Wednesday's Headlines: Elon Musk Agrees to Buy Twitter
Here were the biggest movers in the MyWallSt shortlist yesterday:
Moving Up ⬆️
Twitter (TWTR) +22.2%
Peloton Interactive (PTON) +18.6%
Stitch Fix (SFIX) +16.9%
Shopify (SHOP) +13.6%
Farfetch (FTCH) +13.0%
Moving Down ⬇️
Casey's (CASY) -1.8%
Ulta Beauty (ULTA) -0.2%
Coca-Cola (KO) +0.2%
Brown-Forman (BF.B) +0.3%
Avalara (AVLR) +0.4%
Here are the stories that you need to know ahead of market-open today, Wednesday the 5th of October.
Elon Musk Agrees to Buy Twitter 🤯
In a stunning about-face, Tesla (TSLA) CEO Elon Musk has agreed to acquire Twitter for the original price of $54.20 a share. As the trial date in which Twitter sued Musk to follow through with his original offer to buy the company was fast approaching, the eccentric billionaire stunned everyone by offering to close the deal as originally agreed upon, giving Twitter a price tag of $44 billion.
Musk’s lawyer reached out to Twitter’s board late Monday with the proposal and it has accepted the offer. If the deal goes through, both parties will avoid the 5-day trial scheduled for October 17th. Shares of Twitter soared 22% on the news, closing at $52 yesterday after being halted for most of the day, just shy of the $54.20 Musk initially agreed to pay.
There are many theories as to what caused Musk’s one-eighty, but he most likely saw the writing on the wall as his attempts to wriggle out of the merger agreement weakened. The judge presiding over the case, Chancellor Kathaleen McCormick, has shown plenty so far to surmise that his chances of winning may be low. With his personal text messages released (and widely mocked) as part of the discovery for the trial, he likely wanted to avoid any further distraction and embarrassment too. Musk was to be deposed later this week.
There is a stark difference between the Twitter Musk agreed to buy in April and the one he will receive if the offer goes through, thanks in no small part to himself. Since the original acquisition, the market for tech stocks has plummeted. An impending recession will likely put pressure on digital advertising spend, threatening future revenues, while ex-head of security, Peiter ‘Mudge’ Zatko’s whistleblower claims — which Musk was planning to use as a way of backing out of the deal — are still being investigated. Lastly, there is the reputational damage caused by the Tesla CEO’s constant barrage of accusations and critiques he has lobbed at the social media company over the past few months, primarily over the number of bots on the platform.
If the deal goes through, as most expect it to, we could see wholesale changes to Twitter as we know it, with Musk tweeting last night “Buying Twitter is an accelerant to creating X, the everything app”. X.com is a proposed social media company he plans on building out. Whatever the outcome, I’m sure it won’t be boring.
EU Finally Snatches the Lightning Cable from Apple ⚡️
On Tuesday, members of the European Parliament passed legislation to create a common charging standard for electronic devices, much to the dissatisfaction of Apple (AAPL). Under the reform, the iPhone maker will need to change its beloved lightning cable by 2024 if it wishes to sell its products in the European market. The law will see USB-C become the common charger for everything from earbuds to e-readers.
Apple had previously opposed the proposal, claiming it would harm innovation and create waste. The European Commission believes it will reduce waste over time and save consumers around €250 million.
While the legislation only impacts countries in the European Union, it will likely have a knock-on effect on the rest of the world. The EU has a tremendous influence on international business standards due to its market size — this is known as the “Brussels Effect”. Previously, regulations established by the EU caused Dow Chemical to revamp its production facilities. The company stated it would use the EU standard to guide production across its global operations.
Time will tell if the loss of the exclusive lightning cable will take a bite out of Apple’s accessory revenue. The lightning cable’s design is owned by Apple and the company makes money from licensing it to third-party manufacturers in addition to its own cable sales.
Apple’s stock is down 1% in pre-market trading.
Supply Chain Issues Hold Ford Back 🚙
Shares of Ford (F) jumped close to 8% yesterday after the iconic automaker reported strong demand for its vehicles in the last quarter, though there were also some concerns over ongoing supply chain pressures.
Even though we’re still a few weeks out from the next round of quarterly reports, automakers have been giving us insight into how many vehicles they managed to deliver in the third quarter of the year, with both Tesla and Rivian recently announcing their own delivery figures. Ford managed to deliver 464,674 vehicles in the period, which was an improvement of almost 16% from 400,843 vehicles in the same quarter a year ago.
Interestingly, the company saw its EV sales triple in the month of September compared to last year, driven mainly by its F-150 Lightning truck. This is a good sign for Ford, who is targeting as much as 50% of its global sales volume to come from EVs by the end of the decade.
However, like pretty much all other automakers, the macroeconomic environment is putting severe pressure on the company’s ability to deliver. Supply chain issues remain a persistent thorn in its side, with sales in September specifically down 1% from the same time last year thanks to parts shortages.
And, while demand does seem strong right now, there is also a fear amongst investors that continuously rising interest rates will start to dampen customer appetites for big purchases like a truck in the coming months.