Elon Musk Offers to Buy Rest of Twitter; How I've invested my assets; Worst drawdown for Treasuries in decades; Some of the Biggest Brands Are Leaving Russia. Others Just Can't Quit Putin. Here's a List; The Human Cost of Russia's War on Ukraine
1) It was only yesterday that I reiterated, "Musk has now put Twitter (TWTR) into play, meaning that someone is going to buy this company," but I must say I'm surprised that Elon Musk himself has bid to take it private, this quickly: Elon Musk Offers to Buy Rest of Twitter at a Valuation of More than $43 Billion. Excerpt:
Elon Musk has offered to buy the rest of Twitter Inc. in a deal valuing the social-media company at more than $43 billion, calling the bid his "best and final offer."
"If it is not accepted, I would need to reconsider my position as a shareholder," said Mr. Musk, who earlier this year built a more than 9% position in the stock, making him the company's largest shareholder. "I am not playing the back-and-forth game."
Mr. Musk said he would pay $54.20 a share in cash, representing what he said was a 54% premium over the day before he began investing in Twitter and a 38% premium over the day before his investment was publicly announced.
"Twitter has extraordinary potential. I will unlock it," Mr. Musk added.
But I'm even more shocked at the reaction by the market. I expected the stock to trade up to at least $60, reflecting the likelihood of higher offers, but instead, the stock this morning is trading for less than $50, a meaningful discount to Musk's offer.
For this price to make sense, investors must think that Musk's offer isn't real and nobody else will make a topping bid.
I think both assumptions are wrong. Musk would love to own Twitter at the price he's offered, and he certainly can afford it, as this represents not much more than 10% of his net worth.
And as I wrote yesterday, I think there will be a significant bidding war for this unique asset:
...the most obvious buyers, Meta (FB), Alphabet (GOOGL), or Microsoft (MSFT), are likely blocked for antitrust reasons, and there's no way the U.S. government will allow a foreign company to buy Twitter. But I wouldn't rule out Salesforce (CRM), PayPal (PYPL) – which bid for Pinterest (PINS) recently – or Oracle (ORCL).
But I think the most likely scenario is that Twitter is purchased by a private equity firm with Musk's participation.
I reiterate my conclusion: "I think the takeout price will be much higher, so the stock remains a strong buy."
2) As I suspect, most of my readers, I focus mainly on stocks. That's been my business for more than two decades and where I've invested two-thirds of my liquid net worth.
The balance is 22% cash and 10% in a handful of private companies I know the founders, the largest being my cousin's medical device company and three of my colleague Enrique Abeyta's ventures.
Beyond that, I own one piece of real estate, my home/apartment in Manhattan, and that's it. I try to keep things simple...
You will note that I don't own any bonds. There are three reasons for that. First, I don't know much about them. I find stocks much more interesting! Second, I don't need income – I get that from my job. And lastly, for pretty much my entire investing lifetime, we've been in a low and declining interest rate environment, as you can see in this chart, courtesy of Visual Capitalist:
Such low interest rates made me think I wasn't getting paid enough and made me worry that the value of my investments would decline if rates rose, so if I couldn't find good stocks to buy or the market made me nervous and I wanted to have dry powder, I would simply hold cash.
As you can see from the chart above, I've been wrong for more than 40 years!
But, like a broken clock that's right twice a day (or, in my case, maybe twice a lifetime!), bonds have taken a bath in recent months, as interest rates have spiked due mostly to the Federal Reserve raising rates to fight inflation, as you can see in this chart:
My take: The Fed is certainly going to continue raising rates, but I have no idea how far or how fast when it will stop and how much is already priced into the bond market.
So I'm just going to keep doing what I've always done, focusing on an area where I think I have an edge: finding stocks that are likely to go up!
3) It's good to see corporations being named and shamed: Some of the Biggest Brands Are Leaving Russia. Others Just Can't Quit Putin. Here's a List. Excerpt:
In the latter half of the 1980s, roughly 200 American companies withdrew from South Africa, partly in protest against its apartheid system. As businesses fled the country, South Africa's segregationist president, P.W. Botha, came under increasing economic pressure. The corporate exodus contributed to the end of apartheid and was a remarkable display of the power that companies have. When they're courageous enough to use that power for good, it can help topple repressive governments.
Over the past six weeks, we've witnessed a similarly extensive response from the private sector to Russia's war in Ukraine. Hundreds of American companies have announced that they are voluntarily curtailing or halting their business in Russia, according to data compiled by our team of 24 researchers at the Yale School of Management. While it's impossible to say whether all of these companies are motivated by purely moral concerns, they've all gone above and beyond what is legally required by international sanctions.
It's still too early to tell whether their moves will help force Russia to end the war. But sanctions from Ukraine's allies have already shaken Russia's economy. The country's stock market is on an IV drip, and the Kremlin has imposed strict controls to prop up the value of the ruble.
Companies have a role to play in keeping the economic pressure on President Vladimir Putin. To that end, our team has placed businesses in one of five categories based on their response to the war. Consumers should know whether the companies that make their food, clothes, and goods are fully committed to ending Mr. Putin's atrocities.
Our goal is absolute, and some might even say extreme: Every corporation with a presence in Russia must publicly commit to a total cessation of business there. Russians who rely on the food or medicine those companies make or jobs they provide may suffer hardship. But if that's what it takes to stop Mr. Putin from killing innocent Ukrainians, that's what businesses must do.
Whether you agree or disagree with companies "getting involved in politics," as my colleague Berna Barshay wrote in her Empire Financial Daily about Disney (DIS), it's increasingly becoming part of every CEO's job...
4) Speaking of Ukraine, I have been texting multiple times a day with human rights activist Amed Khan, a board member of the International Refugee Assistance Project (bio here). He's there right now and recently posted this video (warning: very graphic): The Human Cost of Russia's War on Ukraine.
He just wrote to me:
I spent a lot of time in Bucha, Irpin, Borodyanka, and other recently liberated cities in Ukraine. I worked in Rwanda, Bosnia, Syria, and Iraq. The level of brutality of the Russian army in Ukraine, particularly with regard to sexual violence, is really only matched by the Russian army in its previous invasions. I have been speaking daily to new evacuees from Mariupol, and it will take years to get all the stories from there alone.
I echo what Amed says at the end of his video: "We must use all the tools that we can find to stop this war."
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com. Also, Empire Financial Research and the market are closed tomorrow for Good Friday. Look for my next e-mail on Monday, April 18, after the Weekly Recap. Enjoy the holiday!