HERE WE GO AGAIN…
If you spent last week ignoring news alerts about Elon Musk, like I did, you may be in need of a quick catch-up. So let’s dive in.
To those who’ve been following this absolutely bananas story, Musk’s latest move is hardly a surprise. Here’s why:
- Pretty much everyone agrees he was massively overpaying for Twitter. The company’s shares have lost a third of their value since late April, when Musk made his offer. Twitter stock fell further on Monday, to around $34 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.
- 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.
- 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.
NUMBER OF THE DAY: $1.004
For the first time in 20 years, the euro and the US dollar are less than a penny away from parity.
The euro hovered around $1.004 Monday morning, down 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.
This 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.
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. When the government reports GDP data this Friday, economists expect it’ll be the weakest since 2020 early 2020, when the pandemic hit.
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 take the economic hits on the chin and fall in line no matter how bad things get.