What Investors Missed in the Market Last Week

By Markets Fool.com


Image source: Getty Images.

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Despite the reoccurring title of this article that I so fondly write every Friday -- because you surely haven't missed the "Brexit" -- I would be remiss if I didn't speak about the situation that has sent global markets into a small sell-off. While a 611-point drop in the Dow Jones Industrial Average or a 3.6% drop in the S&P 500 wasn't desirable for investors on Friday, we have to keep in mind that we're still hovering near historic highs. This isn't a crisis.

With that said, there were some swings to take note of. The Stoxx Europe 600 dropped 7%, which was its worst trading session since October 2008, amid the Lehman Brothers bankruptcy. Oil futures also dropped more than 5% after slowly moving higher in past weeks. On the flip side, gold futures surged to about $1,320 during Friday trading and closed at their highest level in almost two years.

Ultimately, this will all work out just fine. Aside from the "Brexit" story, here are three stocks making moves this week.

A good reminder

Thursday was an interesting day for shareholders of Planet Fitness Inc. , which surged 12% after details came out that 10 million Class A shares will be sold for $16.50 apiece. This isn't a typical secondary offering, and there won't be significant dilution when these 10 million shares hit the market. That's because the shares are being sold by TSG Consumer Partners, a private-equity firm that has a controlling interest in Planet Fitness.

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This serves as a good reminder that not all share selling is a bad thing, as investors can sell for many reasons that don't spell doom and gloom. First, it should be noted that nothing materially changes in the sense that even after selling the shares, the private-equity firm will still own more than half of the total Class A and Class B shares. Second, it's not unusual to take some profit from successful investments, especially for early investors such as private-equity or venture-capital firms.

Ultimately, the stock price volatility is partly due to the company's sub-$1 billion market cap, which can be influenced by sizable moves and/or newsworthy events. However, this development shouldn't change your investor thesis. As long as you still believe in what made this company successful enough for TSG Consumer Partners to make a lot of money, the company should still continue on the right path.

Energy empire

Before the "Brexit" vote really took hold of the market's attention and headlines worldwide, easily one of the most intriguing storylines was that of Tesla Motors' offer to purchase SolarCity in an all-stock deal.

Tesla's Model X. Image source: Tesla Motors.

The opinions on the seemingly random deal were about as wide-ranging as you could imagine -- anything from "Tesla CEO Elon Musk is bailing out his cousins" to "This was obvious since the day Tesla rolled out its Powerwall."

If you're having difficulties grasping why a maker of electric vehicles would consider buying a solar company, you aren't alone. However, Musk is an ambitious man, and for someone who has aspirations of reaching Mars, selling solar-energy products and services, along with electric cars, in Tesla stores doesn't seem too wild of an idea.

As an investor of automakers myself, and a fan of Tesla in its attempt to disrupt the automotive industry, I think this potential deal could simply complicate things. Tesla has a record of over-promising product launches and time schedules and under-delivering. SolarCity isn't going to help Tesla produce better cars, and it won't help Tesla do it faster. Tesla's Model 3 could be a game-changer, so it's fair to ask, "Can't we just focus on that?"

However, you can't argue that SolarCity is trading at an attractive price, and if Tesla can somehow persuade shareholders to approve this deal, folding the company in while not getting distracted from its Model 3 launch, it could be the beginning of the next great energy empire. Stay tuned.

IPO glory

Also making a splash this week was Twilio Inc. , which had one heck of a Thursday following its initial public offering. The cloud-communications platform company hit the markets with 10 million shares of Class A common stock at a price of $15 -- which was above its proposed $12 to $14 mark. That range proved to be wildly cautious after the company's first day of trading, which sent the stock price soaring 92% to $28.79 as of Thursday's close.

Similar to many young companies, Twilio is growing at a rapid pace, with 2015 revenue climbing 88% compared with the prior year, to $166.9 million. Also similar to other young companies, Twilio isn't yet profitable, and despite rapidly growing revenue, it posted a net loss of $35.5 million last year.

While young tech companies come with major risk, especially so new to the public market, there's no questioning that the winners win big think Facebook, Amazon.com, and Google. Ultimately, it was nice to see an IPO met with such optimism, despite the "Brexit" fears that hit afterwards, in a week that ended on such a sour note for global investors.

The article What Investors Missed in the Market Last Week originally appeared on Fool.com.

Daniel Miller has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com, Facebook, SolarCity, and Tesla Motors. The Motley Fool recommends Planet Fitness. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.