Tesla Investor Concern re Musk Buying Twitter; Instagram Testing NFTs; BMW’s Shipping Without CarPlay or Android Auto; EU May Start New Big Tech Regulation Spring 2023Posted: May 9, 2022
As Elon Musk plows ahead in his deal to buy Twitter, Tesla shareholders continue to fret and worry about his distraction from his primary business…and the one which actually makes money. The New York Times notes that Tesla stock is down 24% since the announcement of the Twitter buy. The Times goes on to report “Even if he’s able to finance it, it just is not a sensible deal from a financial perspective,” said Aswath Damodaran, professor of finance at New York University’s Stern School of Business.
Mr. Musk has demonstrated that he can build two large, successful companies at once: After some stumbles, Tesla sells far more electric vehicles than any competitor, and SpaceX is a leading rocket company. And he may be able to make Twitter more popular and profitable. The Twitter deal does directly involve the EV company, as Musk is borrowing $6.25 billion against his Tesla stock.
Investors have pointed out that it is hard to find another deal where someone has gotten such a big margin loan to help buy another company. The margin loan to buy Twitter could become a destabilizing force if Tesla’s stock value were to plunge. A steep decline might prompt the banks to sell their stock collateral to recoup the money they lent Mr. Musk, which could in turn set off even more selling across the market. The terms of Mr. Musk’s margin loan stated that he must pay off the entire debt if Tesla stock falls more than 40 percent from its price on the day of the loan. With much more competition now in the EV market, Tesla has to face not being nearly the only game in town selling electric vehicles.
NFTs seem to be like a zombie…something that just won’t die. Even with sales of the digital ‘collectables’ down 92% since last September, more companies and platforms seem determined to keep rolling them out. According to TechCrunch.com, this time its Instagram. The Meta-owned platform is testing NFTs from select creators, starting this week. At launch, the supported blockchains for showcasing NFTs on Instagram are Ethereum and Polygon, with support for Flow and Solana coming soon. The third-party wallets compatible for use will include Rainbow, Trust Wallet and MetaMask.Buyers will be able to share their NFTs in their main Feed, Stories, or in messages. I can barely contain my excitement!
The issue…and story…that just won’t die. That would be the chip shortage. Now, engadget.com says BMW is temporarily shipping cars without the support for Android Auto or Apple CarPlay. Due to the shortage, they have moved the cars out with a chip that doesn’t fully support those platforms. BMW says they hope to be able to give the cars the ability to use CarPlay and Android Auto via an over the air update by ‘the end of June at the latest.’ BMW is not remotely the only maker to grapple with shortages. Tesla delivered some cars without USB ports, and Ford had to send some out without rear Climate Control. BMW’s solution is at least better than what Mercedes did with a similar shortage…they sent cars out without chips at all…so owners had to come into the dealerships to have them installed later.
The EU looks to start enforcing the Digital Markets Act (DMA) in the Spring of 2023. Theverge.com reports that this antitrust legislation brings a new set of rules to check the power of Big Tech. The European Union warns that they will be prepared to act against any violations made by “gatekeepers” — a classification that includes Meta, Apple, Google, Microsoft, and Amazon — as soon as the laws come into force. The DMA actually needs final approval from the Council and Parliament. The Act will affect any company that owns a social platform or app and has a market cap of $82 million or more. What will it mean for big tech companies? When passed, the DMA will likely disrupt the business models used by the world’s tech behemoths. For one, it could require Apple to start allowing users to download apps from outside the App Store. It could also require WhatsApp and iMessage to become interoperable with smaller platforms, a policy that may make it harder for WhatsApp to maintain end-to-end encryption.