Before the Bell: Disney Ditches the Metaverse, Buffet Can't Get Enough of Oxy, Alibaba to Split Up

Premarket action on Tuesday had the three major U.S. indexes trading lower. The Dow Jones industrials were down 0.02%, the S&P 500 down 0.09% and the Nasdaq 0.16% lower.

Eight of 11 market sectors closed higher on Monday. Energy (2.1%) and financials (1.4%) added the most. Communications services (−1.08%) and technology (−0.85%) posted the day’s largest losses. The Dow closed up 0.60%, the S&P 500 up 0.16% and the Nasdaq down 0.47%.

Two-year Treasuries rose 18 basis points to end Monday at 3.94%, and 10-year notes rose 15 basis points to close at 3.53%. In Tuesday’s premarket, two-year notes were trading at around 3.99% and 10-year notes at about 3.55%.

Monday’s trading volume was below the five-day average. New York Stock Exchange winners outpaced losers by 2,235 to 787, while Nasdaq advancers led decliners by about 6 to 2.

Earlier this year, Meta Platforms Inc. (NASDAQ: META) CEO Mark Zuckerberg said that 2023 would be the company’s year of efficiency. Not only have 22,000 layoffs been announced since last November, Zuckerberg also has pared spending on the metaverse. Recently reappointed CEO of the Walt Disney Co. (NYSE: DIS), Bob Iger, has taken the pages from Zuckerberg’s playbook and announced that 7,000 employees would lose their jobs, including the group working on Disney’s metaversical strategies.

The Wall Street Journal reported late Monday that 50 or so staff members of Disney’s metaverse program have lost their jobs. The group was put together just over a year ago by former CEO Bob Chapek to create “an entirely new paradigm for how audiences experience and engage with our stories.” But the metaverse is so yesterday. And Disney probably will not start working on an AI chatbot for a while yet, what with the new focus on efficiency.

Disney’s planned job cuts will cut $5.5 billion from the company’s spending. Its stock is down more than 30% for the past 12 months, and the company last paid a dividend in December of 2019. At least Iger avoided a proxy fight with activist investor Nelson Peltz. The price appears to have been 7,000 jobs and the elimination of any ideas that might make the company a growth machine again. This is all pretty standard stuff. Iger needs to do better.

Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK-B) has acquired another 3.7 million shares of common stock in Occidental Petroleum Corp. (NYSE: OXY), bringing his total investment in the company to nearly 212 million shares, enough for a 23.5% stake. Buffett reported paying a weighted average price of between $57.71 and $59.60 per share for four purchases made on March 23 and March 27.

Buffett also owns 100,000 preferred shares that he acquired when he supplied $10 billion in cash to support Oxy’s 2019 $38 billion bid for rival Anadarko. The preferred shares pay an 8% annual coupon. That $10 billion also bought Buffett 80 million warrants at an exercise price of $62.50 per share. About a year later, the number of warrants was increased to about 83.9 million, and the exercise price lowered to $59.624 per share.

Since closing the deal in early August 2019, Oxy’s stock has added about 44% to its share price, after diving nearly 80% in late 2019. Like many other oil producers, Oxy’s share price tracks the price of crude oil.

One more news item of note: China’s e-commerce giant, Alibaba Group Holding Ltd. (NYSE: BABA), announced plans Tuesday to split itself into six units. The units include a cloud computing and intelligence group; a global digital commerce arm; an entertainment and digital media unit; its Taobab and Tmall businesses; the logistics unit; and a local services business.

Alibaba noted that the companies will be on their own to raise funds, including through initial public offerings.

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