Tonight: Wow, Elon Musk is acting erratically — who could have seen this coming? Let's get into it. By Allison Morrow |
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If you spent last week ignoring news alerts about Elon Musk, like I did, you may need a quick catch-up. So let's dive in... The TL;DR version: Musk is pulling out of his $44 billion agreement to buy Twitter (for reasons we'll get into in a moment), but Twitter is going to try to force him to acquiesce to the original deal. In short: They're almost certainly going to have to duke this out in court. To those of us who've been following this absolutely bananas story, Musk's latest move is hardly a surprise. Here's why: - Pretty much everyone agrees Musk was massively overpaying for Twitter. The company's shares have lost about a third of their value since late April, when Musk made his offer. Twitter stock fell 11% on Monday, to around $33 a share. Musk's offer was $54.20 a share — so it's not hard to see why Twitter's board isn't going to let him walk away without a fight. They're never going to land another offer like that, at least not from anyone with a shred of business sense.
- The bot issue: From Day One, Musk has been raising a stink about "spam bots" and accusing Twitter, without evidence, of misleading investors about the real number of those accounts on the platform. Twitter insists that's not true, saying it has provided Musk with a "fire hose" of data to counter his allegation.
- JUST TO BE CLEAR: Twitter does have a spam problem, but it seems obvious this pet issue of Elon's is a red herring. The financials of this deal just make no sense, especially since we entered a bear market that's dragged down Twitter and Tesla, whose shares make up the bulk of Musk's wealth.
- In other words, Musk has gotten poorer and Twitter's gotten cheaper, so he's understandably looking to renegotiate or scrap it completely.
- It's Elon Musk. The guy's a loose cannon.
So what happens now? There are many possibilities, none of which are slam dunk for anyone involved. - The break-up. In theory, Musk could pay a $1 billion break-up fee and everyone can go back to pretending this never happened. That sounds nice for Musk, but it's more complicated for Twitter's board, which could be breaching its fiduciary duty to shareholders by letting him walk. That would likely rattle Twitter's already anxious investors.
- Twitter could force Musk to buy it under the original terms if it can convince a judge it has upheld its end of the deal. That'd be great for Twitter shareholders, less great for Twitter's staff and users if the platform is begrudgingly under the reign of a man who was forced to overpay for it and who's stretched thin running Tesla and SpaceX. (Musk lol'd at that the suggestion he'd be forced to buy Twitter in a predictably childish tweet on Monday.)
- Negotiating a better price. As the two sides prepare for litigation, they'll also keep talking, and the situation could resolve itself through a negotiated sale price. That type of resolution is common in merger disputes, my CNN Business colleagues report.
- Any number of wild cards. With Musk, it's safe to expect the unexpected.
One thing's certain: A handful of lawyers for Twitter and Elon Musk are earning their paychecks this summer. Twitter has reportedly hired the elite New York law firm Wachtell, Lipton, Rosen & Katz, and may file a lawsuit against Musk as early as this week. RELATED: Trump's troubled SPAC got a boost from Musk's attempt to scrap the Twitter deal. |
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For the first time in 20 years, the euro and the US dollar are a fraction of a penny away from parity. The euro stood at $1.004 Monday afternoon, down about 12% since the start of the year. Why? The European currency is getting battered by inflation and concerns about energy supplies. The dollar, meanwhile, is rallying as investors shy away from risk and park their money in safe havens. Some analysts say the euro could keep falling, which is great news for Americans plotting their French wine and croissant budgets for a summer trip. But it's not great for, like, global economic stability, my colleague Nicole Goodkind explains. |
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This past spring, a handful of rural Chinese banks suddenly suspended cash withdrawals, leaving hundreds of people unable to access their savings. The banks offered no explanation of why, or how long the accounts would be frozen. Naturally, those people are furious — it's been three months of trying in vain to unfreeze their accounts. The news: On Sunday, the depositors staged their largest demonstration yet — a rare show of public dissent in China. Around 1,000 people gathered outside a branch office of the central bank in Henan province, demanding the government step in to help them retrieve millions of dollars' worth of frozen funds. It was a peaceful gathering, but authorities responded with force, my colleague Nectar Gan reports. In a clash that lasted several hours, security officers charged at the group, dragging protesters down stairs and beating those who resisted, including women and the elderly, according to witnesses and social media videos. BIGGER PICTURE That wildly disproportionate response speaks to a broader current of anxiety among the leadership in Beijing. The country's strict zero-Covid policy has hamstrung China's economic recovery, and that undermines Beijing's core promise. See here: - When the government reports GDP data this Friday, economists expect it'll be the weakest since 2020 early 2020, when the pandemic hit.
- Meanwhile, stocks are hemorrhaging over concerns about a continued regulatory crackdown on tech companies.
- China's housing market, which accounts for 20% of GDP, is crumbling.
- Retail sales are way down.
- All of this while President Xi Jinping is widely expected to seek an unprecedented third term later this year.
Beijing's leaders know all too well the terms of the social contract that underlies public life in China: Citizens will put their faith in the central government and generally not make much fuss about individual freedoms in exchange for the promise of prosperity. That contract begins to fray when the economic engine that lifted hundreds of millions out of poverty in a generation begins to sputter. With its violent crackdown on depositors — who are legitimately worried their life savings just evaporated — China is sending a clear message that its people will have to stay in line and take whatever financial hits are coming on the chin, no matter how bad things get. |
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💸 Earnings season is upon us, once again. It's like the holiday season except instead of gifts and cocktail parties we get financial results and conference calls. Big banks are first up — here's what you need to know. 🚗 Hundreds of thousands of leaked Uber documents show how the company reportedly employed secret technology to thwart police investigations, sought favors from high-ranking government officials and even perceived a silver lining in possible violent clashes between its drivers and taxicab operators. 🔧 The Nord Stream 1 pipeline from Russia to Germany began a temporary suspension for maintenance on Monday, but some analysts fear Russia won't turn the supply back on. 🌭 About 1,500 food and other concession workers at Dodger Stadium are poised to go on strike during the All-Star Game festivities. |
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