This Week in Tech: Tesla, SolarCity, Alibaba, and More

A lot has occurred in the tech sector this week. In addition to the ‘Brexit’, there have also been M&A deals, damage control, executive transitions, and more.

Let’s dive in and take a closer look at some tech stocks that have been making headlines, including Tesla Motors Inc (NASDAQ:TSLA), SolarCity Corp (NASDAQ:SCTY), Alibaba Group Holding Ltd (NYSE:BABA), Facebook Inc (NASDAQ:FB), and Alphabet Inc (NASDAQ:GOOGL). In addition, we are going to assess the hedge fund sentiment towards them in order to get an idea about the long-term perspective of these companies.

At Insider Monkey, we track around 770 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).

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Elon Musk Attempts to Consolidate 

Tesla Motors Inc (NASDAQ:TSLA) made a bid for SolarCity Corp (NASDAQ:SCTY) this week, offering to buy the solar company in an all-stock deal, offering 0.122 to 0.131 Tesla shares for each share of SolarCity. Although SolarCity’s shares initially spiked on the news and Elon Musk said that SolarCity would help Tesla potentially be a trillion dollar company, SolarCity’s stock has since retreated to around its pre-merger news levels due to pessimism that the deal won’t go through. Notorious short-seller Jim Chanos said on Wednesday that the merger represents “a shameful example of corporate governance at its worst. SolarCity, whose bonds were yielding 20% yesterday, is a company headed toward financial distress. It is burning hundreds of millions in cash every quarter, a burden that now Tesla shareholders will have to bear, at a total cost of over $8 billion”. Given the lack of meaningful synergies between the combination, there is a possibility that Tesla shareholders might not approve the deal. Elon Musk, who owns a substantial part of both companies, has also recused himself from voting on the merger due to the conflict of interest. If the merger doesn’t go through, look for Tesla shares to potentially bounce back. Of the 766 elite funds we track, 39 funds owned shares of Tesla Motors Inc (NASDAQ:TSLA) and 23 held positions in SolarCity at the end of March.

On the next page, we examine Alibaba, Facebook, and Alphabet.

Jack Ma Does Damage Control

Alibaba Group Holding Ltd (NYSE:BABA) CEO Jack Ma penned an article in the Wall Street Journal this week, writing that counterfeit goods have no place in Alibaba. Ma originally got into hot water after stating that some counterfeit goods offered better quality at lower prices than the existing brands. Although that may certainly be true, the statement wasn’t something that investors wanted to hear given China’s past problems with intellectual property protection. Ma later clarified that his comments were taken out of context and that Alibaba Group Holding Ltd (NYSE:BABA) has zero tolerance for the goods. Bulls hope Jack Ma’s article will go a long way in improving the company’s image and shoring up the bullish sentiment on the stock. A total of 67 funds from our database had a long position in Alibaba Group Holding Ltd (NYSE:BABA) at the end of the first quarter, down by 10 funds from the previous quarter.

Facebook Hires Key Executive for Infrastructure Connectivity Unit

Facebook Inc (NASDAQ:FB) made some waves this week by hiring Kevin Lo to be the director of its Infrastructure Connectivity and Investments segment. Lo was a co-founder of Alphabet Inc (NASDAQ:GOOGL)‘s Google Fiber initiative, which aims to provide faster internet speeds to customers than traditional cable companies. Despite the hire, Facebook says it won’t get into the internet service provider business. The company will instead use Lo to provide more connectivity to urban areas and other geographies that will help Facebook indirectly increase its ad revenues and profits.

However, the big news involving Facebook this week was the shareholder meeting held on Monday, during which stockholders approved a new, class C, non-voting shares that will be distributed as two for each class A and class B shares owned by shareholders. The new class of stock will be traded under a separate ticker and the move will allow Mark Zuckerberg to give away his wealth without losing control of Facebook. Among the funds tracked by us, 164 funds had a bullish position in Facebook Inc (NASDAQ:FB) and 155 elite funds were long Alphabet Inc (NASDAQ:GOOGL)’s class A at the end of the first quarter.

Disclosure: none