Market Loop - Elon Musk – the busiest businessman

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22nd April 2022

Bite-sized business news from the UK and beyond

Good morning The days of the 9am-5pm high street bank branch could be numbered. Yesterday Santander announced that from July hundreds of its branches will operate from 9.30am to 3pm on weekdays in response to changing customer habits.
Although the pandemic accelerated the use of online banking, Santander said the number of customers using its branches had already fallen by 33% between 2017 and 2019, then dropped a further 50% in 2020 and 12% last year.

Today's stories

Elon Musk – the busiest businessman
Have we reached peaked Netflix?

TECH
Elon Musk – the busiest businessman

What’s going on?
Tesla boss Elon Musk has capped off a busy few weeks by announcing that: Tesla had a stellar last three months and he’s secured $46.5bn in financing to buy Twitter.

Why is this important?

A month in the life of the world’s richest month is certainly eventful:

Two weeks ago Elon Musk rocked the world by announcing that he had bought 9% of Twitter. Initially he was given a seat on the board but that was swiftly cancelled.
He’s now made his intention clear that he wants control of the whole business to, in his words, protect free speech on the platform. To that end, last week he put forward a bid to buy Twitter for $43bn which the company did not support saying it undervalued the business.
To protect itself from being bought out, Twitter’s board implemented what’s known as a ‘poison pill’ – which effectively prevents him from purchasing more than a 15% stake.
Yesterday he unveiled he had secured $46.5bn of funds including bank debt to buy Twitter and was exploring making a tender offer meaning he would directly negotiate with shareholders and bypass the board.

While the Twitter saga has been rolling on, Musk’s day job running electric carmaker Tesla has been going well. Despite supply struggles and China’s Covid lockdowns, Tesla beat earnings expectations.

Tesla delivered a record 310,000 cars last quarter, with revenue soaring 81% from a year ago. The company is also catching up to traditional carmakers with production numbers close to Mercedes and BMW. It’s already pulled ahead of Volvo and Subaru.

Zooming out

So where next for Twitter and Tesla?

Twitter’s board says it’s doing a “careful, comprehensive and deliberate review” of Musk’s offer but has been clear that it believes the company is worth much more. With the poison pill in place, Musk could face an uphill battle to buy the whole company. However if his offer becomes more attractive then Twitter shareholders could be persuaded to accept even if the board is unsupportive.

Tesla thinks it can produce 50% more cars this year but China’s zero-Covid crackdown is complicating forecasts. It had to suspend manufacturing at its key Shanghai factory for weeks because of citywide lockdowns.

Other stories to keep you in the loop

Nestlé says more price rises are coming after 5% increase
World facing food crisis from Russia’s invasion of Ukraine, says World Bank
Work from home to beat Putin, says EU
CNN shuts down its streaming service less than a month after its launch
Lewis Hamilton and Serena Williams join bid to buy Chelsea
Grubhub gave us indigestion, admits Just Eat

MEDIA
Have we reached peaked Netflix?

Back in 2020 Netflix was on top of the world. Pandemic restrictions meant binge-watching boxsets on the platform became a popular lockdown pastime. Netflix share price reached an all time high and it gained an extra 37m new customers.

But earlier this week, the company reported it lost 200,000 customers in the three months to March - its first quarterly loss in over a decade and a big difference from the 2.5m addition that it expected. And it doesn’t end there, the company forecasts it will lose another 2m subscribers by the end of June.

So what’s behind the demise? The reopening of economies after lockdown has meant consumers have other options on how to spend their free time but there are other factors working against Netflix:

Although Netflix is still the biggest streaming platform with 222m customers, it now faces competition from virtually every entertainment company including Disney, Apple and Amazon.
Households are being more selective with their spending amid the cost of living crisis and decades-high inflation. Around of third of UK and US consumers have either recently cancelled a monthly subscription service or are planning to.
And finally following the start of the Ukraine war, Netflix pulled out of Russia which resulted in 700,000 subscriber loss.

The stock market has not taken the news well. Netflix shares slumped as much as 35% dropping the company’s value by more than $45bn. Investment firm Perishing Square was so disappointed that it dumped the 3m shares it bought in the company just months ago at a $400m loss.

So where does Netflix go from here? The company has a few levers it could pull to kickstart growth, such as selling advertising and cracking down on widespread password sharing. But with so many streaming options and consumers now spending more time outside their homes, it could be that the streaming market may have peaked.

Stat of the day

Netflix estimates that 100m non-paying households share passwords

Interesting links from around the web

12 tips to help future-proof your business
What it would take to make us love our jobs again
Where women earn 120% of men's salaries

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Market Loop - Elon Musk – the busiest businessman

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