Saturday, February 4, 2023
HomeMarketTesla Investors Cheer Musk’s Twitter Poll. It’s Good News for the Stock.

Tesla Investors Cheer Musk’s Twitter Poll. It’s Good News for the Stock.

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It’s a bizarre set of circumstances that has led to Tesla investors closely watching a Twitter poll conducted by Elon Musk in the hope that it provides some relief in the auto stock.

But that’s what is happening Monday.

After experiencing the tension of Sunday’s World Cup final firsthand, Musk opted to create his own personal drama–in the form of a poll to decide whether he should step down as head of Twitter.

Tesla stock has fallen 33% since Musk purchased Twitter for $44 billion at the end of October. Musk himself blamed “macroeconomic tides” last week. However, the Nasdaq Composite index has declined less than 1% over the same period. The EV giant’s shareholders have claimed Musk is too distracted by running the social media platform.

Whether or not that’s the case, it’s clearly weighing on the stock.

The Twitter overhang became more obvious Monday as Tesla shares rose close to 5% in premarket trading as the poll, voted on by more than 16 million people, came out heavily in favor of the billionaire stepping down.

Musk has said he will abide by the results. Yet he also said there’s no successor in place, adding that no one capable of keeping Twitter alive wants the job.

That means more uncertainty for Twitter but potentially provides a positive catalyst for Tesla stock–if Musk does indeed listen to the people.

Beyond that, the macroeconomic tides he spoke of seem to only be going in one direction. Federal Reserve chairman Jerome Powell all but ended hopes of a Santa rally last week with his hawkish tone.

Earnings from economic bellwether FedEx and Nike later in the week could provide key insights into holiday shopping demand as consumers battle inflation and an update on the health of the U.S. economy.

—Callum Keown

*** Join Barron’s senior managing editor Lauren R. Rublin and senior reporter Nick Jasinski today at noon when they discuss the outlook for financial markets, industry sectors, and individual stocks. Sign up here.

Try your hand at this morning’s Barron’s digital jigsaw, which is based on the week’s cover story. For all games, including the daily crossword and sudoku, click here.

***

Twitter Users Vote for Musk to Step Down as CEO

Elon Musk asked his 122 million Twitter followers if he should step down as head of the social media platform. They voted in favor early Monday. Musk had promised to abide by the results of the poll.

  • The poll was started after Twitter said Sunday it will ban posts and accounts that promote rival social media platforms, including
    Meta Platforms
    -owned Facebook and Instagram and newer platforms Mastodon and Post. It will continue to allow paid promotions for any of those social media, however.

  • Former President Donald Trump’s Truth Social is also included in the ban, which involves both links to the other social media platforms and accounts that tell followers where to find them on the listed platforms. TikTok is notably missing from the ban, and cross-posting is still allowed.

  • Twitter is still adjusting under Musk, who courted controversy last week for suspending journalists’ accounts. Some users have been using their Twitter profiles to signal their accounts on rival platforms.

  • The latest policy attracted criticism in a flood of tweets on Sunday, including one from one of its founders, Jack Dorsey, who tweeted, “doesn’t make sense.” Paul Graham, a prominent Silicon Valley figure, had his account suspended on Sunday.

What’s Next: The Twitter drama has raised concerns among
Tesla
shareholders that Musk has lost focus on the EV company as the stock is down 57% this year. Some prominent Tesla investors want its board to take action, including the possibility of a stock buyback to support the price.

Liz Moyer

***


In Washington, It’s Time for Another Spending Bill Deadline

Washington is facing another crunchtime over government funding, with lawmakers returning to Capitol Hill this week to work on meeting the deadline to pass a $1.7 trillion bipartisan spending bill to prevent a government shutdown and fund its operations through September.

  • Lawmakers have agreed to provide $858 billion for military spending in an annual defense policy bill, the amount that passed the Senate last week as the Pentagon works to restock supplies after sending arms to Ukraine in its fight with Russia.

  • Lockheed Martin
    has more than $950 million in orders for military missiles, the New York Times reported, and
    Raytheon Technologies
    has more than $2 billion in Army contracts for missile systems. Military spending could reach its inflation-adjusted highest level next year since 2008-2011, the report said.

  • Lawmakers want to add a bill that would expand incentives for retirement savings, including raising the starting age for required minimum distributions from tax-deferred accounts, The Wall Street Journal reported, adding bipartisan agreement on tax breaks for businesses and households is unlikely.

  • The larger spending bill was hammered out without the involvement of House Republicans, who are expected to voice opposition, the Journal reported. Rep. Kevin McCarthy (R., Calif.) wanted to push budget talks into next year, when the GOP takes a majority in the House.

What’s Next: Senate Minority Leader Mitch McConnell (R., Ky,.) has said he would support the spending bill if it gets completed by Dec. 22. Both the Senate and the House need to pass it by Friday night to avoid a shutdown.

Liz Moyer

***

FTX’s Bankman-Fried Expected to Drop Fight Against Extradition

Sam Bankman-Fried is expected to appear in court today to agree to extradition to the U.S. after being arrested and jailed in the Bahamas last week in connection with the collapse of his cryptocurrency exchange FTX, Reuters reported.

  • It is a reversal from Bankman-Fried’s earlier decision to fight extradition, Reuters reported. A spokesman for Bankman-Fried’s lawyer told Barron’s on Sunday he had no additional comment right now. Last week, he said Bankman-Fried was considering all legal options.

  • Reuters and other reports said it wasn’t clear why Bankman-Fried had changed his mind about extradition. He is being held in jail in the Bahamas after a judge denied bail last week. If transferred to the U.S., Bankman-Fried would face another arraignment and bail hearing in court.

  • FTX’s collapse was just one part of the crypto winter this year. The value of the world’s cryptocurrencies as tracked by CoinMarketCap is around $850 billion now, down from $3 trillion one year ago, the Washington Post reported.

  • Investors are feeling the FTX fallout. They withdrew almost $20 billion from crypto funds in November, or nearly 15% of total assets under management, bringing the funds’ collective AUM to their lowest in nearly two years, The Wall Street Journal reported, citing research firm CryptoCompare.

What’s Next: Bankman-Fried currently is awaiting a new bail hearing in the Bahamas on Jan. 17, the Post reported, and his extradition trial had been scheduled to begin Feb. 8, though a decision to drop his fight against it could speed his return to the U.S.

Liz Moyer

***

L3Harris to Buy Rocket Engine Maker Aerojet Rocketdyne

U.S. defense contractor L3Harris Technologies has agreed to buy rocket engine maker Aerojet Rocketdyne in an all-cash deal valued at $4.7 billion.

  • Aerojet was targeted by Lockheed Martin in a deal reached in December 2020, but the aerospace and defense giant terminated its proposed $4.4 billion takeover after the Federal Trade Commission sued to block the acquisition over antitrust concerns.

  • L3Harris CEO Chris Kubasik has said he wants the company to become an alternative to the largest Pentagon suppliers, including Lockheed and Raytheon Technologies.

  • “We’ve heard the DOD [Department of Defense] leadership loud and clear: they want high-quality, innovative and cost-effective solutions to meet both current and emerging threats, and they’re relying upon a strong, competitive industrial base to deliver those solutions,” Kubasik said in a statement Monday.

  • In October, L3Harris agreed to buy a military communications business—Link 16 Tactical Data Links—from Viasat. L3Harris is a product of the biggest ever defense merger between L3 Technologies and Harris Corporation in 2019, creating the sixth-largest U.S. defense contractor.

What’s Next: A deal to buy Aerojet would certainly help L3Harris toward its aim of challenging the biggest Pentagon suppliers, but, like Lockhead Martin’s efforts, it is likely to face intense regulatory scrutiny.

Callum Keown

***

Microsoft Prepares Arguments Against FTC for Activision Deal

Microsoft
sees itself as an underdog in competition with
Sony’s
PlayStation in the gaming market, and plans to position itself that way in crafting its argument to an administrative law judge about why its deal to buy
Activision Blizzard
should withstand the Federal Trade Commission’s effort to block it.

  • President and Vice Chair Brad Smith gave shareholders an outline of Microsoft’s potential court argument after the FTC sued it in early December to block the $68.7 billion deal on anticompetitive grounds. Smith says the merger is “fundamentally good” for gamers and developers.

  • The FTC argues the deal would help Microsoft control consumer access to Activision’s games beyond the Xbox, including the potential for price increases. Microsoft says Sony has 70% of the console market to its 30% and has more games exclusive to PlayStation than it has on Xbox.

  • Smith said the whole reason behind the deal was that it would add to its game library. “We think that will make us, as the smaller competitor in this market, more competitive,” Smith told shareholders.

  • Microsoft recently offered to the FTC, before it sued over the deal, to submit to a legally binding consent decree with the FTC to provide Call of Duty to Sony and other console system makers for a decade, Smith said last week. It also has agreed with Nintendo to bring the game to Nintendo Switch.

What’s Next: Microsoft has until Thursday to respond to the FTC’s lawsuit. Unless a resolution is reached, a hearing would take place in the FTC’s administrative court in August, according to the FTC’s lawsuit, though any decision could come months after that.

Liz Moyer

***

MarketWatch Wants to Hear From You

If I incur an early withdrawal six-month interest penalty on a bank CD, can I deduct the penalty from my tax return?

A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to thebarronsdaily@barrons.com.

***

—Newsletter edited by Liz Moyer, Rupert Steiner

Credit: marketwatch.com

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