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Why Tesla,, and Edge Therapeutics Slumped Today

By Steve Symington - Mar 28, 2018 at 4:47PM

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On a down day for the market, these stocks suffered more than most. Here's why.

Major benchmarks extended yesterday's losses in another volatile session on Wednesday as tech stocks continued to weigh on the overall market. The Nasdaq Composite led the market lower by falling 0.9%, while the S&P 500 and Dow Jones Industrial Average both edged just barely into negative territory.

But some individual names fared significantly worse than most. Read on to learn why Tesla ( TSLA -4.35% ), ( AMZN -1.81% ), and Edge Therapeutics (NASDAQ: EDGE) were among the market's biggest losers today.

Tesla's new liquidity woes

Shares of Tesla fell 7.7% after ratings agency Moody's downgraded the electric-vehicle specialist's overall credit rating from B2 to B3 -- now six levels below investment grade -- and changed its outlook on the company from "stable" to "negative." Moody's also reduced its rating on Tesla's $1.8 billion in senior notes to Caa1 from B3.

The news extends an 8.2% drop by Tesla shares on Tuesday, after the U.S. National Transportation Safety Board announced it is investigating a fatal accident involving a Tesla vehicle in Mountain View, California, last week. It's still unclear, however, whether Tesla's autopilot feature was engaged at the time of that accident.

"Tesla's ratings reflect the significant shortfall in the production rate of the company's Model 3 electric vehicle," Moody's elaborated. "The company also faces liquidity pressures due to its large negative free cash flow and the pending maturities."

Tesla has repeatedly fallen short of its own Model 3 production targets, and the company is due to release its next update to that end in the coming week. But given Moody's relative lack of confidence in its future, it's no surprise to see Tesla shares falling in the meantime.

Stock market prices and charts overlaying a digital display

Image source: Getty Images.

Amazon in Trump's crosshairs

Amazon stock fell as much as 7.4% early in the session, then partially recovered to close down 4.4% following news that President Trump is weighing legal action to rein in the e-commerce titan's dominance.

According to an Axios report this morning, sources say Trump is "[o]bsessed" with Amazon and the challenges it poses for traditional retailers. Axios' sources further state that Trump believes Amazon is receiving a "free ride from taxpayers and cushy treatment from the U.S. Postal Service," despite being informed "in multiple meetings that his perception is inaccurate and that the post office actually makes a ton of money from Amazon."

As such, Trump is reviewing options for changing Amazon's tax treatment, as well as the potential for curtailing its influence through antitrust or competition law.

Trump has made no secret of his questionable views on Amazon as a tax-advantaged killer of brick-and-mortar retail. But the Axios report offers a reminder that his disdain for the company is alive and well.

Living on the Edge

Finally, shares of Edge Therapeutics plummeted 91.6% -- and no, that's not a typo -- after the biopharma company announced it will discontinue a late-stage trial for its lead drug candidate, EG-1962.

EG-1962 showed early promise in phase 1 and 2 trials for drastically reducing side effects in the treatment of adults with aneurysmal subarachnoid hemorrhage (aSAH), or bleeding around the brain caused by a ruptured brain aneurysm. According to a press release from Edge Therapeutics today, however, an independent Data Monitoring Committee has recommended that EG-1962's phase 3 Newton 2 study be stopped after the treatment "demonstrated a low probability of achieving a statistically significant difference compared to the standard of care."

Edge Therapeutics plans to reduce its scope of operations -- including the size of its workforce -- to preserve the remaining $88.1 million in cash on its balance sheet as of the end of 2017. With its other drug candidates still in their earliest stages, Edge Therapeutics investors understandably made for the exits.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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