🐦 Elon’s new nest

1. Elon’s buying Twitter for $44B, and now the world’s richest man will own the world’s most influential platform

He really did it… Elon bought Twitter. Yesterday Twitter agreed to sell itself to Elon Musk for $44B after weeks of intrigue. A recap: three long weeks ago Elon outed himself as Twitter’s biggest shareholder and (briefly) joined its board. Then he tried to take over, prompting the board to use a poison pill to try to stop him. It didn’t work…

• Money talks: Elon’s offer was 38% higher than Twitter’s pre-Musk value. So once Elon got $13B from Morgan Stanley and other banks, $12.5B from loans against Tesla stock, and put up the rest in cash, the board changed its tune.
• It’s a pricey purchase, even for the world’s richest guy. Elon’s $21B personal investment is one-fifth of his net worth.
• The deal, unanimously approved by Twitter’s board, is expected to close this year, pending regulatory approval.

The internet’s town square… is about to get Elon-ified. After loudly criticizing Twitter for suppressing free speech, he has hinted at making changes to the platform:

• Fewer ads: Elon wants to reduce Twitter’s reliance on ads, which make up 90% of revenue, by prioritizing subscriptions.
• Less moderation: He wants to change current moderation policies to promote free speech, which could frustrate advertisers.
• Clearer algos: Elon plans to open-source Twitter’s algorithm to show users how posts reach their timelines and reduce bots.

THE TAKEAWAY

The Technoking is a famously hands-on tycoon… He’s less interested in reputation and more interested in influence. Twitter doesn’t have TikTok’s user base or The New York Times’ cachet, but it has outsized influence because it's used by everyone from US presidents to Kim K. So while some billionaires pay for prestige (see: Jeff Bezos buying The Washington Post), Elon pays for primacy: he wants to be at the center of the issues that interest him. First it was accelerating the green transition with Tesla, then colonizing other planets with SpaceX, then “solving” traffic with The Boring Company — and now “saving” free speech with Twitter.

2. In this rough market, investors are turning to pantry powerhouses like Coca-Cola to find stability

Have a Coke and a smile… Coca-Cola sales have taken off as more people sip on Gatorades and super-sized movie-theater Sprites. Coke’s stock hit an all-time high yesterday after smashing Wall Street's earnings expectations, posting growth in every category:

• Soda-licious sales: Coke notched a 16% jump in revenue (up 3X since last year), thanks to strong demand for everything from tea to its signature soda line.
• Bubbling over: Blaming higher ingredient and packaging costs, Coke hiked prices by nearly 10% — but kept its upbeat annual forecast (translation: it expects consumers to keep paying).

High-fructose frenzy… Between inflation, rising interest rates, and the war in Ukraine, investors have had a tough time finding stable profits in the market. But pantry powerhouses like Coke have weathered the recent volatility as consumers keep splurging on brands they can’t live without.

• Pampers or bust: Last week Gillette and Tide parent P&G notched its biggest sales gain in decades, with its most expensive products seeing the highest demand.
• Sugar high: Shares of Coke, Pepsi, and Cheerios maker General Mills are all up about 20% in the past year, while the S&P has gained only 3% and the Nasdaq is down 8%.

THE TAKEAWAY

Consumer staples are the port in an economic storm… along with other non-cyclical stocks — aka companies selling essential goods and services (think: groceries, gas). When the economy is booming, non-cyclicals tend to be less popular than their high-growth cyclical peers (like: tech, travel, and cars). But when growth slows, investors gravitate toward necessity-driven non-cyclicals since sales and earnings tend to remain stable regardless of the broader economic conditions.

What else we’re Snackin’

• Bars: SpaceX’s satellite biz, Starlink, will offer free Wi-Fi on Hawaiian Airlines flights starting next year. It’s the company's first collab with a major airline as it looks to become a household name.
• Rev: Pedal to the metal: In the coming days, Ford is set to become the first mainstream carmaker to sell a full-size EV pickup. It’s now planning to boost production targets for the coming year, from 40K to 150K trucks.
• Perk: Tyson Foods will spend $60M to cover college costs for its 120K US employees, after rival JBS did the same. The meatpacking industry has been hit especially hard by employee turnover in the tight labor market.
• Till: Shares of Deere are down 12% over the past week. The tractor giant had been benefiting from higher commodity prices (good for farmers = good for Deere), but now a fertilizer shortage has analysts concerned.
• Bricks: The metaverse but IRL: Meta is opening its first retail store, in NorCal. The location will sell hardware, like the Quest 2 VR goggles, a critical part of the metaverse that the company is building.

Snack Fact of the Day

Tuesday

• Earnings expected from Microsoft, Alphabet, Visa, PepsiCo, Novartis, UPS, BP, GE, Starbucks, Mondelez, 3M, UBS, GM, Capital One, and Chipotle

Authors of this Snacks own: shares of Alphabet, Twitter, Starbucks, Ford, New York Times, Microsoft, Tesla, and GM

ID: 2169243