Musk toys with Twitter deal at lower price

This is an audio transcript of the FT News Briefing podcast episode: Musk toys with Twitter deal at lower price

Marc Filippino
Good morning from the Financial Times. Today is Tuesday, May 17th, and this is your FT News Briefing.

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Tesla CEO Elon Musk says buying Twitter at a lower price isn’t out of the question. But is he really just angling to get out of the deal? Tech stocks have crumbled this year and one hedge fund is now licking its wounds. Plus, wheat prices have shot up since Russia’s invasion of Ukraine. Now a shock from a different part of the world has pushed prices even higher. I’m Marc Filippino, and here’s the news you need to start your day.

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Elon Musk totally freaked out investors on Friday when he said his deal to buy Twitter was on hold because of concerns over spam and fake accounts. Twitter stock caved. The company lost $7bn in value. So yesterday, we got our west coast editor Richard Waters on the line to chat about what game Tesla’s CEO might be playing.

Richard Waters
The general view on Wall Street is that he’s softening Twitter up either because he wants to renegotiate the price of this deal, cut price, or he wants to walk away completely and he’s finding a good reason to do it.

Marc Filippino
So Richard and I have this long chat and just minutes after we hang up, this Bloomberg News alert hits our inbox saying Musk would consider buying Twitter at a lower price. Once again, Twitter shares plummet. So we get Richard back on the line.

Richard Waters
Hello again, Marc.

Marc Filippino
OK Richard, let’s talk about this before Musk tweets again. What just happened?

Richard Waters
Well, we always knew that this deal was gonna move at Twitter speed and indeed, that’s what’s happening. So he was talking at a conference in Miami via video link. He just came out right out and said it. He was asked, you know, are you gonna renegotiate? And he said, well, that’s not out of the question. He said it’s possible the deal might not go through. And he pinned it all on this question of fake accounts. He basically said, look, I think at least 20 per cent of the accounts on Twitter aren’t real people. It could be as high as 90 per cent. And he came out with this fantastic, what I thought, a fantastic image. He said, you know, if you are buying a house and someone said, although it’s 5 per cent termites, at least you knew where you stood. But if it turned out it was 90 per cent termites, you might think differently. He doesn’t believe Twitter’s numbers, and if they can’t satisfy him, he’s gonna try and walk away. I mean, at least that’s my reading of it.

Marc Filippino
Now Richard, isn’t there something a little fishy about Musk tweeting last week that the deal is on hold, sending the share price lower, and then a few days later this week saying, yeah, I’ll buy the, I’ll buy Twitter for a lower price? Of course, he’s gonna buy Twitter for a lower price now that the market cap has shrunk. It feels a little funny here.

Richard Waters
Yeah, I mean, this is a concern that always comes out when Musk starts tweeting and share prices start moving. People start getting jumpy on Wall Street. And it’s one of the things about Musk is, you know, we all know he’s deeply unconventional, but when he tweets, it sounds like he’s skirting around the edges of securities laws. He’s moving share prices. And people kind of don’t really know what’s going on. They don’t know what he’s intending, they don’t know where he’s going next. And it causes a lot of consternation. Now, talking to lawyers about this one, it would be extremely difficult for the FCC to bring a case against him over share price manipulation. They hardly ever do that, purely because you’d have to prove intention. You’d need statements or emails or something in which it was clear that Musk was deliberately talking down the stock to try and get a better deal. And, you know, that’s always impossible to prove. So no one really thinks they’re gonna come after him over that. But, you know, for Twitter shareholders, it was a real blow to the calf.

Marc Filippino
So Richard, is this deal really dead or is there a way that Twitter can lower the price so that it’s still attractive to Musk?

Richard Waters
Well, what we have to remember here is that Musk is on the hook to buy Twitter at the price that he agreed. He can’t walk away from this unless he can prove that, or show that, Twitter somehow hid important information from him. And so I think this is the debate we now, we’re now in. You know, is he trying to establish that Twitter misled him, and he can walk away or indeed use that information to negotiate a much lower price. And it’s, I think that’s the worrying moment for Twitter investors now, because it is notoriously hard to accurately find how many fake accounts and bots there are operating on the network. Twitter itself says it finds it difficult. So I think we’re in this scene now where Musk is clearly signalling he doesn’t want to go ahead as things stand. If he can find good information to justify it, I think he’s gonna walk.

Marc Filippino
Richard Waters is our west coast editor. He covers all things tech. Thanks, Richard.

Richard Waters
Nice to talk to you.

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Marc Filippino
The sell-off in tech stocks this year has pummelled some of the biggest hedge funds, especially those known for betting on high-flying tech stocks. One of them, Tiger Global, has lost an astonishing $17bn this year. It’s one of the biggest dollar declines for any hedge fund firm in history. Now, Tiger Global is significantly slashing its stakes in former big tech darlings like Netflix and Airbnb. Yesterday, it sold its stakes in electric vehicle maker Rivian and the Chinese ride-hailing company Didi. And it’s trimmed its stake in the connected fitness company Peloton by nearly 80 per cent.

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Wheat prices were already on the rise and then came Russia’s war in Ukraine. It disrupted wheat shipments from both countries, which account for a third of global wheat exports. Since the invasion, wheat prices have shot up about 40 per cent, and yesterday they rose again after India banned exports. Officials there cited the need to manage domestic food security as prices surge.

Emiko Terazono
So one of the grain traders I spoke to on the weekend after the India announcement, he described the event as an absolute bombshell.

Marc Filippino
That’s our commodities correspondent Emiko Terazono.

Emiko Terazono
I think for a country the size of India to actually come in and ban exports is a big event. And also it’s a 180 degree turnaround from what they were saying that they would do.

Marc Filippino
Yesterday, global wheat prices rose almost 6 per cent on the Chicago Mercantile Exchange to about 1250 a bushel.

Emiko Terazono
It’s larger than the market story. Of course, you know, the fact that the wheat prices has shot up again is scary for everyone, but it’s the contagion effect and the impact that’s gonna have. One of the analysts said, you know, it’s a domino effect. When one country does it, then, you know, another follows and then another follows. Over the last few weeks alone, we’ve had Indonesia and now we’ve got India. I think the fear is that there’ll be another country forced to or, you know, will think, well, my domestic inflation’s rising, I can’t export this food to other countries and impose an export ban or export restriction.

Marc Filippino
Emiko Terazono is the FT’s commodities correspondent.

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One of the most prominent western brands in Russia is getting out. Yesterday, McDonald’s said it’s gonna sell its Russian business, which employed more than 60,000 staff locally. Here’s the FT’s Andrew Edgecliffe-Johnson.

Andrew Edgecliffe-Johnson
McDonald’s is hoping that these operations will be bought by a local operator and that essentially these employees will still have jobs. There will still be 850 burger restaurants in McDonald’s. They just won’t display the golden arches. They won’t use the McDonald’s branding. They won’t have exactly the same menu. But the hope is that they’re gonna negotiate some kind of deal which allows them to save as many of these jobs as possible. By and large, though, we know from conversations with other companies that they’re finding it very, very difficult to find buyers who are not on a western sanctions list, who they can actually trust to operate these businesses the way that they would have hoped for on the behalf of their employees. And who can actually pay them in a way that will allow them to get the money out of the country.

Marc Filippino
But Edge says the company may not be gone forever.

Andrew Edgecliffe-Johnson
Chris Kempczinski, the CEO, signed off his message to employees with the words, until we meet again. I think we’ll see a lot of companies try to structure these exits in a way that still gives them an option to return to Russia at some point in the future when the politics look a little easier.

Marc Filippino
Andrew Edgecliffe-Johnson is the FT’s US business editor.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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