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Investors in the Nasdaq Composite (^IXIC 2.56%) weren’t too happy with their performance in 2022, and they hoped that the growth-heavy index would bounce back in 2023 from dramatically weaker returns than other major market benchmarks. Friday’s early market moves only continued that adverse trend for the Nasdaq, which was down briefly even as other indexes gained ground.
Tesla (TSLA 2.46%) has been a key drag on the Nasdaq over the past year, and the electric car maker once again fell significantly as it faced new challenges abroad. Yet the biggest decliner on the Nasdaq was a much smaller and lesser-known company, Fate Therapeutics (FATE -61.45%). Below, you’ll get the details on both of these stocks and what’s happening with the companies that has shareholders nervous.
Shares of Tesla were down 4% as of 10 a.m. ET, recovering slightly from steeper losses near the open. Reports based on examining the automaker’s website showed that Tesla reduced its prices yet again on vehicles in various markets in the Asia-Pacific region.
Price cuts were dramatic in several markets. In China, which has become an essential component of Tesla’s long-term growth prospects, the company cut its prices of Model 3 and Model Y vehicles by 6% or more, with some models seeing double-digit percentage reductions. Tesla Model 3 and Model Y vehicles in Japan got a price cut for the first time in a more than a year, weighing in at roughly 10%. South Korean prices for Tesla vehicles saw similar declines on a percentage basis, while the Australian market saw more modest cuts of 2% to 5%.
Many investors have blamed declining demand on overall macroeconomic weakness across the globe. Yet while that might be a factor, some of Tesla’s competitors have been doing quite well. That suggests a more company-specific issue that could be troubling for the electric vehicle pioneer’s longer-term prospects.
Tesla shareholders dealt with big share-price losses in 2022, and they’re hoping that the company can reestablish its upward trajectory in 2023. Unfortunately, restoring confidence might take longer for Tesla to achieve.
Shares of Fate Therapeutics plunged more than 60% on Friday morning, putting it among the worst performers on the Nasdaq. The biopharmaceutical company lost a key partner and now faces a key test to its business.
Fate said late Thursday that it had elected not to continue its collaboration with the Janssen Biotech division of Johnson & Johnson (JNJ 0.81%). Fate noted that Janssen had suggested revised terms and conditions, and rather than accepting them, it will wind down its partnership during the first quarter of 2023. Instead, Fate will move forward with what it has identified as its most innovative programs, particularly those that differentiate the biotech from its peers. With $475 million in cash and receivables, the company thinks it has enough money to conduct clinical trials and continue its programs through the end of 2025.
The move marks the end of what many investors had seen as a promising collaboration. When Fate and Janssen first announced their partnership in April 2020, investors had hoped that $100 million in upfront payments and investment would be just the beginning for Fate, with milestone payments potentially adding up to $3 billion. It was therefore shocking to see the agreement between the two companies come to such an abrupt end.
Fate stock is now down 95% from where it was two years ago. Investors are skeptical about its ability to go it alone, and Janssen’s move seems just to confirm what the company already suggested might be an insurmountable challenge.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fate Therapeutics and Tesla. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.
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