Daily Brief: Elon Is Just Toying With Twitter’s Emotions At This Point…

Daily Brief: Elon Is Just Toying With Twitter’s Emotions At This Point…

almost 2 years ago3 mins

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Elon Musk threatened to pull out of his $44 billion takeover of Twitter on Tuesday, as the little minx decides to play a cheeky game of hard to get.

What does this mean?

Elon and Twitter have gone from the “Will they?” stage of their courtship to the “Won’t they?”: the Tesla CEO said on Friday that he was putting the deal “temporarily on hold” until Twitter clarified the number of fake accounts on its platform. Twitter claims bots make up fewer than 5% of its users, but Elon’s skeptical: he suspects it’s at least 20%. And if there really are fewer eyeballs on Twitter’s all-important ads, that could mean the company is worth a lot less than he offered. All this came to a head when the world’s richest man put his foot down on Tuesday, saying he wouldn’t go forward with his $44 billion takeover bid unless Twitter backs up its claims.

Why should I care?

For markets: Is Elon having second thoughts?

Analysts reckon there’s one of two reasons for Elon’s power play: either he wants to find a way to pay less for the platform, or an excuse to walk away from the deal altogether. Investors seem to agree: Twitter’s stock is sitting 30% lower than the price Elon offered to pay for the company, which just goes to show they don’t have high hopes for the deal as it stands either.

Twitter stock

The bigger picture: Elon reads the China playbook.

If the acquisition does go through, there could be big changes to come: Elon said this week that he’s open to the idea of turning Twitter into a “superapp” where users can shop, text, and post to social media all in one place – much like China’s WeChat. As plans go, there are worse ones: analysts reckon it would allow him to achieve his goal of quadrupling Twitter’s revenue by 2028.

Keep reading for our next story...

Walmart Reported Worse-Than-Expected Quarterly Earnings

Walmart image

Walmart reported much weaker-than-expected earnings on Tuesday, as the big-box retailer’s aspirations for a hedonistic Spring Break were well and truly washed out.

What does this mean?

Walmart was waxed, vaxxed, and ready to go last quarter: the retailer had stocked up on everything from barbecues to pool chemicals, only for unseasonably wet weather to derail everyone’s outdoor plans. The company found itself overstaffed too, after workers reduced their Covid leave to get back to their bread-winning ways. That left Walmart with higher labor costs, which was partly to blame for a 25% drop in profit from the same time last year. And since it doesn’t think higher costs are going away anytime soon, the company cut its profit outlook for the year. It’s not exactly the debaucherous trip to Cancun it was hoping for: investors sent Walmart’s stock down 9% after the announcement.

Walmart stock
Source: Google Finance

Why should I care?

The bigger picture: Inflation has bitten.

As the world’s biggest retailer, Walmart is a go-to for economists trying to understand how Americans are handling record inflation. Its results probably confirmed what they already knew: Walmart said customers bought more of its own-brand products and fewer discretionaries like electronics and clothing. Those are telltale signs of high inflation, when consumers tend to plump for discount goods and scale back on nice-to-haves.

US inflation

Zooming out: Credit where credit’s due.

You wouldn’t notice this shifting behavior if you just looked at US retail data, which showed on Tuesday that the value of retail sales in the US grew 0.9% in April from the month before. But that measure isn’t adjusted for inflation, so it’s likely that shoppers were spending more to buy less. There’s also the possibility that Americans are loading up on credit card debt to buy what they need, with data out last week showing that they opened a record 537 million accounts last quarter.

US retail sales
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