How did Elon Musk go
from punchline to deal in under two weeks? The Tesla chief looks set to pull off a Twitter acquisition that earlier this month looked highly unlikely.
The world’s richest man has convinced Wall Street sceptics to back his offer to buy the social media platform, whose board has
agreed to sell him the company for roughly $44bn. It is a deal that could result in Musk, who has more than 85mn Twitter followers, seizing control of the influential site and becoming a modern-day media baron. He has in the past used Twitter to attack regulators and critics.
Twitter’s board had attempted to hamper Musk’s ambitions with a
poison pill to limit his liability. But it was forced to negotiate at the weekend after he unveiled a $46.5bn financing package. Directors even received calls from large and small investors pushing them to accept the offer.
As I wrote
in my column this week, shareholder activism is on the rise - and has a new protagonist in Musk. There are political
ramifications, too. Musk has no particular affiliation, but in the US, Democrats are nervous while Republicans are rejoicing at the prospect of a return to Twitter for Donald Trump, whose account was excluded in the wake of the January 6 2021 attack on the US Capitol.
In his
pitch, Musk said he wants to make Twitter “better than ever” by introducing new features, making its algorithms open source, stamping out bots and authenticating “all humans”.
What next? The deal could still fall apart if blocked by regulators, or if Musk fails to deliver on the equity component of the transaction. It is worth noting that the terms allow Musk to back out by paying a $1bn "
break fee" - a significantly lower backout fee than typical leveraged buyout.
Neither has Musk said how he will finance the deal. One option is to sell billions of dollars worth of his Tesla shares - a move anticipated on Tuesday when the carmaker’s
shares slid more than 12 per cent. Volatile moves in Tesla’s stock
underline the risks for Wall Street.
Meanwhile, the US dollar
hit its highest level in more than two years this week, as the Fed was expected to tame inflation with an aggressive interest-rate rise. The dollar index, which tracks the US currency against six others including the euro and sterling, has risen by roughly 12 per cent in the past year.
Wider inflationary pressures are at play here: Russia’s invasion of Ukraine has lifted commodity prices, and rising coronavirus cases in China have prompted lockdowns that threaten to disrupt global supply chains further.
Gazprom, Russia’s majority state-owned energy group, suspended gas supplies to Poland and Bulgaria this week after it claimed it had not received payment in roubles. The interruption in supply rippled into markets, with the
euro falling to a five-year low against the dollar. Our
analysis sets out Russia’s rationale. Other EU energy groups are
preparing to meet Putin’s payment terms.
In companies news, next month will see Amazon shareholders
vote on a proposal asking the group to produce a tax transparency report to include a country-by-country reporting of taxes paid. The vote could be
a litmus test for those businesses who profess to be champions of ESG, argues the FT’s Helen Thomas.
Tax is a major component of social impact. The OECD estimates that avoidance costs governments between 4 and 10 per cent of global corporate tax revenues - money that could be spent on health, education or infrastructure for the energy transition.
Others are taking pre-emptive action. Schroders - one of the UK’s largest asset managers, which manages £731.6bn - is trying to burnish its governance credentials by
overhauling its “anachronistic” ownership structure to improve ESG, in a move that will give all shareholders voting rights. Schroders, whose founding family is still its largest shareholder, is aiming for the plan to be in place by late July.
Asset managers generally are finding their own governance under scrutiny as they make a concerted push into ESG investing. In 2016, the group drew criticism for flouting best corporate governance guidelines by making its then-CEO Michael Dobson its chair. Dobson will step down at the company’s annual meeting this week.
And in the US, investors in Abbott Laboratories, a medical device company, will this week
vote on a first-of-its-kind shareholder proposal, which asks the company to disclose more information about transactions conducted using pre-arranged trading schedules.
These allow executives to divest shares according to a preset schedule filed with the US Securities and Exchange Commission without breaking insider trading rules. But the SEC and some investors are worried that they are open to misuse.
Meanwhile, accounting group RSM has this week
bought out most of the shares in the business held by its former UK partners, consolidating the power of its new management team two years after the entire board was ousted following an investor coup. The move allows management to strengthen its grip and gives retired shareholders an exit route.
And finally, can you reach net zero by 2025? See if you can save the planet from the worst effects of climate change with
the FT’s new interactive game.
