In this edition, we talk about the collapse of the Twitter-Musk deal and the Uber Files that shed insights into the murky affairs of the ride-hailing giant. We also talk about billionaire Gautam Adani’s big-bang entries into India’s telecom sector and Israel’s port sector.
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What do you do if something looks funny, smells funny and even tastes funny? Well, just take the blame and move on. For, if it looked funny and smelled funny, you shouldn’t probably have tasted it in the first place.
Jokes aside, that’s exactly what’s going on with Twitter. The social network sued Elon Musk this week after the world’s wealthiest man and founder of Tesla and SpaceX walked away from a $44-billion deal to acquire Twitter. How did Musk respond? The petulant billionaire tweeted a poop emoji!
To be clear, Musk’s intentions behind making a hostile bid for Twitter and taking it private were always in doubt. Also in doubt was the price he had agreed to pay. But that still didn’t stop the Twitter board from unanimously approving the offer.
Musk had offered to buy Twitter at $54.20 apiece, a 38% premium to the then prevailing price. Twitter shares initially rose to almost $52 after the deal was announced, but have fallen since then to around $36. That’s half of the $77 level the stock hit in February 2021.
Will the lawsuit achieve its intended objectives? Well, let’s hope it doesn’t—at least in so far as forcing Musk to honour the deal. Else, Twitter will be stuck with an owner that doesn’t want to buy it and, more importantly, an erratic owner that shouldn’t buy a global communications platform that shapes public opinions.
Twitter wasn’t the only high-flying tech company that found itself in a soup this week. It had company in Uber.
The Uber Files
Five years ago, in June 2017 to be precise, Travis Kalanick stepped down as the CEO of the startup that he had co-founded and grown to a multi-billion-dollar company that redefined urban travel worldwide. Kalanick’s resignation from the top post at Uber Technologies Inc. came following months of turmoil at the ride-hailing giant after a former employee described a workplace full of a toxic corporate culture, gender discrimination and sexual harassment.
This week came further proof of how deep the rot was within Uber when Kalanick was the CEO and the company was rapidly expanding worldwide, fuelled by millions of dollars it racked up from venture capital investors.
Thousands of documents leaked this week by the whistleblower Mark MacGann, Uber’s former chief lobbyist for Europe, the Middle East and Africa, showed how Uber broke laws in several countries and fooled law enforcement agencies. The documents – known as the Uber files – also show how Uber secretly lobbied governments and courted billionaires and media publications from Europe to India to muscle its way through any roadblocks it faced.
To give the company some credit, Uber has now admitted to the “mistakes” but said it has changed since 2017 under its current CEO, Dara Khosrowshahi.
By the way, how has Uber done for its investors? The company’s shares have dropped by more than half in 2022, valuing it a tad above $40 billion, amid a rout in tech stocks. That’s a little more than half of its IPO valuation of $75 billion and barely a third of the $120 billion tag it aspired before it went public in May 2019.
More Tech Troubles
Twitter and Uber apart, tech stocks in general have suffered a meltdown over the past few months, both in India and the US. And this week, troubles spilled over onto the real world when Microsoft became the first big mainstream tech company to announce layoffs.
The Satya Nadella-led company said it would terminate 1,800 employees, or 1% of its workforce. This was followed by a memo from Sundar Pichai-led Google saying it would slow down hiring for the rest of the year.
At home, top Indian IT companies Tata Consultancy Services and HCL Technologies both disappointed investors this week. TCS missed estimates for first-quarter operating margins, earnings as well as dollar revenue. HCL also missed profit forecasts for the April-June quarter, and shares of both companies fell to their 52-week lows.
Meanwhile, one man who doesn’t have to care about stock markets or economic cycles is marching on.
Adani’s double punches
Billionaire Gautam Adani, owner of India’s largest port operator, made his biggest overseas jump in the sector this week as his group company Adani Ports won a tender to privatise Israel’s Haifa Port.
Adani and Israeli chemicals and logistics group Gadot won the bid for the port on the Mediterranean coast for almost $1.2 billion. Adani will have a 70% stake and Gadot will hold 30% in their joint venture. This adds to Adani’s acquisitions of Gangavaram and Krishnapatnam ports in India last year.
Adani also dived into the Indian telecom sector and applied for taking part in the upcoming 5G auctions. Adani Data Networks will compete with billionaire Mukesh Ambani’s Reliance Jio and Sunil Mittal-led Bharti Airtel as well as the cash-strapped Vodafone Idea in the auction that begins July 26.
Adani says it wants to acquire spectrum to create a private network to support its businesses that range from ports, airports, power as well as data centres. But the move left analysts wondering about Adani’s game plan. While Adani says it has no intention to enter the consumer services segment, analysts point out this is how Jio had started as well a decade ago before eventually decimating competition and capturing the biggest pie of the consumer segment.
While the three billionaires—Ambani, Adani and Mittal—will fight it out in the auctions, a billion of us lesser mortals have more mundane problems to worry about.
Inflation, Rupee and Trade
Government data showed this week that retail inflation eased slightly to 7.01% in June from 7.04% in May and wholesale price inflation eased to 15.18% from 15.88%. But that’s little comfort for the common man.
The data also shed a light on the Reserve Bank of India’s performance. WPI inflation has now stayed in double digits for 15 months in a row while retail inflation has stayed above the RBI’s medium-term target of 4% for 33 months!
A separate set of data showed India’s merchandise trade deficit in June nearly tripled to $26.18 billion from $9.60 billion a year earlier, raising concerns of a wide current account deficit and additional pressure on the rupee.
Meanwhile, the rupee continued to weaken this week and is now just a hair’s breadth away from falling past 80 to a dollar. This means the local currency has slumped almost 6.8% against the greenback in 2022.
And more weakness is in store, as foreign investors continue to pull out of Indian equities and bonds and as the US Federal Reserve looks set to raise interest rates even more aggressively later this month.
Eyes on the Fed
Usually, the Fed acts and other central banks follow suit. But the Fed may now take a cue from its northern neighbour, the Bank of Canada, when it reviews its monetary policy on July 26-27. The BoC surprised the markets this week with a 100-basis-point increase in its interest rates, the sharpest hike since 1998, to fight inflation.
The odds of the Fed making an equally steep hike have risen, more so after US inflation accelerated to 9.1% in June—the highest in 41 years. With that, odds are rising also of a recession in the world’s biggest economy.
Meanwhile, the world’s second-largest economy has already slowed substantially. China’s GDP for the April-June quarter grew barely 0.4% from a year earlier. This is its worst performance since 1992, after excluding a 6.9% contraction in the first quarter of 2020 when the Covid-19 pandemic began.
Market wrap
Back home, Indian stock markets snapped three weeks of gains to end lower. The 30-stock BSE Sensex and the Nifty 50 both ended the week about 1.3% lower.
IT stocks led the declines. HCL fell 10.2% and TCS lost more than 8% this week. Infosys, Wipro and Tech Mahindra slipped 5-6% each. Airtel fell over 6% amid news of Adani’s plans to enter the 5G race.
State-run power producer NTPC and oil producer ONGC were the top Nifty 50 gainers with 4% each. Tata Consumer and auto stocks such as Maruti, Mahindra & Mahindra and Escorts were among the other gainers.
OTHER HEADLINES
- RBI liberalises use of rupee for export, import settlements
- Enforcement Directorate arrests former NSE CEO Chitra Ramkrishna
- Govt offers 10 oil, gas blocks in next auction
- India’s IIP growth hits one-year high of 19.6% in May
- India’s passenger vehicle sales jumps 19% in June
- Nomura lowers India 2023 growth forecast by 70 basis points to 4.7%
- Rishi Sunak tops second round of voting to succeed Boris Johnson as UK PM
- Sri Lanka stays in turmoil, President Gotabaya Rajapaksa resigns
- Euro on a par with US dollar for first time in almost 20 years
THE WEEK AHEAD
- RBI to release FDI inflow data for May.
- Petroleum ministry to release crude throughout and refining data for June.
- Q1 earnings to pick up momentum. Hindustan Unilever, Ambuja Cement, IndusInd Bank, Wipro and PVR among stocks to watch out for.
Until next week, happy investing!
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