Daily Brief: Elon Musk Just Offered To Buy Twitter. Now It’s Stuck Between A Rock And A Hard Place.

Daily Brief: Elon Musk Just Offered To Buy Twitter. Now It’s Stuck Between A Rock And A Hard Place.

almost 2 years ago3 mins

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Elon Musk offered to buy Twitter on Thursday for $43 billion, as he dreams of a utopian internet where everyone can talk freely and openly – about him.

What does this mean?

Elon revealed two weeks ago that he’d bought a 9% stake in Twitter, which the company shortly followed with an offer of a spot on its board. But when he turned it down, analysts were quick to point out that the move would’ve limited him to a 15% stake, suggesting that he might want to launch a full-scale takeover. They were right: the world’s richest person – reportedly worth around $260 billion – offered to buy Twitter for $54.20 a share on Thursday. That values the company at around $43 billion – 54% more than it was worth before Elon started investing. As for his intentions, he says Twitter needs to be taken private in order to make it a “platform for free speech around the globe.” God's work, Elon: the world's worst people have been too muzzled for too long.

Elon makes a bid

Why should I care?

For markets: Twitter’s backed into a corner.

Twitter’s shares jumped 12% on the news, but there’s a catch: Elon has said he lacks confidence in current management, and would reconsider his position as a shareholder if his offer wasn’t accepted. Let’s say we take him at his word (a big if): the sale of his stake would probably send Twitter’s shares plunging toward the low-30s they sat at before this whole saga. That leaves Twitter with a decision to make: accept the offer, or accept its shareholders’ wrath.

Twitter stock
Source: Financial Times, Refinitiv

Zooming out: Morgan Stanley could do with the work.

Musk hired Morgan Stanley to advise him on the deal, and it might be glad of the business: the firm reported on Thursday that its investment banking business – the segment that advises on deals and initial public offerings – saw its revenue fall 37% last quarter versus the same time last year, and its total profit fall by 8%.

Keep reading for our next story...

Chipmaker TSMC Notched Record Quarterly Results

TSMC image

TSMC reported record results on Thursday, and the world’s biggest contract chipmaker only had to force its employees to live at work to make it happen.

What does this mean?

There’s an adage that you’re never more than six feet away from a rat, but TSMC’s chips are probably even closer: so high was demand for smartphones, TVs, and other gadgets last quarter that you’d find them everywhere. And the chipmaker made the most of that demand, albeit with some suspect compromises: it kept production running at its Chinese factories by having workers sleep on site, even as other companies – or as TSMC calls them, slackers – shut down in response to Covid-related restrictions. It was able to hike prices by as much as 20% too, in the company’s biggest-ever single increase. Put them together, and TSMC’s revenue and profit jumped 36% and 45% from the same time last year.

TSMC prices

Why should I care?

Zooming in: How does TSMC like them apples?

The time between an order of chips and delivery hit almost 27 weeks across the industry last month, but TSMC wants to bring that down: it announced plans to spend up to $44 billion on upgrading existing facilities and building new ones in the US, Japan, and more this year. The chipmaker’s getting a taste of its own medicine on that front, mind you: it could be forced to wait at least 18 months for essential chipmaking equipment.

The bigger picture: Too much of a good thing.

Chip sales have been climbing 20% a month or more for almost a year now, but there’s no guarantee it’ll continue. For one thing, the synchronized decision of every chipmaker to build up stockpiles and boost manufacturing could lead to oversupply, while an increasingly likely economic slowdown could damage demand. That might be why an index tracking some of the world’s biggest chipmakers has underperformed the US stock market by 14% this year.

Chips down
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