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Apr 30, 2022 11 min read

🧮 Newsletter #75: BigTech's BigNumbers | Elon's BigDebt | Twitter Rumbles On | Other Stuff

🧮 Newsletter #75: BigTech's BigNumbers | Elon's BigDebt | Twitter Rumbles On | Other Stuff
Photo by Crissy Jarvis / Unsplash
Table of Contents

Wiser! #75: Elon Musk is borrowing big time against his Tesla stock to buy Twitter. He's skating on thin ice with that one and many doubt he'll still go through with it. Also, it's earnings week as the big tech stocks report for the quarter.


w/Issue #75 - 29th April 2022


Welcome, Wiser! friends. You're now amongst 9,846 like-minded subscribers who want to know what's happening and what's coming next in the digital economy.

This week I'm covering the latest on Elon buying Twitter and the quarterly earnings calls from BigTech. Plus a roundup of the top stories from the tech economy.



w/SocialMedia


Tesla Twitter

Elon Musk To Become The Most Indebted CEO in America...IF He Actually Takes Over Twitter

Back Story:  Apparently Elon is buying Twitter with around $34 billion of other people's money that he's borrowed against his personal holding of Tesla stock. Elon is estimated to be worth $250 billion, a wealth entirely linked to his stock holdings in Tesla, SpaceX and his other companies.

According to his SEC filings, Elon's financing plan includes $13 billion in bank loans and $21 billion in cash. How he raises the cash is a mystery but it is most likely that he will sell Tesla stock. He's already sold around $4 billion as part of this transaction.

Elon's acquisition plan also includes a $12.5 billion margin loan, using his Tesla stock as collateral. Because Tesla is a growth stock, ie, it's not as  stable as a value stock, like, say Ford or Mercedes, which means that Musk will need to pledge about $65 billion in Tesla shares as security.

However, Elon has already pledged around $75 billion of his Tesla stockholding to secure financing for other ventures.

Is Elon Skating on Thin Ice?

Here's the thing:  If Tesla stock was to do a Netflix and drop 70% in value, Elon would be screwed!

Not just because he'd be forced to pay Twitter $1 billion for reneging on the deal.

He'd be forced to sell Tesla stock to repay his debt. This would compound any price collapse, sending the stock falling even further...and remember, Tesla stock is already massively overpriced.

Ford make 3.5x more profit than Tesla but are valued 16x less.

Just during April, as the Elon/Twitter story has unfolded, Tesla stock has dropped from $1100 to $870.

Which is why there is much speculation that Musk may not go ahead with the deal. He has form too!

Four years ago, Elon announced he intention to set up a peanut brittle company to take on Warren Buffet's US confectioner See's Candies. Then got cold feet and pulled out. Will he do the same again? There are plenty who think he will.

Meanwhile, the Twitter story continues to occupy headlines with a new twist very day. There's a ton of great thoughts and opinions written about Elon and Twitter and I need to concentrate on other things (recording the first episode of the podcast next week is one of them!)

So, here are some of the better ones...

w/Related:

You win some, you lose some:


w/BigTech


bigtech big numbers

BigTech's Quarterly Earnings

Back Story:  It's that time of the year again when the tech stocks report their quarterly earnings. Time to see how the business is doing, check out the fundamentals of their business and listen to the Executive explain where they're going and what they're doing.

I've written all the detail in a separate post  (because there's too much to go into this issue of Wiser!). The key takeaways are below. But, if you want more details, they're here.

Apple beset by supply chain challenges

  • It seems that even the master of supply-chain (Tim Cook) isn't immune to global challenges. Apple have set expectations of a hit on revenues of between $4 and $8 billion, not helped by a softening of demand in Covid-locked down China (Apple's 2nd biggest market).
apple revenue breakdown

Amazon's poor numbers hide behind the Cloud

  • Amazon is the market leader in the global cloud computing sector (c 40% marketshare). This profitable business unit reported $6.5 billion in operating income in the first quarter, up almost 57% YoY.
  • However, when you add in all other Amazon businesses, the total operating income for the Corporation was ONLY $3.67 billion.
  • To make matters worse. Amazon took a $7.6 billion hit for its investment in EV auto manufacturer, Rivian. Following last year's IPO, Amazon's stake in the EV manufacturer yet to deliver a car delivered a $11.8 billion bonus to its bottom line in the fourth quarter. However, since then the value of Rivian has dropped more than 50%, wiping away $7.6 billion from Amazon's first-quarter profits.

Meta/Facebook report their weakest growth in a decade

  • This is going to be a long hard road to the Metaverse for Mark Zuckerberg. One change in Apple's operating model and Facebook's business is screwed. The expectations were set last quarter of tough times ahead, so the damage was minimised when weaker numbers were announced.
  • On the upside, Facebook reported a return to growing user numbers. This was enough to placate the market...for now.

Microsoft stand out as a stellar performer

  • Microsoft are the best performers of the tech stocks right now. Apart from weaker ad revenues numbers in its Search business, all parts of the business reported growth and a strong performance.

Alphabet/Google numbers soften as YouTube is hit by TikTok competition and a return to work

  • Alphabet missed both the market's top and bottom line expectations in this week's earnings call. The Alphabet Execs gave an upbeat assessment against a set of weaker than expected numbers. It was an odd call, to say the least.
  • Troubling for Alphabet is the slowing revenue growth at YouTube. Facing competition from TikTok and an audience that is returning to work (so less time sat at home), YouTube's growth slowed from 25% to 14% reflecting a drop off in ad revenues.
  • Meanwhile, Google's Cloud Computing business continues to grow, 44% YoY. But it's still losing almost a $1 billion a year.

Twitter misses its Revenue expectations amongst growing user numbers

  • There's not a lot of point dissecting the Twitter numbers at the mo. Elon's set a 90 day plan to change the product, take the company private and fix social media for the good of civilisation.
  • However, the headlines were that revenue remains tepid at $1.2bn and user numbers are on the up (although nobody knows how many are fake accounts or spambots and the Twitter user numbers are probably not worth spending 280 characters on.)

Snap also missed revenue expectations but reported strong user growth

  • Snap don't get the attention they warrant. Mainly because the app was written off when Instagram nicked its "stories" in 2016. And then came TikTok. But the messaging app has focused on augmented reality and innovating new features for its user base that is predominately in the 13-24 age group. It has built a loyal following of 332 daily active users, with around 2/3rds using  the AR features every day.

(Snap is a good comparator to Twitter. Both have revenues of around $1 billion and a user base in the 200-300 million range.)

Netflix reports declining user numbers for the first time on over a decade

  • Netflix's market cap has dropped from $300 billion to around $100 billion in no time at all. It's only going to get worse for the streaming app that redefined how we watch TV. Netflix reported a loss of 200,000 subscribers this quarter. And set expectations of a loss of an additional 2 million next.

Spotify's slow growth continues as stock sinks to lowest price ever

  • Spotify shares sank to a record low after posting lower-than-expected subscriber growth last quarter. CEO Daniel Ek was at pains to distance himself from comparisons to the growth issues at fellowing streaming platform, Netflix. He said; “Besides both being media companies and being primarily subscription revenue companies, that’s kind of where the similarities end for me.”

Teladoc shares collapse after missing its margin forecasts

  • Teladoc is the world’s largest global digital health platform with 1 in 6 Americans being a full member. However, the telemedicine platform is battling against high customer acquisition costs, a strategic shift from direct to consumer to B2B and a $6.5 billion hit for its acquisition of Livongo.

BigTech's BigNumbers

For much more detail, go here...or here👇

BigTech’s Quarterly Earnings Roundup - April 2022
Tech Stocks had enjoyed a 2 year ride since the Covid induced crash of March 2020. With a few notable exceptions, that’s over for alot of the tech stocks. It’s tough times ahead as I take a look at the round of quarterly earnings for BigTech’s BugNumbers.

w/Snippets


Some Other News


“Despite its size and colossal profits, Ukraine has shown that Facebook’s systems are totally unequipped to deal with all-out information war.” Source: coda.

The Challenge:  Facebook are estimated to have around 15,000 human moderators to police the content of the 3 billion or so users across its network. They each have around 90 seconds to decide if a piece of content violates their own rules.


Some Stats

Some Trivia

  • This video shows celestial objects to scale in size, rotation speed, and tilt. I found it fascinating and thought you'd like it too.
0:00
/

w/AI


"A plush toy robot sitting against a yellow wall" - DALL-E 2

AI Created Art by DALL-E 2

This is a piece of art created by DALL-E 2. It's the 2nd generation of an AI system that can "create realistic images and art from a description in natural language."

The picture above was generated by DALL-E in response to the description: "A plush toy robot sitting against a yellow wall."

For more AI art from DALL-E, check out their Instagram page.


w/read/watch/listen


Reading

Bitcoin: Hard Money You Can't F*ck With, by Jason Williams

Just started this one and was drawn to the tagline: "Why bitcoin will be the next global reserve currency." Not something I'm convinced about yet...which is why I'm reading the book!

📕 Check it out on Amazon here.

Watching

Inside the Metaverse Are You Safe? C4 Dispatches

A 30 minute mainstream TV documentary that paints a troubling picture of human behaviour when it can hide behind the anonymity of an avatar in the Metaverse.

👀 Watch it here.

WeCrashed

This is the story of WeWork. Or, to be precise, the story of Adam Neumann, the maverick, narcissistic, "serial entrepreneur" who reshaped the utility office experience and led it to the edge of a $47 billion IPO. Only to have it come crashing down.

I'm half way through, Jared Leto is massively irritating as Neumann and it's pretentious. I'll give you my score out of 10 next week.

Listening

Pivot take on Elon and Twitter (extended episode)

Two hours after Kara and Scott recorded the show, the news broke than Elon's offer for Tweet was going ahead. So they got back on the phone and recorded another 20 minutes. This is raw and unscripted.

📣 Listen on Spotify or Apple Podcasts


w/Promotion

Tech Tools and Productivity Ideas

Disclaimer:  These are "affliate links". If you buy from them, I receive an introduction fee.



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