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Over $400 billion has been erased from the value of Europe’s tech industry this year

Source image: https://www.cnbc.com/2022/12/07/400-billion-erased-from-european-tech-market-in-2022-atomico-says.html

The Klarna logo displayed on a smartphone.

Rafael Henrique | SOPA Images | LightRocket via Getty Images

Europe’s tech industry has lost more than $400 billion in value this year, according to venture capital firm Atomico.

The combined value of all public and private European tech firms has fallen to $2.7 trillion from a peak of $3.1 trillion in late 2021, Atomico said in its annual “State of European Tech” report Wednesday.

The figures underscore what has been a rough year for tech. Once richly-valued technology companies have seen their shares come under pressure from global factors, including Russia’s invasion of Ukraine and tighter monetary policy.

The Federal Reserve and other central banks are raising rates and reversing pandemic-era stimulus to stave off soaring inflation. That’s prompted investors to reassess their positions on lossmaking tech companies, whose values typically rest on the expectation of future cash flows.

“It’s been a tough year — war in Ukraine, inflation, interest rate hikes, geopolitical tensions all across the continent,” Tom Wehmeier, a partner at Atomico, told CNBC. “It’s the most challenging macroeconomic environment since the global financial crisis.”

In Europe, some companies have seen precipitous drops in their market values. Klarna, the Swedish buy now, pay later group, slashed its valuation by 85% from $45.6 billion to $6.7 billion in a so-called “down round.” Shares of music streaming service Spotify, meanwhile, have fallen over 60% in the past year.

Overall venture capital funding of European startups is expected to drop to $85 billion this year, according to the Atomico report, which is based on quantitative data and surveys in 41 countries. That is down 18% from the more than $100 billion European startups raised in 2021.

It was nevertheless the second-highest amount ever invested in the European tech ecosystem to date, Atomico said. European tech investment shattered records last year as participation from U.S. investors surged to new heights.

There's 'a lot of upside' for tech, investment firm says

This year saw a reversal of that trend, with foreign investors largely retreating. The number of active U.S. investors in “mega rounds” of $100 million or more dropped 22% from last year.

“It’s a less liquid funding environment now,” Wehmeier said. “We’ve gone from a period in 2021 when capital was abundant, when it was cheap, to one where it is harder to raise capital and one in which the cost of capital has increased.”

Slowdown began in second half

In the first half of 2022, Europe’s tech sector was on fire, with investment levels still 4% higher than at the same point in 2021, Atomico said.

However, investment began slowing from July and decelerated further through August and September. Since then, monthly investment levels have averaged around $3 billion to $5 billion, in line with 2018 levels.

The rate of unicorn creation also slowed, with the number of new $1 billion-plus unicorns minted in 2022 falling to 31 from 105 last year.

Meanwhile, public market listings have virtually evaporated. Just three tech IPOs with a market cap of $1 billion or more took place globally in 2022, with two happening in Europe, Atomico said. In 2021, there were 86 such IPOs.

And the region wasn’t immune to the wave of tech layoffs. European-headquartered firms laid off more than 14,000 employees this year, accounting for 7% of total layoffs globally, according to the report.

At industry trade shows like Web Summit and Slush, founders of well-funded unicorns encouraged their fellow entrepreneurs to keep costs under control and ensure they have ample runway to survive a downturn.

‘There’s a lot of upside’

Still, for some investors, not all is doom and gloom. Per Roman, partner at GP Bullhound, said he is bullish about the promise of certain technologies, including artificial intelligence, cybersecurity and environmental tech.

“There’s a lot of upside,” Roman told CNBC Monday. “Right now, we’ve seen through the year, the beginning of last year, the software and internet markets revaluing, I think that’s quite positive and healthy. It’s been in strong bubble territory for some time.”

“At the same time, these software layers are running the world we live in today, whether it’s a hospital, school or construction site. So the core fundamentals will remain strong over the next decade.”

There are reasons to be optimistic, says Sarah Guemouri, principal at Atomico. One is growth in Ukraine’s tech industry. Despite Russia’s brutal onslaught, business activity has returned to pre-war levels for 85% of Ukrainian IT companies, according to figures from the Lviv IT cluster. Since the war began, 77% of ICT firms in Ukraine have attracted new customers.

And while the market picture was bleak this year, investment is still eight times greater than it was in 2015.

“Overall, the series needs to be viewed from the lens of a much longer time horizon,” Guemouri told CNBC. “It is still a pretty remarkable on many levels. For us, what we are really excited about is the future and the opportunity that lies ahead, which continues to be huge.”

Source: https://www.cnbc.com/2022/12/07/400-billion-erased-from-european-tech-market-in-2022-atomico-says.html

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Two children and two adults survive after Tesla plunges 250 feet off California cliff

View from the helicopter during a rescue operation after a vehicle carrying two adults and two children went over a cliff in Devil’s Slide, San Mateo county, California, U.S., January 2, 2023, plunging hundreds of feet, according to the Department of Forestry and Fire Protection, in this still image obtained from social media video.

CHP – Golden Gate Division | Reuters

Two adults and two children were rescued from a Tesla that plunged 250 feet off a cliff Monday morning in San Mateo County, California, officials said. 

The car was traveling southbound on the Pacific Coast Highway when it went over the cliff at Devil’s Slide, south of the Tom Lantos tunnel, and landed near the water’s edge below, the Cal Fire San Mateo-Santa Cruz Unit said. 

The car flipped and landed on its wheels in the fall, CAL FIRE/Coastside Fire Incident Commander Brian Pottenger said. Witnesses saw the accident and called 911. 

As crews were lowered down, they were able to see movement in the front seat, through their binoculars, meaning someone was alive.

“We were actually very shocked when we found survivable victims in the vehicle. So, that actually was a really hopeful moment for us,” Pottenger said. 

Fire officials called for helicopters to help hoist the survivors to safety. As they waited, firefighters rappelled to the scene and rescued the two children.

Rescue teams are seen at the scene as a Tesla with four occupants plunged over a cliff on Pacific Coast Highway 1 at Devils Slide on January 2, 2022 in San Mateo County, California, United States.

Tayfun Coskun | Anadolu Agency | Getty Images

The California Highway Patrol shared video on social media showing helicopters lower first responders to the scene to extricate and rescue two adults inside. 

All four were hospitalized. The San Mateo Sheriff’s Office said the two adults suffered non-life-threatening injuries and the two children were unharmed.

It’s not clear what caused the car to go over the cliff. CHP is handling the investigation. 

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Tesla shares tumble more than 10% following deliveries report

Tesla vehicles are shown at a sales and service center in Vista, California, June 3, 2022.

Mike Blake | Reuters

Shares of Tesla dropped 13% on Tuesday morning, a day after the electric auto maker reported fourth-quarter vehicle production and delivery numbers for 2022.

Deliveries are the closest approximation of sales disclosed by Tesla. The company reported 405,278 total deliveries for the quarter and 1.31 million total deliveries for the year. These numbers represented a record for the Elon Musk-led automaker and growth of 40% in deliveries year over year, but they fell shy of analysts’ expectations.

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Some analysts see a buying opportunity in Tesla for 2023 despite persistent demand pressures

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According to a consensus of analysts’ estimates compiled by FactSet, as of Dec. 31, 2022, Wall Street was expecting Tesla to report around 427,000 deliveries for the final quarter of the year. Estimates updated in December, and included in the FactSet consensus, ranged from 409,000 to 433,000.

Those more recent estimates were in line with a company-compiled consensus distributed by Tesla investor relations Vice President Martin Viecha. 

Some Wall Street analysts think Tesla’s deliveries miss spells trouble for the electric vehicle maker, but others see a buying opportunity for the company in 2023.

Baird analyst Ben Kallo, who recently named Tesla a top pick for 2023, maintained an outperform rating and said he would remain a buyer of the stock ahead of the company’s earnings report, which is scheduled for Jan. 25.

“Q4 deliveries missed consensus but beat our estimates,” he said in a Tuesday note. “Importantly, production increased ~20% q/q which we expect to continue into 2023 as gigafactories in Berlin and Austin continue to ramp.”

Analysts at Goldman Sachs said they consider the delivery report to be an “incremental negative,” and view Tesla as a company that is “well positioned for long-term growth.” Goldman reiterated its buy rating on the stock in a Monday note and said that making vehicles more affordable in a challenging macroeconomic environment will be a “key driver of growth.”

“We believe key debates from here will be on whether vehicle deliveries can reaccelerate, margins and Tesla’s brand,” the analysts said.

Shares of Tesla suffered an extreme yearlong sell-off in 2022, prompting CEO Musk to tell employees in late December not to be “too bothered by stock market craziness.”

Musk has blamed Tesla’s declining share price in part on rising interest rates. But critics point to his rocky $44 billion Twitter takeover as a bigger culprit for the slide.

Morgan Stanley analysts said they think the company’s share price weakness is a “window of opportunity to buy.”

“Between a worsening macro backdrop, record high unaffordability, and increasing competition, there are hurdles for all auto companies to overcome in the year ahead,” they said in a note Tuesday. “However, within this backdrop we believe TSLA has the potential to widen its lead in the EV race, as it leverages its cost and scale advantages to further itself from the competition.”

CNBC’s Lora Kolodny and Michael Bloom contributed to this report.

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Tesla makes China boss Tom Zhu its highest-profile executive after Elon Musk

Tom Zhu Xiaotong, Tesla’s current executive in charge of China, speaks as a new Tesla experience store opens on Aug. 18, 2015 in Hangzhou, China.

Visual China Group | Getty Images

Tesla’s China chief Tom Zhu has been promoted to take direct oversight of the electric carmaker’s U.S. assembly plants as well as sales operations in North America and Europe, according to an internal posting of reporting lines reviewed by Reuters.

The Tesla posting showed that Zhu’s title of vice president for Greater China had not changed and that he also retained his responsibilities as Tesla’s most senior executive for sales in the rest of Asia as of Tuesday.

The move makes Zhu the highest-profile executive at Tesla after Chief Executive Elon Musk, with direct oversight for deliveries in all of its major markets and operations of its key production hubs.

The reporting lines for Zhu would keep Tesla’s vehicle design and development — both areas where Musk has been heavily involved — separate while creating an apparent deputy to Musk on the more near-term challenges of managing global sales and output.

Tesla did not immediately respond to a Reuters request for comment.

Reuters reviewed the organizational chart that had been posted internally by Tesla and confirmed the change with two people who had seen it. They asked not to be named because they were not authorized to discuss the matter.

Elon Musk needs to go back to Tesla and have others run Twitter, says Jim Cramer

Zhu and a team of his reports were brought in by Tesla late last year to troubleshoot production issues in the United States, driving an expectation among his colleagues then that he was being groomed for a bigger role.

Zhu’s appointment to a global role comes at a time when Musk has been distracted by his acquisition of Twitter and Tesla analysts and investors have urged action that would deepen the senior executive bench and allow him to focus on Tesla.

Under Zhu, Tesla’s Shanghai plant rebounded strongly from Covid lockdowns in China.

Tesla said on Monday that it had delivered 405,278 vehicles in the fourth quarter, short of Wall Street estimates, according to data compiled by Refinitiv.

The company had delivered 308,600 vehicles in the same period a year earlier.

The Tesla managers reporting to Zhu include: Jason Shawhan, director of manufacturing at the Gigafactory in Texas; Hrushikesh Sagar, senior director of manufacturing at Tesla’s Fremont factory; Joe Ward, vice president in charge of Europe, the Middle East and Africa; and Troy Jones, vice president of North America sales and service, according to the Tesla notice on reporting lines reviewed by Reuters.

Tesla country managers in China, Japan, Australia and New Zealand continued to report to Zhu, the notice showed.

Zhu does not have a direct report at Tesla’s still-ramping Berlin plant, but a person with knowledge of the matter said responsibility for that operation would come with the reporting line for Amsterdam-based Ward. Ward could not be immediately reached for comment.

Zhu, who was born in China but now holds a New Zealand passport, joined Tesla in 2014. Before that he was a project manager at a company established by his MBA classmates at Duke University, advising Chinese contractors working on infrastructure projects in Africa.

During Shanghai’s two-month Covid lockdown, Zhu was among the first batch of employees sleeping in the factory as they sought to keep it running, people who work with him have said.

Zhu, a no-fuss manager who sports a buzz cut, favors Tesla-branded fleece jackets and has lived in a government-subsidized apartment that is a 10-minute drive from the Shanghai Gigafactory. It was not immediately clear whether he would move after his promotion.

He takes charge of Tesla’s main production hubs at a time when the company is readying the launch of Cybertruck and a revamped version of its Model 3 sedan. Tesla has also said it is developing a cheaper electric vehicle but has not provided details on that plan.

When Tesla posted a picture on Twitter last month to celebrate its Austin, Texas, plant hitting a production milestone for its Model Y, Zhu was among hundreds of workers smiling on the factory floor.

Why China is beating the U.S. in electric vehicles

Allan Wang, who was promoted to vice president in charge of sales in China in July, was listed as the legal representative for the operation in registration papers filed with Chinese regulators in a change by the company last month.

Tesla board member James Murdoch said in November the company had recently identified a potential successor to Musk without naming the person. Murdoch did not respond to a request for comment.

Electrek previously reported that Zhu would take responsibility for U.S. sales, delivery and service.

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