Category: Stock Market

ASX tech shares are taking off after Wall Street as rising bond yields pressured investors out of fast-growing technology shares.

The S&P 500, Nasdaq Composite and Dow Jones Industrial Average logged sharp declines, sliding 2.04%, 1.63% and 2.83% respectively.

Major US tech shares including Alphabet, Apple, Facebook and Microsoft fell between 2.38% to 3.66%, weighing on the S&P 500 and Nasdaq.

Benchmark 10-year US treasury yields have continued to rise this week, trading at their highest levels since late-June.

The yield on benchmark 10-year Treasury notes rose 5 basis points on Tuesday night to 1.541% and are currently fetching 1.546%.

A sea of red for ASX tech shares

The S&P/ASX Information Technology (INDEXASX: XIJ) index is currently the worst performing sector on Wednesday, down 2.85%.

This compares to the S&P/ASX 200 Index (ASX: XJO) which is currently down 1.37% to a 3-month low of 7,176.

Taking the brunt of the losses include EFTPOS provider Tyro Payments Ltd (ASX: TYR) sliding 5.10% to $3.91 and Zip Co Ltd (ASX: Z1P) down 4.93% to $6.75.

On the big end of town, heavyweights Afterpay Ltd (ASX: APT), Xero Limited(ASX: XRO) and WiseTech Global Ltd (ASX: WTC) are logging consistent declines, down between 2.6% and 3.8%.

Other notable losers include Nextdc Ltd (ASX: NXT) down 4.09% to $11.95, Carsales.com Ltd (ASX: CAR) down 3.53% to $24.59 and Altium Limited (ASX: ALU) down 2.89% to $34.57.

Why do yields matter?

Tech shares are able to justify expensive valuations from much higher cash flows expected in the future.

As yields increase, this can make future cash flows appear less valuable in the present.

Higher borrowing rates could also hinder growth prospects, especially if the company is already carrying significant debt.

ASX tech shares have enjoyed a prolonged era of ultra-low interest rates.

But looming interest rate hikes could pose a risk to tech and high-growth sectors.

The post Why ASX tech shares are crashing on Wednesday appeared first on The Motley Fool Australia.

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• The S&P 500 just dropped 2%. Why is this impacting ASX 200 shares?
• Square slides 5%. What does this mean for the Afterpay (ASX:APT) share price?
• 2 hot ASX growth shares that this income fund manager favours
• 5 things to watch on the ASX 200 on Wednesday
• Why CSL, Domino’s, Temple & Webster, & Xero shares are tumbling

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Alphabet (A shares), Alphabet (C shares), Altium, Apple, Facebook, Microsoft, Tyro Payments, WiseTech Global, Xero, and ZIPCOLTD FPO. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO, Altium, WiseTech Global, and Xero. The Motley Fool Australia has recommended Alphabet (A shares), Alphabet (C shares), Apple, Facebook, Tyro Payments, and carsales.com Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Polynovo Ltd (ASX: PNV) share price has not had a good time of it recently.

In the past 3 weeks, shares in the medical device company have tumbled more than 15%.  

Let’s take a look at why investors have been dumping Polynovo shares.

What’s weighing down the Polynovo share price?

The Polynovo share price has had a shocking year thus far.

The pain has continued for shareholders in the last 3 weeks as shares in the biotech continue their slide.

Despite the bearish price action, Polynovo has been scarce with price-sensitive news.

Most recently, the company made headlines after announcing the commencement of its Biomedical Advanced Research and Development Authority (BARDA) funded burn study in the United States.

Shares in Polynovo were given a brief reprieve as the company pursued FDA approval for its NovoSorb BTM product.

In addition, the resignation of the company’s chief operating officer, Dr Anthony Kaye, has also weighed on its shares.

However, much of the bearish sentiment towards the Polynovo share price can be traced back to its full-year report.

How did Polynovo perform in FY21?

Shares in Polynovo tanked late last month, despite releasing fairly robust results for FY21.

The biotech’s report was highlighted by a 32% increase in total revenue of $29.3 million.

Other highlights from Poynovo’s full-year report included:

• Distributor sales grew by 53% over the year
• Gross margin increased by 3% from “manufacturing efficiency gains”
• Corporate and overhead expenses increased by 10% as the business expanded
• Net profit after tax of $260,000 when adding back in non-cash items
• Achieved breakeven in FY21

Polynovo flagged strong results in FY22 in all of its markets, including the United States, Europe, United Kingdom, Middle East, Asia, Australia, and New Zealand.

However, investors did not seem impressed with the report, inflicting more selling pressure on the Polynovo share price.

Snapshot of the Polynovo share price

The Polynovo share price jumped off a cliff to start the year.

Shares in the Aussie biotech fell hard and fast in the early months of 2021 following a dour first-half report.

As a result, Polynovo shares have more than halved since the start of the year.

At the time of writing, shares in the biotech have continued their fall, trading more tan 2% lower for the day.  

The post Why has the Polynovo (ASX:PNV) share price tanked 15% in 3 weeks? appeared first on The Motley Fool Australia.

More reading

• Why the Polynovo (ASX:PNV) share price is edging higher today
• Why the Polynovo (ASX:PNV) share price is sitting at a 52-week low
• The Polynovo (ASX:PNV) share price has halved this year. What’s going on?
• These were the worst performing ASX 200 (ASX:XJO) shares last week
• Why Cleanaway, IRESS, Omni Bridgeway, & Polynovo shares are dropping

Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended POLYNOVO FPO. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The S&P/ASX 200 Index (ASX: XJO) has slipped into the red in early trade on Wednesday, dropping 1.38% to 7,172.5 points.

Shares in rare earths’ producer Australian Strategic Materials (Hldngs) Ltd (ASX: ASM) are following the Index down, trading in the red this week and dropping another 1.12% this morning to $9.73.

In fact, the Australian Strategic Materials share price has dipped from a high of $13.66 on 26 August and is down 16% this month alone.

Here’s what appears to be behind these moves.

Why are Australian Strategic Materials’ shares trending down lately?

Even though Australian Strategic Materials’ share ticker was added to the S&P/ASX 300 Index (ASX: XKO) on 3 September, it hasn’t been enough to spur a lift in the company’s share price to date.

The company also released its FY21 statutory accounts last week where it outlined progress for the year, including several investment partnerships.

Investors didn’t appear too impressed given the company’s share price has failed to head back towards its previous highs.

Instead, investors have continued to sell ASM shares in droves. This has coincided with a cooling off in the price of Neodymium, a rare earth that the company has exposure to.

After a strong gain this year in the commodities markets, the price of Neodymium has climbed 26% this year to date.

However, this growth level has wound back in the last month or so and the rare earth has only edged higher by roughly 1.5% since August.

Zooming out, it appears there is weakness across the broader rare earths sector as well.

To assess the growth of shares in an industry, indexes and exchange traded funds (ETFs) serve as good proxies to do so.

The MVIS Global Rare Earth/Strategic Metals Index, which tracks the performance of the most important players in the global rare earths industry, is tracking down over the last month.

It has decreased in value by almost 5% since the start of September.

Also, the VanEck Rare Earth/Strategic Metals ETF (NYSEARCA: REMX) – another good proxy – has fallen 10% into the red this past month.

Hence, it appears that Australian Strategic Materials’ shares are falling in line with the broad sector, propelled by volatility in the underlying rare earths markets.

Australian Strategic Materials share price snapshot

On a longer term basis, the Australian Strategic Minerals share price has posted outsized returns this year to date.

It’s climbed 54% since January 1, extending its gain over the past 12 months to 363%.

These results are well ahead of the broad Index’s return of around 25% over the last year.

The post Why is the Australian Strategic Materials (ASX:ASM) share price down 16% this month? appeared first on The Motley Fool Australia.

More reading

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• Which ASX shares are looking to finish the week as the top movers on the ASX 300 today?
• Which ASX shares are leading the way on the ASX 300?
• Which ASX 300 shares are the biggest winners and losers today?
• The Australian Strategic Materials (ASX:ASM) share price is sliding 7% on Monday

The author Zach Bristow has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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It was a painful time for the S&P 500 (INDEXSP: .INX) overnight. The S&P 500 dropped by 2.04% to 4,353 points. That’s one of the worst drops since the onset of the COVID-19 global pandemic.

For readers that don’t know, the S&P 500 is a list of 500 of the biggest and most profitable businesses in the US (and the world).

There are many names in the index that readers have probably heard of like Apple, Microsoft, Amazon.com, Alphabet (Google), Facebook, Tesla, Nvidia, Berkshire Hathaway, JPMorgan Chase, Johnson & Johnson, Visa, Procter & Gamble, Walt Disney, PayPal, Mastercard, Adobe, Salesforce, Netflix, Pfizer and so on.

Not only does the S&P 500 generate earnings from across the globe, but the US share market is also very influential on the rest of the capital markets around the world. As the biggest stock market, the US market can give signals that global investors watch and take actions on.

ASX shares also have a habit of moving upwards or downwards when the S&P 500 also has a very positive or negative day.

Looking at some of the biggest businesses in the US, the Apple share price fell 2.4%, the Microsoft share price dropped 3.6%, the Amazon.com share price went down, the Amazon.com share price declined 2.6%, the Alphabet share price sank 3.7%.

Many ASX shares have opened in negative territory this morning.

Why did the S&P 500 drop so much?

Only investors selling would be able to answer why they are willing to accept prices materially lower than yesterday.

One of the main changes overnight was that the US Treasury bond yields increased. The 30-year treasury bond yield jumped around 10 basis points, whilst oil prices also dropped. Interest rates can have an impact on asset valuations.

But, reporting by Bloomberg also pointed to some ongoing political drama in the US that could have been a catalyst for the drop. The media outlet reported:

During a Senate hearing, Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen both warned that a US default due to a failure to raise the debt ceiling would have catastrophic consequences. Republicans blocked a Democratic move in the Senate to raise the debt limit.

Heated remarks from Senator Elizabeth Warren also weighed on markets. After slamming Powell on his track record over financial regulation, Warren said he’s a “dangerous man to head up the Fed” and that’s why she’ll oppose his re-nomination.

What have ASX shares done in early trading?

Looking at some of the biggest businesses on the ASX, there are also some material declines in the S&P/ASX 200 Index (ASX: XJO), following on from the S&P 500. The ASX 200 as a whole is down 1.4%.

The Commonwealth Bank of Australia (ASX: CBA) share price has fallen 0.8%, the BHP Group Ltd (ASX: BHP) share price has dropped 2.5%, the Afterpay Ltd (ASX: APT) share price has declined 3.7%, the Zip Co Ltd (ASX: Z1P) share price is down 4.5% and the Xero Limited (ASX: XRO) share price has fallen 2.5%.

The post The S&P 500 just dropped 2%. Why is this impacting ASX shares? appeared first on The Motley Fool Australia.

More reading

• How China’s energy crisis could be good for BHP (ASX:BHP) and Rio Tinto (ASX:RIO)
• Square slides 5%. What does this mean for the Afterpay (ASX:APT) share price?
• 2 beaten-up ASX shares that could be buys in October 2021
• 5 things to watch on the ASX 200 on Wednesday
• Here are the top 10 ASX shares today

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Xero, and ZIPCOLTD FPO. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO and Xero. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Fenix Resources Ltd (ASX: FEX) share price is struggling through September despite only good news being released by the company.

Fenix released its annual results and news of its maiden dividend on 15 September. At the time, its maiden dividend saw the iron ore producer with a massive 16.6% dividend yield.

However, that same notable dividend might have been the downfall of the Fenix share price. It fell 23% on its ex-dividend date.

At the time of writing, the Fenix share price has recovered slightly. It is currently trading at 23 cents, 20.69% lower than at the end of August.

Let’s take a closer look at the news that’s been driving the mineral explorer’s stock lately.

The month so far for Fenix

The Fenix share price is battling through a tough month despite posting a massive 16.6% dividend yield.

Fenix announced its profits and dividend for financial year 2021 last fortnight.

Over the 12 months ended 30 June 2021, the company sold 501,000 wet metric tonne of iron ore from its flagship Iron Ridge iron ore project. Production at the project began in December 2020, and its first sales occurred in February 2021.

As a result, Fenix boasted a $49 million net profit after tax for financial year 2021. Of its $49 million of profits, Fenix committed to paying out $24.8 million to its shareholders.

That represents a maiden dividend payment of 5.25 cents per share.

The Fenix share price gained 13% on the back of its annual results. Unfortunately, it fell 23% when the company surpassed its ex-dividend date on 20 September.

The company’s dividend will be paid out to shareholders on 5 October.

Fenix share price snapshot

This month’s drop has put Fenix’s stock into the red on the ASX.

Right now, it is 4% lower than it was at the start of 2021. However, it’s still 64% higher than it was this time last year.

The post Why has the Fenix Resources (ASX:FEX) share price crashed 20% this month? appeared first on The Motley Fool Australia.

More reading

• Why is the Fenix (ASX:FEX) share price surging 10% on Thursday?
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• Fenix Resources (ASX:FEX) share price eyes 16% maiden dividend
• Worried about iron ore prices? This ASX share has prices locked in at A$230/tonne

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned.

The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Telstra Corporation Ltd (ASX: TLS) share price is edging lower on Wednesday amid a broad market selloff.

At the time of writing, the telco giant’s shares are down 0.5% to $3.91.

This is actually better than the market as a whole, which may be due to the release of a shareholder presentation today.

What did Telstra release?

This morning Telstra is holding its retail shareholder event and has released its accompanying presentation.

The telco giant used the presentation to reiterate its T25 plans, which include bold growth targets in the coming years.

For example, the company is aiming to grow its underlying earnings before interest, tax, depreciation and amortisation (EBITDA) by a mid-single digit compound annual growth rate (CAGR) between FY 2021 and FY 2025.

Things are even better for its underlying earnings per share, with management targeting a high-teens CAGR for the same period.

Another focus for Telstra will be its dividend. Management advised that it intends to maximise its full franked dividend and seek growth over time.

Some of this growth will be underpinned by management’s cost cutting plans. It is seeking to remove a further $500 million of fixed costs from FY 2023 to FY 2025. Though, it stresses that this won’t be at the expense of investments in growth.

Is the Telstra share price in the buy zone?

One leading broker that sees a lot of value in the Telstra share price is Goldman Sachs.

A recent note out of the investment bank reveals that its analysts have a buy rating and $4.40 price target on its shares.

Based on the current Telstra share price, this implies potential upside of 12.5% or 16.5% if you include the forecast fully franked 16 cents per share dividend.

Goldman was pleased with Telstra’s T25 plans. It is expecting the plans to underpin solid earnings and dividend growth in the future.

The post Telstra (ASX:TLS) share price lower despite retail shareholder update appeared first on The Motley Fool Australia.

More reading

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• How does the Telstra (ASX:TLS) dividend compare to ASX 200 shares?
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• Telstra (ASX:TLS) share price higher on Vita (ASX:VTG) deal

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Telstra Corporation Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Vulcan Energy Resources Ltd (ASX: VUL) share price is falling on Wednesday morning.

At the time of writing, the clean lithium developer’s shares are down 1% to $12.81.

Why is the Vulcan share price falling?

The Vulcan share price is trading lower today after a broad market selloff offset the release of a positive announcement.

That announcement reveals that Vulcan has secured a site for the planned Central Lithium Plant (CLP) of its Zero Carbon Lithium Project.

According to the release, the company has signed an agreement with chemical park management company, Infraserv, for a site located in the Industriepark Hochst just outside of Frankfurt in Germany.

The release notes that Hochst is one of the largest chemical sites in Europe and is home to 90 companies. These include Celanese, Clariant, Nobian, and Sanofi.

What is the CLP?

Vulcan’s CLP will be used as a processing hub. From this site the company will process lithium chloride from multiple combined geothermal and lithium sorption plants into lithium hydroxide monohydrate.

This lithium hydroxide monohydrate will then be transported to Vulcan’s European customers in the battery and electric vehicle industry. It believes this will dramatically lower the transport footprint of the current lithium supply chain.

The company will now work on obtaining the necessary permits in the chemical park to make the construction of the CLP a reality.

Vulcan’s Managing Director, Dr. Francis Wedin, commented: “Securing a site for the Central Lithium Plant is an important step toward the execution of the Zero Carbon Lithium Project. Importantly, the location allows for low carbon transport options from our nearby project areas, as well as renewable energy to power the proposed plant, which underpins our commitment to minimising our carbon footprint in each step of our process. This follows on from the first production of battery quality lithium hydroxide from our pilot plant, announced on 27th September.”

The post Vulcan (ASX:VUL) share price falls despite positive lithium plant update appeared first on The Motley Fool Australia.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The iron ore price found its feet recently and BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) shareholders may have China’s energy crisis to thank for this.

In case you forgot, the price of the steel making mineral plunged by more than half.

The commodity hit a record high over US$200 a tonne in May 2021 before bouncing last week. It’s currently trading at around US$100/t.

Power blackouts a boon for BHP and Rio Tinto

It’s not easy to nail down what prompted bargain hunters to jump in to support the price. But Macquarie Group Ltd (ASX: MQG) suspects its mainly to do with the rolling power blackouts that’s gripping parts of China.

The Chinese government is ordering industries and households to ration the use of electricity. This has impacted on electric arc furnace (EAF) operators more than traditional steel mills.

“Macquarie Commodity Strategy Team believes lower EAF operation could also be behind the iron ore price rebound late last week,” said Macquarie.

“As current production curtailment has shifted from emission reduction driven to power supply shortage driven, EAF mills have seen a clear drop in their operating rate over past two weeks, helping demand for integrated mills that use iron ore.”

Iron ore price stabilises at expense of EAF operators

EAF is a greener way of producing steel but it requires more power. The process uses scrap steel and direct reduced iron as raw material.

As output from EAF facilities are cut due to China’s electricity shortage, iron ore hungry steel mills are having to step up.

BHP and Rio Tinto share prices getting lift from China’s misstep

If so, this is a double-own-goal by the Chinese government and the irony shouldn’t be lost on ASX investors.

The crash in the iron ore price was in no small part triggered by the Communist Party’s policy decisions.

Officially, it wanted to drastically cut pollution ahead of the Winter Olympics and ordering steel mills to curtain production was an easy way to achieve this.

Unofficially, they seething that Australia was benefiting from record iron ore prices.

Market manipulation malfunction

But what significantly contributed to China’s power crisis was its decision to ban Australian coal imports.

Its aging infrastructure combined with a shortage of coal in that country have been blamed for China’s current predicament.

China’s addiction hard to break

To rub salt to the Chinese wound, iron ore exports from ASX iron ore producers, including Fortescue Metals Group Limited (ASX: FMG), have increased lately.

“The combined shipping rate for RIO, BHP and FMG in September to date has increased above the 800mtpa mark, at 847mtpa,” added Macquarie.

“By contrast, Vale shipments slowed by 12% to 6.2mt.”

Despite strong political will, China and Australia may not be able to sever economic ties as easily as they would like.

The post How China’s energy crisis could be good for BHP (ASX:BHP) and Rio Tinto (ASX:RIO) appeared first on The Motley Fool Australia.

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• 2 beaten-up ASX shares that could be buys in October 2021
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• Why the Fortescue (ASX:FMG) share price is down 5% today
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• Can Fortescue (ASX:FMG) shares deliver long-term passive income?

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Fortescue Metals Group Limited, and Rio Tinto Ltd. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Regional Express Holdings Ltd (ASX: REX) share price is having a great week despite the company’s planned take off being pushed back again.  

The regional-focused Australian airline announced it had delayed its planned restart to flying for the second time on Monday. The delays are due to COVID-19 infections and lockdowns in Victoria and New South Wales, and REX’s need for “lead time” ahead of scheduled flights so as to sell tickets.

While the only recent news the market has heard from REX isn’t exactly positive, the company’s share price has been gaining.

At the time of writing, the REX share price is $1.49, 6.43% higher than it was at Friday’s close.

Let’s take a closer look at the news that might be boosting the airline’s share price this week.

The REX share price is soaring this week

The REX share price is taking off this week despite its fleet staying grounded.

REX announced that the suspension of its domestic services and reduction of regional services will continue until 31 October.

The airline’s planned resumption coincides with when it expects its front-facing staff to be fully vaccinated against COVID-19.  

While this week’s news from REX seems unfortunate, the company’s share price is soaring.

And it’s not alone in its gains. Shares in Flight Centre Travel Group Ltd (ASX: FLT), Webjet Limited (ASX: WEB), and Qantas Airways Limited (ASX: QAN) have also been gaining this week.

The travel sector’s boost might be due to good news from the federal, New South Wales, and Victorian governments.

Over the weekend, Prime Minister Scott Morrison told Channel 7 there’s no reason states shouldn’t open their borders once 80% of the country’s population is fully vaccinated.

As of yesterday evening, 76.7% of Australians have had one COVID-19 jab and 52.6% are fully vaccinated.

Additionally, vaccinated people in New South Wales and parts of Victoria are set to exit lockdown on 11 October. Travel between the 2 states is expected to restart on 5 November.

All the good news might have boosted the REX share price and that of its peers.  However, it hasn’t been enough to get the regional airline’s shares back into the green.

REX’s stock has fallen 28% year to date. Though, it is 17% higher than it was this time last year.

The post Why has the REX (ASX:REX) share price gained 6% so far this week? appeared first on The Motley Fool Australia.

More reading

• Regional Express (ASX:REX) share price takes flight despite extended stand-downs
• Regional Express (ASX:REX) extends suspension of services and stand downs
• Regional Express (ASX:REX) share price up on 33% net loss after tax improvement

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Webjet Ltd. The Motley Fool Australia has recommended Flight Centre Travel Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Afterpay Ltd (ASX: APT) share price is sliding in Wednesday’s premarket, indicating further losses in September with just three days left of the month.

Afterpay shares have closely tracked the performance of Square Inc (NASDAQ: SQ) after the US payments company came forth with a $39 billion takeover offer.

The US market tumbled on Tuesday night as rising bond yields pushed investors out of popular tech shares. The Nasdaq Composite logged steep losses, down 2.83% to a 1-month low.

Square falters overnight

The Square share price couldn’t escape the rout in the technology sector, sliding 5.97% to a 2-month low of US$242.70.

When Square made its offer to acquire Afterpay on 2 August, its shares jumped 10.16% from US$242.84 to US$272.38 on the day.

Square is now trading at its lowest levels since its takeover offer.

In addition, the largest US-listed BNPL player, Affirm Holdings Inc (NASDAQ: AFRM) fell sharply, down 10.79% to US$144.52.

The heavy-tech based selling across US tech and payments peers paints a grim picture for how the ASX tech sector might perform on Wednesday.

What does this mean for the Afterpay share price?

Under the terms of Square’s takeover, Afterpay shareholders will receive a fixed exchange ratio of 0.375 Square shares for each Afterpay share they hold on the record date.

After last night’s selloff, the fixed exchange ratio of 0.375 represents around US$91.01 worth of Square stock.

Converting this figure back into Australian dollars at the current exchange rate would, theoretically, value the Afterpay share price at $125.99.

It’s worth mentioning that the Afterpay share price has typically traded at a discount to the theoretical value.

For example, the Square share price hit all-time highs of US$289.23 on 5 August. This implies a theoretical value of $149.70 for Afterpay.

However, the Afterpay share price has only rallied as high as $135.70 since the takeover offer.

The post Square slides 5%. What does this mean for the Afterpay (ASX:APT) share price? appeared first on The Motley Fool Australia.

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• 5 things to watch on the ASX 200 on Wednesday
• Why is the Afterpay (ASX:APT) share price falling today?
• What’s moving the Afterpay (ASX:APT) share price since the Square news?
• These ASX shares are surging on the back of key Aussie lifestyle trends
• ASX tech shares are leading the market’s gains on Thursday

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended AFTERPAY T FPO, Affirm Holdings, Inc., and Square. The Motley Fool Australia owns shares of and has recommended AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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