Musk has second thoughts

Delivered on By Justin Pyvis

Good morning! You know we’re getting close to election day because national security has become a recurring theme, with the latest attempt at fearmongering coming from Defence Minister Peter Dutton, who called the presence of a Chinese spy ship off the coast of WA “an aggressive act”:

“It is unusual in terms of the way in which it has come so far south and the way it’s hugging the coastline as it heads up in the direction of Darwin.

It is an aggressive act particularly because it has come so far south — for it to come south of Exmouth is without precedent.”

Is it concerning that Chinese vessels are sailing down the Australian coast? It could be, depending on what it’s up to. But it’s certainly not the first time it has happened and it’s a completely legal and common practice (Australia does it in the South China Sea), with international maritime law permitting ships to sail freely in international waters, which the Chinese ship was doing.

Dutton’s own department made that perfectly clear:

“Australia respects the right of all states to exercise freedom of navigation and overflight in international waters and airspace, just as we expect others to respect our right to do the same. Defence will continue to monitor the ship’s operation in our maritime approaches.”

Hardly an “aggressive act”… this election can’t be over soon enough!


Reading the tea leaves

Daily % change

AUD/USD

69.3

+1.0%

AUD/CNY

4.71

+1.1%

AU Bond

3.38

+1.6%

US Bond

2.94

+4.2%

ASX200

7,075

+1.9%

S&P500

4,024

+2.4%

Brent (bbl)

111.2

+3.5%

Gold (oz)

1,810

-0.8%

Iron ore (t)

127.2

+1.3%

Bitcoin

30,936

+2.8%

Ethereum

2,119

+3.0%

Note: Brent oil, gold bullion and iron ore prices are the second futures contract. Bond yields are 10-year Treasuries.

The US S&P500 finished the week with a bang, rising 2.39% with all 11 sectors rallying led by consumer discretionary, which surged by 4.1%. But it wasn’t enough to prevent the index from falling for a sixth consecutive week amid fears that policy tightening by the Fed could drop the economy into a recession, with chair Jerome Powell warning that rising rates would “include some pain”.

Locally the ASX200 (+1.93%) enjoyed its best day since 22 January, although as with most other indices around the world – the FTSE All-World index is on its longest weekly losing streak since the middle of 2008 – it still finished down -1.8% for the week due to ongoing war and recession fears.


Food for thought

Based on where the share prices of rival tech companies such as Snap have moved in recent weeks, Elon Musk might want a price closer to $30.
Based on where the share prices of rival tech companies such as Snap have moved in recent weeks, Elon Musk might want a price closer to $30. Source

Whenever Elon Musk is involved you know there’s going to be drama, and Friday was no exception: a single tweet from the eccentric billionaire sent Twitter’s share price down -9.7% after he declared the acquisition was on hold “pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users”.

While Musk also took to Twitter to state he was “still committed” to the deal, Twitter’s share price of $40.72 is now significantly below Musk’s offer of $54.20 per share, reflecting the market’s view that there’s a decent chance the deal will either fall through or be negotiated to a lower level.

The timing of Musk’s tweet is certainly suspicious and reeks of buyer’s remorse. Musk likely feels aggrieved following the broad-based tech selloff in recent weeks, combined with Twitter’s uninspiring March quarter results, which together mean his offer may have been at least 50% too high (see chart above, which compares Twitter’s share price with Snap, another social media company not subject to a takeover offer).

But walking away isn’t that easy. Musk faces a penalty of $US1 billion if he pulls out of the deal, which might be why he’s trying to unearth skeletons in Twitter’s public filings, giving him some leverage to either renegotiate the offer price or scrap the break fee entirely.

How will the acquisition play out from here? Anything’s possible when Musk’s at the centre of it, but if he has decided he’s no longer interested then it will come down to the legal specifics of the $US1 billion break fee, and how vigorously and to what extent Twitter’s board is willing and able to enforce it.


Chewing the fat


Bits and bytes

🏡 If re-elected the Coalition will “allow Australians over the age of 55 to sell and downsize their home and contribute $300,000 into their superannuation fund”.

🏠 In attempt to match Labor’s ill-conceived housing plan, a re-elected Coalition will also boost demand and ignore supply by allowing first home buyers “to use up to $50,000 from their superannuation account to buy property”.

👩‍⚕️ Opposition leader Anthony Albanese “pledged nearly $1 billion in new Medicare funding if the Labor party wins the federal election”.

⛈️ Queensland was once again inundated with rain over the weekend, with major flooding causing road closures and residents in low-lying areas urged to self-evacuate.

🐆 The leopard says he’ll change his spots: After three years of being a self-described “bulldozer”, if re-elected ScoMo promised a “change with the way I do things”.

🦗 Not a great year to be an ex-Australian cricketer. RIP: Cricket legend Andrew Symonds died in a car accident on Saturday night aged just 46.

😢 The University of Michigan’s US consumer sentiment index fell -9.4% from April, hitting its lowest level since late 2011 “continuing the general downward trend in sentiment over the past year”.

❌ Turkey’s President Tayyip Erdogan said he would not support plans by Sweden and Finland to join NATO because they were “home to many terrorist organisations”.

🎤 A recording of an oligarch made in mid-March claimed that Russia’s President Putin is “very ill with blood cancer” and that “The problem is with his head… One crazy guy can turn the world upside down.”

⚡ Russia cut electricity supplies to Finland on the weekend although it will have limited impact, with the 14% of power imported to “be compensated by importing more electricity from Sweden and by generating more electricity in Finland”.

🏒 Russia’s President Putin told his Finnish counterpart Sauli Niinisto – with whom he played ice hockey in 2012 – that joining NATO “may have a negative impact on Russian-Finnish relations”.

☕ BoJo must not drink coffee in the office: “My experience of working from home is you spend an awful lot of time making another cup of coffee and then… forgetting what it was you’re doing.”

🔓 “Shanghai will gradually begin reopening businesses such as shopping malls and hair salons from Monday after weeks in a strict COVID-19 lockdown.”