Tesla CEO Elon Musk’s bombshell takeover bid of
One takeaway from EMJ Capital’s Eric Jackson is that Twitter’s results on Thursday are likely to be “horrible.” How else do you explain the highly unusual decision by Twitter’s board to accept the first offer in a hostile bid?
They might have also been flabbergasted by the question of what it could do to get the share price up to Musk’s offer. Given the speed of the deal, it seems unlikely that Musk looked at the finances himself. A 32% premium on the price before Musk took his stake, especially with the
down 9% this year, was perhaps too good to pass up.
Add in that
Snapchat, Facebook parent
Meta Platforms, and
Pinterest have performed poorly recently and the logic of Twitter’s management seems clear. With the price of the stock now secured, it has already canceled the earnings call.
Another interesting take comes from former
Amazon chief, and current Washington Post owner, Jeff Bezos. Given that Musk’s wealth comes from Tesla, and the electric-car maker relies heavily on China for both sales and production, Bezos wondered (on Twitter) if the country’s government just gained “a bit of leverage over the town square.” He answered his own question with a not terribly convincing “probably not.” Tesla shares also slipped yesterday.
One benefit of the Twitter news might be that it clears the decks for investors to focus on other things. It’s earnings season, the Russia-Ukraine war isn’t slowing down, and the Federal Reserve is set to increase interest rates next week. There will be plenty of distractions during the aftershocks.
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Tesla’s Shares Dip After Twitter Accepts Musk’s Offer
Twitter’s shares rose and Tesla stock slumped after Twitter’s board of directors accepted Musk’s $44 billion offer to buy the company for $54.20 a share. Musk secured financing and isn’t expected to sell Tesla stock, but Tesla’s investors were still a bit worried.
- Twitter’s stock rose 5.7%, and Tesla’s stock dropped 2% shortly after the announcement on Monday. Twitter was originally expected to reject the offer after adopting a “poison pill” defense, but warmed to it after Musk met with some Twitter shareholders, The Wall Street Journal reported.
- The billionaire, a prolific tweeter with 84 million followers, said he would make Twitter’s algorithms open source, authenticate users, and defeat the “spam bots.” He has suggested an edit function and wants to cut Twitter’s reliance on advertising. He also said “Free speech is the bedrock of a functioning democracy.”
- To buy Twitter, Musk arranged $25.5 billion in debt and margin loan financing and committed $21 billion in equity. Musk can raise 25% of the value of his unexercised Tesla stock options—worth more than $200 billion—meaning he could borrow $40 billion.
- His $21 billion equity commitment can come from partners he brings into the transaction, as well as existing Twitter shareholders who want to stay invested. Meaning Musk, who now owns a 9% stake of Twitter shares, wouldn’t need to sell stock for that, either.
What’s Next: The deal comes amid calls for greater accountability for large social-media platforms. White House press secretary Jen Psaki said: “No matter who owns or runs Twitter, the president has long been concerned” about the power of social-media sites. Twitter reports earnings on Thursday.
—Al Root and Janet H. Cho
Fidelity Plans to Bring Bitcoin to 401(k) Plans
Fidelity Investments is rolling out Bitcoin for 401(k) plans. The implications for the crypto industry and investors could be vast, though it faces potentially stiff regulatory pushback. Fidelity on Tuesday said that some of the 401(k) plans it administers would soon offer employees a way to invest in Bitcoin through dedicated “digital assets accounts.”
- Fidelity’s crypto product won’t be a mutual fund. Instead, each plan sponsor would have a separate account for employees. The accounts would hold both Bitcoin and short-term money-market investments for liquidity.
- The Bitcoin would be custodied by Fidelity on its digital assets platform. The company said it would charge between 0.75% and 0.90% in annual fees for administration, custody, and accounting.
- “Fidelity believes that blockchain technology and digital assets are going to be a much larger part of financial industry’s future,” said Dave Gray, Fidelity’s head of workplace retirement offerings and platforms, in an interview.
What’s Next: The first customer will be
MicroStrategy, a software company that has built a cache of more than 125,000 Bitcoins on its corporate balance sheet. Fidelity aims to expand the accounts to more plan sponsors in midyear. Employees could put up to 20% of their 401(k) balances into the accounts, Fidelity said, though employers can set a lower limit.
Coca-Cola Issues Effervescent Outlook for 2022 Growth
Coca-Cola is forecasting 8% to 10% growth in 2022 on a currency-neutral basis, or earnings per share of $2.51 to $2.55, which would beat the $2.45 expected. Beverage sales to restaurants, stadiums, and movie theaters are expected to keep growing as more venues reopen, but challenges remain.
- Adjusted first-quarter EPS of 64 cents beat estimates, as did revenue of $10.5 billion. Organic revenue, which excludes currency fluctuations, acquisitions and divestitures, surged 18%, despite higher costs.
- Coke also noted losses from suspending its Russian business, China’s strict Covid-19 lockdowns, supply-chain slowdowns, rising labor and transportation costs, and ongoing inflation.
Analysts are expecting profit gains for restaurants, including
Domino’s Pizza, bargaining that diners returned last quarter despite the rising cost of food and other household expenses pressuring pocketbooks.
- McDonald’s is outpacing other quick-serve restaurants, with customer visits nearing 2019 levels, according to Placer.ai foot traffic data. With many people still working from home, visits are down during the traditional breakfast and lunch rush, but up in the afternoon and evening.
PepsiCo reports first-quarter results Tuesday morning. Chipotle Mexican Grill kicks off restaurant earnings season when it reports after Tuesday’s close, followed by McDonald’s and Domino’s Pizza, which both report on Thursday.
—Janet H. Cho
Facebook Opening First ‘Meta Store’ to Showcase Virtual Gear
Facebook parent Meta Platforms has decided the best way to showcase the future of the virtual metaverse is to open a 1,550-square-foot retail store in this universe. Its first Meta Store will open May 9 at its Reality Labs campus in Burlingame, Calif., south of San Francisco.
- The store aims to show people what is possible, while offering a glimpse into the future through demonstrations of Oculus Quest 2 virtual-reality headsets ($299), Portal video-calling hardware for TVs ($99) or displays, and Ray-Ban Stories smart glasses ($299). Items are also available online.
- “The best way to understand virtual reality is to experience it,” Meta CEO Mark Zuckerberg said. At the Meta Store, “anyone can demo popular apps on Quest 2 and project what you’re experiencing onto a big wall for your friends to see.”
Apple’s more than 500 retail stores worldwide have become an important part of its branding and distribution strategy. But other technology companies have been less successful expanding into physical stores.
Amazon.com last month announced it would close 68 of its retail stores, including all its Amazon bookstores.
Microsoft closed its 83 stores in 2020, and
Sony closed its U.S. stores in 2014.
Samsung has a small number of U.S. retail stores, including one in Palo Alto.
What’s Next: Visitors to the Meta Store will get a 30-second mixed-reality clip of their demo experience to share. Meta, which reports earnings Wednesday, hasn’t said whether it plans to open additional Meta Store locations.
—Eric J. Savitz and Janet H. Cho
Buffett Will Auction Annual Private Lunch for Last Time
Warren Buffett, the billionaire CEO of
Berkshire Hathaway, is offering the last chance for someone and up to seven guests to have a steak lunch with him for charity, opening bidding for this formerly annual event on eBay for Charity from June 12-17.
- The minimum bid for this “Power of One” event is $25,000, and the winner and guests will dine with Buffett at New York’s Smith & Wollensky restaurant, one of his favorites.
The idea was conceived by Buffett’s late wife Susie Buffett and has raised more than $34 million since it moved to
eBay in 2003. Proceeds go to San Francisco’s Glide Foundation, which focuses on poverty, housing and homelessness. The first auction was in 2000.
- The auction was suspended after 2019 because of the Covid-19 pandemic. But it had got increasingly more popular in the early 2000s, garnering winning bids of $1 million or more since 2008. The private event went for $4.6 million in 2019.
- The only topic off limits is what Buffett will buy next. The winner of the 2019 auction was blockchain pioneer Justin Yuchen Sun, who founded the TRON platform and is CEO of streaming company BitTorrent, now known as Rainberry.
What’s Next: The auction will be advertised at this weekend’s Berkshire Hathaway annual shareholder meeting, also the first to be held in-person in Omaha, Neb., since the pandemic began.
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