Weekly Digest (Jan 10-14): Updates from Take-Two, TSMC, Virgin Galactic, and US Market Indices

How did the shares of Take-Two Interactive Software and Zynga react to the news about their merger? What happened to US stock indices after the US Fed published the PPI and inflation data for December 2021? Why did TSMC shares grow while Virgin Galactic shares dropped? Here are the results of the week.

Take-Take-Two Interactive is buying Zynga

On Monday, 10 January 2022, Take-Two Interactive Software, the developer of popular video games like Grand Theft Auto and Civilization, announced its intent to acquire mobile game developer Zynga for $12.7 billion.

The two representatives of the gaming sector are planning to close the deal this summer. Take-Two Interactive Software is confident that the purchase of Zynga will help secure its position in the market, and stay ahead of rivals like Electronic Arts and Activision Blizzard.

How did Take-Two Interactive Software and Zynga stock react to the news?

On the very day of the purchase announcement, the share price of Take-Two Interactive Software Inc. (NASDAQ: TTWO) dropped 13.13% to $142.99. It seems that the news that the company was planning to buy all Zynga shares in circulation, paying 64% over the Friday price, disappointed investors.

On the other hand, on the same day, Zynga Inc. (NASDAQ: ZNGA) shares skyrocketed 40.67% from $6 to $8.44. They kept climbing on Tuesday and Wednesday.

The impact of the head of the Fed’s speech on US stock indices

On Tuesday, 11 January 2022, Jerome Powell, Chairman of the US Federal Reserve System, delivered a speech to the Senate Banking Committee.

Powell stated that the speed of the economic recovery was satisfactory, yet he warned that the rising inflation could slow down the process. Moreover, the head of the Fed stated that the economy of the country was ready for a tighter credit and monetary policy.

After the speech, the NASDAQ Composite (NAS100) closed the trading session 1.41% higher, the S&P 500 (US500) gained 0.92%, and the Dow Jones Industrial Average (US30) increased 0.51%.

US inflation rate and PPI in December 2021

On Wednesday, 12 January 2022, the US Ministry of Labor announced that in December 2021, the country's inflation rate jumped 7% compared to the statistics of December 2020. This is the highest inflation level reached in the US since 1982.

The Producer Price Index (PPI) for December 2021 was published on Thursday, 13 January 2022. The release showed the PPI had increased 9.7% compared to the statistics of December 2020. Analysts had predicted a growth rate of 9.8%.

How did US stock indices react?

After seeing a minor growth as a result of the published inflation data, US stock indices noticeably dropped following the PPI release.

On 13 January 2022, the NASDAQ Composite closed the trading session with a 2.51% decline, the S&P 500 dropped 1.42%, and the Dow Jones Industrial Average fell 0.48%.

TSMC Q4 2021 results: 24% revenue growth

On Thursday, 13 January 2022, one of the world's largest manufacturers of chips — TSMC — reported its Q4 2021 financial results. Thanks to the high demand for semiconductors, the revenue of the company had reached its all-time high.

The shares of Taiwan Semiconductor Manufacturing Company (NYSE: TSM) saw a 5.26% rise to $139.19 after the report was published. The shares jumped, rallying for four sessions in a row to a total of 12.7%.

Important report details

• Revenue – $15.74 billion, +24.1%
• EPS – $0.23, +16.4%
• Net profit – $6.01 billion +16.4%

Virgin Galactic to issue convertible bonds

On 13 January 2022, Virgin Galactic announced on its website that it would be placing $425 million of convertible bonds that mature in 2027 in a private offering.

The money will be allocated for financing the working capital and expanding the spaceship park. The information had a negative impact on the shares of Virgin Galactic Holdings Inc. (NYSE: SPCE), sending them down 18.92% to $10.03 as result.

Summing up

Take-Two Interactive is buying Zynga at an inflated price. Take-Two's stock dropped 13%, while Zynga's shares surged 40%.

Jerome Powell's speech of 11 January 2022 was a growth trigger for US stock indices. However, two days after, the publishing of the inflation data and PPI release dragged US stock indices down.

Chip manufacturer TSMC reported its Q4 2021 financial performance. The shares of the company went up 5% thanks to the positive results.

Virgin Galactic announced that it planned to issue convertible bonds. The shares of the company dropped 19% following this news.