Elon Musk’s Latest Twitter Adventure

What’s the plan?

Shares of Twitter soared 25 percent in premarket trading on news that Elon Musk had personally bought a 9.2 percent stake in the social media company, making him its largest shareholder. The stake, revealed in a regulatory filing, was amassed before Musk criticized Twitter in — yes — a series of tweets, questioning the company’s commitment to “free speech” and wondering whether a new social media platform was needed. With more sway over the company, will he try to reinvent Twitter to be more to his liking?

Musk’s relationship with Twitter is long and complicated, involving most notably his legal wranglings with the S.E.C. over his tweets about Tesla’s finances. Will Musk now agitate for Twitter to alter its policy on moderating content in the name of freer speech? What is Elon Musk doing now?Will he push for Twitter to open up its algorithm, which the company’s co-founder and former C.E.O. Jack Dorsey appeared to support last week? (Musk and Dorsey are friendly.)

We have many more questions:

• Musk built the stake through passive investments — will he keep buying or even try to acquire the company outright? (It would put a relatively small dent in his $270 billion-plus net worth.)

• Will Musk ask to join Twitter’s board? Will Twitter invite him to join?

• What do Tesla and SpaceX shareholders think of this? Will they see it as a distraction for Musk? And if Musk steers Twitter in a direction that irks policymakers, who have been trying to rein in social media platforms, could that create complications for Tesla or SpaceX? Recall that President Trump took a dim view of Amazon because he disagreed with coverage in The Washington Post, which Jeff Bezos owned separately.

• Given Musk’s history with PayPal and interest in cryptocurrency, might he push Twitter to do more in payments?

• How much money did Musk make off this morning’s news? Musk’s disclosure came out today, but the document detailing the stake, worth about $3 billion at Friday’s closing price, is dated March 14. Twitter’s shares are up about 50 percent since then.

HERE’S WHAT’S HAPPENING

A judge strikes down a California law on board diversity. The law, which went into effect in 2020, requires California-based public companies to have board members from underrepresented communities. The law put pressure on boards nationwide to diversify, and some lawyers said the ruling was unlikely to reverse those efforts.

The labor movement notches a historic win at an Amazon warehouse. Supporters of a grass-roots unionization effort topped opponents at the Staten Island facility by more than 10 percentage points.

SoftBank winds down its embattled hedge fund. After racking up estimated losses of more than $6 billion, the Japanese tech giant decided to liquidate almost all of the fund, which became known as the “Nasdaq Whale” for its voracious tech trades.

China proposes changes to confidentiality rules on offshore stock listings. The move signals that China is eager to resolve a dispute over American regulators’ ability to audit Chinese companies, which could have led to hundreds of Chinese firms delisting from U.S. markets.

A quick roundup of global election news: Voters in Hungary and Serbia appear to have extended the tenures of Europe’s two most Putin-friendly leaders; preliminary results for Costa Rica’s presidential election put Rodrigo Chaves, who was reprimanded for sexual harassment while at the World Bank, in the lead; and Carrie Lam, Hong Kong’s leader since 2017, said that she would not seek a second term.

‘We are facing challenges at every turn’

This morning, JPMorgan Chase published Jamie Dimon’s annual letter to shareholders, which is widely read on Wall Street and beyond. Dimon, the head of America’s largest bank, focused on the effect that the war in Ukraine could have on the global economy, and on JPMorgan specifically, among other issues that present “challenges at every turn.”

Lananh Nguyen, who covers Wall Street for The Times, highlights some of the most noteworthy parts of Dimon’s 44-page letter for DealBook:

On the war in Ukraine: The conflict is already having a “substantial economic impact,” Dimon wrote, and it could worsen in unpredictable ways, particularly if more sanctions are imposed on Russia and commodity supplies are further disrupted.

On JPMorgan’s exposure to Russia: Dimon said the bank could lose $1 billion “over time,” but it’s not something he’s worried about. He described complying with sanctions as an “enormous undertaking.” JPMorgan and Goldman Sachs said last month that they were winding down their businesses in Russia.

On energy security: “We need a ‘Marshall Plan’ to ensure energy security for us and our European allies,” Dimon wrote, a point he made to President Biden directly last month. Dimon called on the U.S. to boost investments in liquefied natural gas that can be exported to Europe to reduce the continent’s dependence on Russian energy.

On the U.S. economy: Consumers and businesses are flush with cash, but inflation is mounting and persistent, Dimon said. As such, Dimon wrote that JPMorgan is “prepared for drastically higher rates and more volatile markets.”

On return to office: Dimon softened his earlier stance on wanting all JPMorgan employees back in the office as soon as possible. Instead, he now expects that about 40 percent of JPMorgan’s roughly 271,000 employees may move to a hybrid working model, and an additional 10 percent could end up working from home full-time. But he also said there were “serious weaknesses” to remote working, which “eliminates much spontaneous learning and creativity.”

Starbucks puts buybacks on ice

Starbucks announced this morning that it is immediately suspending stock buybacks. It is Howard Schultz’s first act on his first day back in the top job. He returns as the chain is under pressure from a growing effort to unionize its stores, which it has resisted. Halting buybacks could win Schultz some fans among frustrated workers, and highlights the tension between supporters and critics of the practice.

Stopping buybacks would allow Starbucks “to invest more profit into our people and our stores,” Schultz said in a letter to employees, customers and shareholders. This is “the only way to create long-term value for all stakeholders,” he said, echoing critics who say that buybacks divert money from R.&D., capital expenditure, hiring and wages. Last October, Starbucks said it would spend $20 billion on buybacks and dividends over the next three years. Starbucks’ stock was down in premarket trading today.

Corporations are spending more money than ever on buybacks, which have drawn increased scrutiny from policymakers.Last week, the Biden administration proposed a new tax on buybacks and called for regulations that would bar executives from selling their personal shares for years after a company repurchases its own stock.

Many executives have been critical of rules that could limit buybacks. In December, the S.E.C. proposed a number of new rules that, like the more recent White House proposal, are aimed at limiting the ways executives can disproportionately benefit from stock buybacks. Executives, corporate lobbying groups and institutional investors submitted comment letters last week asking the S.E.C. to rewrite some of the proposed changes or scrap them altogether. The National Association of Manufacturers, for example, said more frequent and timely disclosure of buybacks, which the S.E.C. has proposed, would lead to market manipulation — benefiting traders, not long-term shareholders.

“Why should I be in the office? It’s not ‘because I told you to.’ That’s not the answer.”

— Tom Naratil, the president of UBS in the Americas, on how many big banks are now offering flexible working arrangements. With the competition for talent heating up and some workers resisting a full-time return to the office, Wall Street executives are (sometimes grudgingly) adopting work-from-home policies.

On private equity, E.S.G. and unions

Blue Wolf Capital has closed its fifth fund, at $1.1 billion, DealBook is first to report. The private equity firm, which focuses on midmarket investments that adhere to environmental, social and governance, or E.S.G., criteria, was founded by Adam Blumenthal, a former finance official at the New York City Comptroller’s office who also helped oversee the United Auto Workers’ medical fund.

Blumenthal spoke with DealBook about E.S.G., unions and more. The conversation has been edited and condensed.

Do you support the S.E.C.’s recent proposal to regulate E.S.G. disclosures?

Right now, there’s strong investor interest in E.S.G., and so it’s very appropriate for the S.E.C. to create rules and definitions for reporting, in order to both standardize metrics and make people accountable for the accuracy of what they report. That’s the kind of transparency that brings discipline to markets.

It’s rare to see unions come out in favor of a private equity takeover, like in some of your deals. How does that work?

It really depends on the situation. At Twin Rivers Paper Company, we were invited by the paperworkers union to evaluate buying the company, even though they knew that it was overstaffed. For this company to be sustainable, it needed both new management, new capital and a new labor contract that would be more productive. So the trust that we would deliver all three of those things and create a sustainable business is why we got the call.

How big a deal is the union win at the Amazon warehouse?

I think it’s representative of a very broad change in the labor market. The number of jobs in the U.S. today is about 2 million less than it was prepandemic and it’s because there are not enough workers. And so your bargaining power is going to change: That will support unionization, it will support other changes in working conditions in nonunion companies.

Since you began raising your fund, Russia invaded Ukraine, inflation jumped and the yield curve inverted. Are you preparing for a recession?

We certainly anticipate a recession within the investment horizon of the fund. We capitalize our companies quite conservatively as a result, because resiliency is going to turn out to be a critical factor. If you borrow as much money as you can, you’re going to regret it.

THE SPEED READ

Russia-Ukraine war

• Mounting evidence of Russian forces’ indiscriminate killings of Ukrainian civilians led world leaders to consider harsher sanctions, including a ban on Russia’s gas industry. (NYT)

• The price companies are paying to leave Russia is high, but so is the cost of staying. (FT)

• Vladimir Putin has stabilized the ruble but left his country financially isolated. (NYT)

Deals

• Shein, the Chinese fast-fashion company, is considering a funding round at a heady valuation of $100 billion. (Bloomberg)

• Short sellers are reportedly betting aggressively against the cryptocurrency Tether. (WSJ)

• KKR said it plans to drop its nearly $12 billion takeover of Telecom Italia if it doesn’t get access to the company’s books soon. (Bloomberg)

Policy

• A flurry of legislative action is intensifying the divide between liberal- and conservative-led parts of the country. (NYT)

• Jen Psaki is in advanced talks to join MSNBC after she leaves the Biden administration, which could happen as soon as next month. (NYT)

• Britain wants to make its pandemic-era business aid programs permanent. (FT)

Best of the rest

• Pay packets last year for S&P 500 C.E.O.s surpassed 2020’s record, reaching a median of $14.2 million. (WSJ)

• Sony and Netflix are reportedly putting their Will Smith projects on the back burner. (NBC, The Hollywood Reporter)

• A conversation with the economist Thomas Piketty, who thinks America is primed for wealth redistribution. (NYT)

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