Elon Musk moves in mysterious ways so it is just about possible that his yanking of his $44bn offer to buy Twitter is an aggressive attempt to bounce the target’s board into accepting a lower takeover price. That, at least, is a popular interpretation of events, and Musk’s motive would not be hard to fathom.
Nobody likes to overpay and the original offer price of $54.20 has plainly been overtaken by the slump in valuation of most US tech stocks since April. Twitter’s new share price of $33.50, down 9% in early Monday trading, looks a truer reflection of the social media site’s standalone prospects.
A renegotiation strategy would be a long shot for Musk, but more than a few Twitter shareholders might be willing to roll over at, say, $42, if they thought the cash would arrive at the second time of asking. Twitter doesn’t have an alternative buyer in the wings, and its commercial position with advertisers has been weakened by three months of entanglement with Musk that have shoved the troubled issue of bots, or fake accounts – the pretext for pulling out – into the spotlight.
Let us hope, though, that Twitter’s board maintains its robust “we’ll see you in a Delaware court” line. The principle at stake here is worth defending: a takeover agreement, entered willingly, has to be binding. If it can be relegated to the status of a foot in the door, with the final price subject to revision, then the entire business of buying and selling becomes a nonsense.
Enforcing a ruling against the untameable Musk might become a saga in itself, but virtually every US legal expert thinks Twitter’s case is excellent. Its board must press on: a pragmatic capitulation would give Musk a last laugh he does not deserve.
Gains generated in electricity sector
A chaotic Tory party leadership contest can be good for share prices, it seems – at least for the likes of Centrica, Drax and SSE. The trio saw their shares rise between 3% and 6% as the government abandoned its flirtation with the idea of extending the North Sea windfall tax to electricity generators.
To be strictly accurate, Rishi Sunak, in his last days as chancellor, had already seemed to be veering against an extension on the grounds that defining the “windfall” element of a generator’s profits is trickier than with oil and gas producers. But a Tory contest in which everybody, Sunak aside, wants to be seen as a tax-cutter may have delivered the final nail.
The generators should count themselves lucky. Yes, their terrain is harder to navigate because their product tends to be sold under long-term contracts rather than at transparent “spot” prices. But it is also plainly true that, to some degree, Centrica (via its 20% stake in nuclear generator British Energy), Drax (in biomass and coal) and SSE (windfarms and hydro) will benefit from high wholesale energy prices this winter through no extra effort or risk-taking on their part.
Sunak’s original thought had the virtue of consistency. If you’re looking for gains that have arisen from exceptional market conditions, it shouldn’t matter whether the windfall comes from under the North Sea or from a plant burning wood pellets.
Even the generators’ objection that investment would be deterred felt weak: the windfalls in generators’ cases came from old-style “renewables obligation certificates” contracts, rather than new-style contracts-for-difference arrangements, where HM Treasury is already collecting extra income. Such details seem to have been lost in the noise. That’s politics.
Not cleared for full takeoff
Nobody in the aviation industry did more than John Holland-Kaye, chief executive of Heathrow, to lobby the government to drop strict Covid testing regulations, reopen borders and generally get planes in the air again.
Almost from the first month of the pandemic, he was at it. In May 2020, he warned about millions of job losses in the industry. By April 2021, when reopening was happening, his big worry was that UK Border Force wouldn’t be able to cope. In January this year, as the last Omicron restrictions were about to be lifted, he wanted the government to move faster.
Now, it turns out, one party that definitely wasn’t ready for normal life to resume was Heathrow itself. The airport cancelled 60 flights on Monday and warned that it may have to ask airlines to go further if schedules are deemed too ambitious. Heathrow is not alone, and everybody understands the difficulties created by the shortage of workers. But a period of silence from Holland-Kaye would be in order.