The biggest losers in the Musk-Twitter saga were literally everyone involved.

HERE WE GO AGAIN…

If you, like me, ignored the Elon Musk news last week, you may need to catch up quickly. So let’s dive in.

TL version; DR: Musk is backing out of his $44 billion deal to buy Twitter (for reasons we’ll explore in a bit), but Twitter will try to get him to agree to the original deal. In short: they will almost certainly have to figure it out in court.

For those who have followed this completely insane story, Musk’s latest move is hardly a surprise. That’s why:

  • Virtually everyone agrees that he heavily overpaid for Twitter. The company’s shares have lost a third of their value since the end of April, when Musk made his offer. On Monday, Twitter shares fell to about $34 a share. Musk’s offer was $54.20 a share, so it’s not hard to see why Twitter’s board won’t let him walk away without a fight.
  • The Bot Problem: Since day one, Musk has been making noise about “spam bots” and accusing Twitter without evidence of misleading investors about the real number of these accounts on the platform.
  • JUST TO REVEAL: Twitter does have a spam problem, but it seems clear that this favorite topic of Elon’s is a red herring. The financials of this deal simply don’t make sense, especially given that we’ve entered a bear market that has weighed down Twitter and Tesla, shares of which make up the bulk of Musk’s wealth. In other words, Musk has gotten poorer and Twitter has gotten cheaper, so he understandably wants to renegotiate the terms or drop it entirely.
  • This is Elon Musk. The guy is a loose gun.

So what is happening now? There are many possibilities, none of which is true for all participants.

  1. Parting. In theory, Musk could pay a $1 billion divorce fee and everyone could go back to pretending it never happened. That sounds good for Musk, but harder for Twitter’s board of directors, who could violate their fiduciary obligations to shareholders by letting him go. This is likely to stir up the already anxious Twitter investors.
  2. Twitter could force Musk to buy it on the original terms if he can convince the judge that he stood by his side of the deal. That would be good for Twitter shareholders, but not so good for Twitter staff and users if the platform is reluctantly dominated by a man who was forced to overpay for it and who is strained to run Tesla and SpaceX. (Musk scoffed at the suggestion that he would have to buy Twitter in a predictably childish tweet on Monday.)
  3. Negotiation for the best price. As both parties prepare for litigation, they will continue to negotiate as well, and the situation may resolve itself by agreeing on a sale price. As my colleagues at CNN Business report, this decision is common in merger disputes.
  4. Any number of wild cards. With Musk, it’s safe to expect the unexpected.

One thing’s for sure: This summer, a handful of Twitter lawyers and Elon Musk are on the payroll.

NUMBER OF THE DAY: $1.004

For the first time in 20 years, the euro and the US dollar are less than a penny below parity.

The euro hovered around $1,004 on Monday morning, down 12% year-to-date. Why? The European currency is suffering from inflation and concerns about energy supplies. The dollar, meanwhile, is rising as investors avoid risk and place their money in safe havens.

Some analysts say the euro may continue to fall, which is great news for Americans traveling in Europe this summer, but not good for global economic stability, explains my colleague Nicole Goodkind.

CASH CRISIS

This spring, several rural Chinese banks suddenly suspended cash withdrawals, leaving hundreds of people unable to access their savings. The banks did not explain why and for how long the accounts would be frozen.

Naturally, these people are furious – they have been trying in vain for three months to unfreeze their accounts.

News: On Sunday, savers staged their biggest demonstration yet, a rare public dissent in China. About 1,000 people gathered outside a central bank branch in Henan province demanding the government intervene to help them recover millions of dollars of frozen funds.
It was a peaceful gathering, but the authorities responded with force, according to my colleague Nectar Gan. In a clash that lasted several hours, security officials attacked the group, dragging protesters down stairs and beating those who resisted, including women and the elderly, according to witnesses and social media videos.

BIG PICTURE

This wildly disproportionate response speaks to the wider leadership unrest in Beijing.

The country’s strict coronavirus policy is hindering China’s economic recovery. When the government releases GDP data this Friday, economists expect it to be the weakest since the start of 2020, when the pandemic hit.

Meanwhile, stocks are falling on concerns about continued crackdown on tech companies by regulators. China’s housing market, which accounts for 20% of GDP, is collapsing. Retail sales are down.

And all this while President Xi Jinping is expected to run for an unprecedented third term later this year.

Beijing’s leaders know all too well the terms of the social contract that underpins China’s social life: citizens will trust the central government and generally won’t make much fuss about personal freedoms in exchange for the promise of prosperity. That contract begins to unravel when the economic engine that lifted hundreds of millions of people out of poverty in a single generation begins to falter.

With its brutal crackdown on savers who are legitimately concerned that their savings have simply evaporated, China is sending a clear signal that its people will have to take the economic punch to the chin and comply, no matter how bad things get.

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