To Ye or not to Ye
Ye, the designer and musician who was once known as Kanye West showed why Elon Musk’s acquisition and his vision for free speech could be problematic for Twitter.
The scandal started offline last week when Ye wore a T-shirt that said “White Lives Matter” at his Paris fashion show.
The company quickly responded. Adidas stated on Thursday that it was reviewing its relationship to Ye. The rapper Sean Combs, also known as Diddy (or Sean Combs), publicly criticized Ye for wearing the shirts. Ye responded with “war” and stated that Combs had acted under Jewish control. Ye was then blocked from accessing his Instagram account by Meta in response to that comment.
Then, Twitter was the scene of much chaos. After a two year absence, Ye returned to the social media network on Saturday. After a two-year absence, Ye posted an antisemitic rant on Saturday. He even threatened to go “death Con 3 On JEWISH People” and accused Mark Zuckerberg (C.E.O. of Meta), of removing him from the social network. He was sent to the penalty box again for all of this. Ye was eventually suspended temporarily by Twitter.
What would Musk do? Musk has said he will take a different approach in content moderation if Twitter is his. Although it’s not clear what Musk has in mind, his comments about wanting to create a “de facto public square” to preserve democracy and freedom of speech suggests that he supports a more free-flowing exchange, even though this may turn off some advertisers. Others doubt Musk would allow Twitter to become a toxic sewer.
Musk’s position on the Ye controversy is hard to determine. It’s hard to say. Musk sent the mercurial artist a warm “Welcome Back to Twitter, My Friend!” greeting on Saturday. But, Musk has not said anything about him since.
Here’s WHAT’S HAPPENING
The Nobel economics Prize is presented to Ben Bernanke. Two other academics and the former Fed chair were honored for their research on financial crises and banks. The chair of the prize committee stated that their insights had “improved our ability to avoid serious crises as well as costly bailouts”.
Russia launches missile attacks on Ukraine. At least five people were killed in the attacks on multiple cities, including the capital. Power was also knocked out. These attacks were an apparent reprisal for the blast that destroyed a bridge linking Russia and Crimea.
South Carolina chooses BlackRock over E.S.G. The state treasurer has plans to pull $200 million from BlackRock by the end of the year, joining other states like Louisiana or Utah. Red states have pledged to pull investments in order to punish the firm for its environmental investing policies.
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Other product modifications are possible. His advisers and Mr. Musk have also discussed the possibility of adding paid direct messaging, which would allow users to send private messages directly to high-profile users. They also discussed the possibility of charging fees for viewing certain videos, and revive Vine, a short-form video platform that could be a draw to younger audiences.
Today marks the beginning of Harvey Weinstein’s second trial for sex offences. In Los Angeles, the disgraced movie mogul is facing 11 charges. He could be sentenced to life imprisonment, regardless of whether his New York conviction is overturned on appeal.
Why Elon Musk might have very little room for error
There are many questions surrounding Elon Musk’s $44 billion takeover offer for Twitter. One puzzler is: What was Musk thinking when he returned to the $54.20-per share offer after negotiations for a cut price deal collapsed? One theory is that he didn’t really want to take his deposition. DealBook offers another theory.
We know this: Renegotiation talks were held last month at the suggestion of Ari Emanuel, a super-agent who was friends with both Musk (and Egon Durban, a member of the Twitter board), and they discussed renegotiating the deal. The deal that would have reduced the asking price by about $4 billion was settled in the end.
We now know some details about the reason those talks failed: Twitter was determined to make sure that the deal was closed. It also refused to stop litigating. Could this be why Musk left?
What if Musk was actually paying more for a $4 billion cut? The $12.5 billion loan that Musk received from banks to finance his deal could have been seen by the banks as an opportunity to negotiate a deal. They would be able to either walk away or modify the terms of their loans to Musk.
After the collapse of the loan market, that’s exactly what happened in 2007. Similar to the above, the financing environment has worsened ever since Musk struck the deal. The banks now face a possible $500 million loss.
If Musk had pushed Twitter for a redo of the deal, banks might have tried to reprice loans at higher interest rates to increase financing costs. They could have tried to reduce the amount of debt they had funded. This would have made Musk, who is responsible for all equity and the entire deal, personally responsible.
It is most likely that it would have been a combination of both. Musk was there ever a situation in which shaving $4 billion from the total deal price wasn’t worth it?
He cannot alter the deal in any material way because of his banks’ debt obligations. This could allow banks to use a decent argument to get revised debt arrangements. Judges often consider price material, according Eric Talley, a Columbia Law School professor. A price cut is unlikely, regardless of recent events.
Twitter is asking Musk to pay interest for every day that the deal drags on beyond last month’s shareholder vote supporting the transaction. This means that Musk is paying more than $54.20 per day.
Investors are in for a rough quarter
Earnings season is upon us. This week, the S&P 500 heavyweights Delta Air Lines (and PepsiCo) will report their third quarter results. The big banks and major banks are also set to report this week. Investors have one major fear: Companies will reveal how inflation and slowing economic development have impacted profits.
It’s not a perfect picture. According to FactSet, only 65 companies of the S&P 500 have indicated that their third quarter results will disappoint. However, 41 companies have reported earnings increases.
S&P 500 companies will report that revenue increased by almost 9 percent on average last quarter. Profits are expected to rise by only 2.4 percent, which is the lowest growth since the worst Covid pandemic of 2020.
The energy sector accounts for almost all the growth in earnings. Only four of the 11 S&P 500 sectors — energy, airlines and real estate — are expected show overall growth. Energy companies’ bottom lines are expected to rise an average of 117% compared to a year ago. This is the largest increase of any sector.
According to Bank of America, the average drop in bottom line for the remaining companies, minus the 21 energy companies that make up the S&P 500 would be 4.2 percent.
More about Elon Musk’s Twitter Takeover
Twittering through the Criticism: Elon Musk, who bought Twitter, has been under intense scrutiny. He started a Twittering frenzy to defend, spar, and justify his actions.
A Familiar Playbook. Musk was inspired by Mark Zuckerberg’s actions in his first days as Twitter CEO.
Another kind of deal: Silicon Valley moguls used yachts and islands to purchase. They are now wealthy enough to buy the companies they want.
“Hard Fork”: Two employees of Twitter described the atmosphere within the company after the acquisition in an episode of The Times’s tech podcast.
Multinational companies are not happy with the strong dollar. The recent rise of the dollar has been a boon for U.S. tourists, but it is bad news for U.S. exports which account for about 40% of S&P 500 company’s sales.
Strong dollar means American goods are more costly to foreign buyers and less profitable for home-based businesses when they are converted into dollars.
John Butters, senior earnings analyst at FactSet says that about half of the companies who are facing earnings problems have pointed to dollar as a contributor.
“There is a chance that Mark is correct about almost all aspects of the metaverse, but the timing is further out than he anticipated.”
Matthew Ball, a Silicon Valley investor, has warned Mark Zuckerberg that Meta faces a major timing risk, as it invests billions in a virtual world for users to play, work, and socialize.
PayPal is burned in culture wars
PayPal was caught in the culture wars last week after an apparently incorrect policy update caused a commotion.
The controversy began Friday when The Daily Wire, an conservative news site, reported on a PayPal update that would see a $2,500 fine for users who “promote false information.” Some critics claimed that PayPal was censoring conservatives.
Conservatives have reacted with anger to PayPal’s statements on social and political issues, including hate speech and discrimination. Right-wing critics claim that PayPal has gone too far by banning accounts including those belonging to the Free Speech Union. This group claims it opposes “cancel culture.” The decision was reversed.
Surprised quarters reacted with anger. During the chaos, conservative activists threatened to stop using PayPal. David Marcus, former president of PayPal, joined the criticisms and tweeted Saturday: “@PayPal’s new AUP is against everything I believe.
If you disagree with something, a private company can now decide to take your money. It’s insane.” Elon Musk, a PayPal founder, responded, “Agreed.” However, PayPal’s accepted use policy prohibits users from using the service to promote hate, violence, or any other form of intolerance that is discriminatory.
PayPal claimed that the document was incorrectly published. PayPal spokeswoman said that PayPal is not going to fin people for misinformation.
She also stated that the language in question was not intended to be part our policy. “We are sorry for the confusion that this has caused.” A spokeswoman for PayPal declined to comment on the origins or reason behind the retraction.
Deals
Juul, a vaping company, has added two corporate restructuring specialists to its board in preparation for a possible bankruptcy filing. (Bloomberg)
F.T.C. The F.T.C. narrowed its claims against Meta during its lawsuit against the company opposing its takeover of virtual reality startup Within Unlimited. (WSJ)
Policy
Publicly, the U.S. and Germany want the World Bank to do more for climate change. (FT)
New York City declared an emergency in response to a migrant crisis that it estimated could cost $1 billion. (NYT)
Under pressure from lawmakers and investors, Britain’s government will announce its fiscal plan and economic outlooks on October 31st. This is nearly a month before schedule. (Bloomberg)
The best of the rest
Why Elon Musk’s dream for a WeChat-like superapp in the U.S. might not be able to fly. (TechCrunch)
Rivian, an electric carmaker, recalled nearly 13,000 vehicles over a problem that could affect steering. (NYT)
Nikki Finke, a Hollywood journalist who founded Deadline, has died. She was often mocked by movie executives. She was 68. (Deadline)
Your iPhone may think you were in a car accident, when you really have just been on a roller coaster. (WSJ)
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