalued, saying the airline represented an attractive investment opportunity. He has made a career out of buying companies he sees as undervalued. The JetBlue purchase is one of his first big moves in 2024.

“We are always open to constructive dialogue with our investors,” JetBlue said on Tuesday.

Analysts at Deutsche Bank said Icahn’s investment in the U.S. airline industry reinforces their view that the sector will likely undergo more restructuring beyond previously announced mergers.

JetBlue’s earnings have been under pressure due to higher operating costs and uneven travel demand. Its new CEO, Joanna Geraghty, has vowed “aggressive action” to return the airline to profitability.

As part of the plan, JetBlue has deferred about $2.5 billion in planned aircraft capital expenditure and is also planning to cut costs through buyouts to employees in corporate, airports, and customer support functions.

It is also trying to drive its ancillary revenue in a bid to generate an extra $300 million in revenue this year.

The company’s $3.8 billion deal to acquire Spirit Airlines, however, has been a bigger concern for some analysts.

The deal was blocked by a U.S. judge last month, but both airlines have asked for an expedited appeal. A U.S. appeals court will hear arguments in June.

When Spirit originally accepted JetBlue’s acquisition offer, the market value of its equity was $3.8 billion. Its enterprise value, inclusive of its outstanding debt at the time, was $7.6 billion. Since then, the company’s market capitalization has fallen to about $735 million.

If JetBlue is able to complete the deal with new debt to fund the original transaction, its debt-to-EBITDA ratio will increase to 12 times or more at the end this year, up from 9 times at the end of 2023, according to Moody’s investor service.

JetBlue’s annual interest burden will also increase to about $620 million from about $375 million in 2023, Moody’s said.

In a regulatory filing on Monday, JetBlue acknowledged that its indebtedness following the merger will be substantially higher and could increase borrowing costs. Yet the company last month said the merger agreement remained in effect.

JetBlue’s stock has gained 36% since the merger ruling.

Icahn has built his reputation over the years as a corporate raider and activist shareholder, pressuring companies make changes to their business strategies and boost their stocks.

(Reporting by Rajesh Kumar Singh in Chicago and Shivansh Tiwary in BengaluruEditing by Sriraj Kalluvila and Matthew Lewis)