Musk’s reaction is not over yet
Thursday was set to be a big day for Tesla and its investors, as the electric vehicle maker finally began delivering its much-hyped Cybertruck pickup truck to customers, its first new model in more than three years.
Instead, Tesla shares fell nearly 2 percent. Part of that loss may have been due to disappointing news about the Cybertruck Pricing and Availability. But some may also reflect renewed concern about Elon Musk’s latest comments, made at the DealBook Summit this week, and whether the self-inflicted damage to X is distracting attention from his other businesses.
Advertisers are not impressed by Musk’s recent tirade. On Wednesday, he claimed that brands were trying to “blackmail” him by suspending his advertising after he endorsed an anti-Semitic conspiracy theory about X. “Don’t advertise,” he said, before using an expletive for emphasis.
At least half a dozen marketing agencies said their clients would keep their advertising campaigns off-site, while others had begun advising their clients to do so as well. “There is no advertising value that can outweigh the reputational risk of returning to the platform,” Lou Paskalis, founder and CEO of AJL Advisory, a marketing consultancy, told The Times.
This has renewed concerns about the fate of X, which may lose up to $75 million in advertising sales (its main source of income) by the end of the year amid such controversies. Increased tension only makes life Harder for Linda Yaccarino, CEO of X, as she tries to revive the company’s difficult finances. (That said, in an internal note On Thursday, he praised Musk’s comments as “sincere and insightful” and urged employees “not to be distracted by secondary critics who don’t understand our mission.”)
Musk’s crude comments indicate that he is willing to let X die from an advertising boycott, in what he suggested was a martyrdom in the name of free speech. He hinted that X could eventually make money by licensing his content to technology companies to train artificial intelligence models. But it’s a risky bet and it’s unclear how much money it would raise.
Some shareholders of private company Billionaire financier Bill Ackman, you may not be bothered by Musk’s comments. But other stakeholders (including banks that still have billions in debt tied to their $44 billion acquisition of the company) are probably feeling less optimistic.
Musk’s latest antics may be a distraction from his other businesses. The White House has already criticized the billionaire for the uproar over anti-Semitism. The federal government is a major customer of SpaceX, Musk’s rocket company. And Tesla shareholders had criticized Musk for that previous incident: a prominent investor, Ross Gerber, last month condemned the mogul’s decision. “Outrageous” behavior and “the damage it has caused to the brand.”
It’s not yet clear how long-lasting that damage will be. The US government still relies heavily on SpaceX and its Starlink satellite internet service. And Gerber, who has already said that he has not sold his Tesla shares, has not weighed in on comments from Musk’s advertisers. Instead, Gerber promoted the features of the Cybertruck.
THIS IS WHAT’S HAPPENING
An Emirati fund partners with Wall Street giants for climate investments. Lunate Capital, a fund with $50 billion in assets controlled by Abu Dhabi’s royal family, is expected to announce a partnership with BlackRock, Brookfield Asset Management and TPG to invest in green projects. In related news, the world’s richest countries agreed at the COP28 climate summit in Dubai on a new disaster relief fund for the poorest and most vulnerable countries.
OPEC Plus countries announce more oil production cuts. The cartel said it would reduce production by about 700,000 barrels, or 1 percent of global output, per day in an effort to prop up falling oil prices, prompting a rebuke from the White House. Still, the price of Brent crude oil is down this morning as investors remain concerned about slowing global demand.
Fighting has resumed in Gaza. A week-long ceasefire ended on Friday after Israel, citing rocket fire from Gaza, resumed attacks on the territory even as international mediators were working to revive the truce. Meanwhile, The Times reports that Israeli military and intelligence officials had obtained a battle plan for the October 7 Hamas attack more than a year in advance.
Meta is said to be bringing its Threads app to the EU The tech giant is expected to unveil the app, its social network rival X, as soon as this month. The Wall Street Journal reports, in the service’s largest expansion since Threads debuted in July. In other social media news, a Montana judge temporarily overturned a state ban on TikTok.
A second blockbuster fight at Disney
Disney CEO Bob Iger said at the DealBook Summit this week that his media giant had made too many movie sequels. But his company is now embroiled in the corporate equivalent of one.
Financier Nelson Peltz, who runs the activist investment firm Trian, formally announced a fight for representation on Disney’s board of directors, almost a year after ending a similar battle. The question is how this effort will reach investors.
Peltz pointed to the performance of Disney shares, noting that the company had lost about $70 billion in market value since abandoning its previous effort to gain a board seat. He added that the addition of two new directors – James Gorman, the outgoing chief executive of Morgan Stanley, and Jeremy Darroch, the former head of British media company Sky – had improved Disney’s corporate governance, but not enough.
Not stated: The specific actions Peltz wants Disney to take. (CEO succession is an issue Peltz has raised before; in naming Gorman as chairman, Disney noted how he had won praise for his handling of the issue at Morgan Stanley.)
Disney has defended its actions, saying on Thursday that he is on his way to save about $7.5 billion in costs, more than initially planned. And at the DealBook Summit, Iger said he has had to deal with unexpected challenges, “some caused by decisions made by my predecessor, others that are basically the result of a tremendous amount of disruption in the world and in our business.”
Disney also criticized Peltz’s association with Ike Perlmutter, the former president of Marvel Entertainment and one of the company’s largest individual shareholders.
The company said the shares of Perlmutter, who was fired this spring after years of feuding with other Disney executives, represent 78 percent of the shares Peltz says he controls. Perlmutter’s “long-standing personal agenda” against Iger raised questions about Peltz’s campaign, as that motivation “may be different than that of all other shareholders,” Disney said.
At least one Disney investor seems concerned about Peltz’s campaign. Blackwells Capital said he was “concerned that Trian’s campaign prioritizes Mr. Peltz’s ego over what is best for all Disney shareholders, and that his latest effort could cost Disney shareholders more than $50 million.” (The size of Blackwells’ stake is unclear.)
“We have one thing in common: none of us will be our party’s candidate in 2024.”
— Gavin Newsom, the Democratic governor of California, in a Fox News debate with Governor Ron DeSantis of Florida last night. Newsom dropped the comment suggesting that DeSantis he would inevitably drop out of the race for the Republican presidential nomination because he was so far behind Donald Trump in the surveys.
A November to remember for investors
Global stocks look set to extend their winning streak on Friday, with European markets in the green and Dow Jones Industrial Average futures pointing to a positive open.
And the rally in debt markets continues after U.S. bonds posted their best monthly performance since 1985, according to Deutsche Bank, in a sign that investors are increasingly hopeful that interest rates have peaked. .
Investors had a good November. The S&P 500 broke a three-month losing streak and gained 8.9 percent, its best monthly gain since the pandemic surge of 2020. Fears of a broader war in the Middle East have eased, putting downward pressure on crude oil prices, while a host of inflation data from both sides of the Atlantic show prices are moderating.
Inflation hawks received more good news Thursday when the Personal Consumption Expenditures report, a measure of inflation detailed by the Federal Reserve, showed that price increases were cooling.
Market watchers are betting that central banks will no longer raise rates. Some now even see the fed court your preferred interest rate at its political meeting in May. As borrowing costs are expected to fall, investors have returned to risk assets. The Nasdaq 100, a collection of big tech stocks, rose about 11 percent last month.
Not everything is rosy. Many economists are worried slower global growth next year. And JPMorgan Chase analysts see a series of risksincluding political uncertainties (there are dozens of national elections taking place around the world next year, including the race for the White House) that could drive stocks lower over the next 13 months.
Can the rally last? A big test could come later Friday, when Federal Reserve Chairman Jay Powell delivers a speech that could reveal any concerns he has about the latest surge in asset prices.
“Market moves have been so large since he suggested that tight financial conditions were doing part of the Fed’s job (Nov. 1) that you have to think he will address subsequent moves and either reject or support them,” said Jim Reid , a strategist at Deutsche Bank, wrote to investors this morning.
The best of the rest
A new UBS report reveals that the new billionaires gained their status this year via inheritance instead of wealth creation. (UBS)
Alistair Darling, who as Britain’s chancellor during the 2008 financial crisis oversaw a bailout of that country’s banking system, died Thursday. He was 70 years old. (FT)
Bloomberg Businessweek is published monthly. (NY)
“A Harvard professor prepares to teach a new subject: Taylor Swift” (NYT)
We would like to receive your comments! Email your ideas and suggestions to firstname.lastname@example.org.