Why Elon Musk went to China
Just days after Secretary of State Antony Blinken traveled to Beijing and warned China about unfair trade practices, Elon Musk landed in the Chinese capital. The Tesla boss’s meeting with China’s second-biggest official may have paid off: Musk reportedly cleared two obstacles to the introduction of a fully autonomous driving system in the world’s largest car market.
The split screen once again shows the gap between Western diplomacy and corporate imperatives. Tesla must remain committed to China even as it faces major headwinds – a problem that other multinational companies also face and that Beijing is eager to exploit.
Musk is betting big on self-driving, and China is key. Tesla reported its worst quarter in two years last week as a price war hurt profits. Tesla shares have slumped amid plans for big layoffs (though they have recovered in recent days, rising more than 8 percent in premarket trading).
Musk has tried to calm the market by pushing a low-cost model. Fully autonomous driving is also crucial. Musk told analysts last week that if investors don’t believe Tesla would “solve” the technological challenge of autonomous driving, “I don’t think they should be an investor in the company.”
The automaker is facing challenges in its second-largest market. Heavily subsidized Chinese competitors are reducing sales, especially the Warren Buffett-backed BYD, which is vying with Tesla for the crown of the world’s largest electric vehicle manufacturer.
Teslas are banned from many Chinese government sites because of fears about what data the American company collects. President Biden’s move to declare Chinese electric vehicles a security threat likely won’t have made things any easier for Tesla in China.
But Musk seems to have received good news. Beijing signaled that Tesla could roll out its self-driving system after the company passed a data security test; The company will reportedly work with Chinese technology company Baidu, which will provide the mapping and navigation software for the cars.
(It also suggests that, despite speculation, targeting Tesla in retaliation for a possible US ban on TikTok has not materialized.)
Musk’s visit is also a boost for the Chinese. Beijing showed that it still has influence over foreign companies that rely on its market. Musk’s meeting with Li Qiang, the Chinese premier, was covered in state media (and on Musk’s
Tesla is not the only one doing everything it can to stay in China. Many foreign car manufacturers are doubling their offerings. Volkswagen has invested in companies such as Horizon Robotics, a leading Chinese AI chip designer, and Xpeng, a Chinese electric vehicle rival, even as non-German rivals say they need EU protection from cheap Chinese imports.
Of course, Musk has proven his doubters wrong many times. But he and his foreign rivals may have no choice either.
Here’s what’s happening
Antony Blinken meets with Arab leaders on Israel-Gaza war. The foreign minister is holding talks in Riyadh with officials including Prince Faisal bin Farhan, Saudi Arabia’s foreign minister, on issues such as Israeli hostages and the path to a Palestinian state. Meanwhile, nonprofit World Central Kitchen announced it would resume operations in Gaza, nearly a month after targeted Israeli military strikes there killed seven of its workers.
Philips shares are rising after a smaller-than-expected sleep apnea settlement. Shares of the Dutch company rose 45 percent on Monday after the company set aside about 982 million euros ($1 billion) to cover costs related to U.S. claims over faulty sleep apnea machines.
Taylor Swift’s latest album is breaking records. “The Tortured Poets Department” debuted at the top of the Billboard 200 chart with the equivalent of 2.61 million album sales in its first week and 891 million streams, the biggest streaming week ever for an album. Swift now ties Jay-Z for the most No. 1 albums by a solo artist, despite some concerns that she is oversaturating the market.
What a huge shock the Paramount deal talks represent
Paramount’s chaotic corporate history is about to take another dramatic turn. The media giant is expected to announce the departure of its CEO Bob Bakish as early as Monday, even as Shari Redstone plans to sell her majority stake.
Skydance – David Ellison’s film studio that is in exclusive talks about a deal with Paramount, the company behind the “Top Gun” film series and television networks including CBS and Nickelodeon – has submitted a revised offer.
The exit of a top executive during negotiations is unusual and could have an impact on what happens next, writes DealBook’s Lauren Hirsch.
The focus is again on a special committee overseeing the deal. A Skydance deal could give Redstone personally, who controls Paramount through holding company National Amusements, a significant premium for her stake, including more than $2 billion in cash.
That could bring additional legal scrutiny to a deal that has already been criticized by several major investors, who are pushing Paramount to consider a previously rejected all-cash approach from private equity giant Apollo.
Separation from Bakish could further escalate tensions. “We are in the land of a select committee. “Which means we’re in church from a legal perspective,” says Jim Woolery, an experienced M.&A. Lawyer and banker who has advised many special committees on deals told DealBook. “That’s not ecclesiastical – that’s sloppy. This creates more risk.”
Bakish’s departure could weaken Paramount’s hand. Bakish would not be replaced by a CEO, but several executives would lead an office of the CEO. Paramount’s financial health is also in focus, with the company set to report earnings on Monday, as questions arise about the status of its crucial cable deal with Charter. Investors are demanding progress on its streaming ambitions.
The company is preparing for all eventualities, including a possible deal. The Wall Street Journal reports that it has drawn up a contingency plan in which it remains independent.
TThe clock is ticking. The Skydance exclusive conversation window expires on Friday (although it could be extended). And Apollo’s hand appears to be significantly stronger than when it last approached Paramount about a deal, given its potential partnership with Sony that would bring additional cash and operational expertise.
But an Apollo-Sony push could also face tough questions from shareholders and even the board, including: What is the structure of their deal? And how would they address the likely regulatory risk?
Betting on green in sports
Investors were eager to get a piece of live sports, from stakes in teams to media rights.
Bruin Capital, the sports-focused private equity firm led by former NASCAR COO George Pyne, is taking a new approach, DealBook first reported: It’s buying a specialist in growing and maintaining natural grass in stadiums .
Bruin buys PlayGreen, the Netherlands-based owner of SGL, which provides technology including lighting and monitoring tools for growing natural grass. According to DealBook, the deal values PlayGreen at approximately $120 million.
SGL was founded in 1997 to focus on sport. The company received its first major contract in 2004 with Arsenal, the English Premier League football club. It later expanded into the NFL, professional tennis (Wimbledon), cricket, horse racing and more while surviving the trend toward artificial turf.
SGL works with approximately 520 stadiums, from the Green Bay Packers’ Lambeau Field in Wisconsin to the Kingdom Arena in Riyadh, Saudi Arabia. “We have proven that we can grow weed under any circumstances,” Mark Trübenbacher, CEO of SGL, told DealBook.
The investment is a bet on several things, Pyne said:
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Player Safety: Highly paid athletes need to be protected given the frequency of injuries such as ACL tears in football and soccer. “The surface the game is played on affects the quality of the game and the safety of the game,” Pyne said. (Trubenbacher added that interest in SGL grew following Aaron Rodgers’ season-ending injury in September.)
There is also an artificial intelligence aspect. Trübenbacher said that with all the data SGL’s systems collect, his company will eventually introduce AI to help automate turf management.
“We know exactly when we have reached ideal daylight,” he said. “In the future we will know when to turn off the lights. This used to be set on a timer.”
“Most of what he learned about AI came from working with me over the years.”
– Demis Hassabis on his childhood friend, former colleague and current rival Mustafa Suleyman from Microsoft. The two grew up in London and co-founded DeepMind, the artificial intelligence research laboratory (acquired by Google), where Hassabis is CEO. The duo are among the most influential in the AI sector and their companies are in a high-stakes race for sector supremacy.
Next week
The Fed, jobs and a busy earnings calendar – here’s what to keep an eye on:
Tuesday: Amazon, AMD, Samsung, Eli Lilly, Volkswagen, Starbucks and McDonald’s are expected to report earnings. Investors will also be keeping an eye on the latest euro zone inflation data for clues on whether the European Central Bank will begin cutting interest rates in June.
Wednesday: It’s the day of the Fed decision. Economists expect the central bank to keep borrowing costs at their highest level in decades well into the fall. On the earnings front, KKR, Mastercard, Pfizer and Devon Energy will report.
Thursday: Apple, Ozempic maker Novo Nordisk, Shell, Apollo, Live Nation and Maersk report quarterly results.
Friday: It’s job day. Economists polled by Bloomberg forecast that employers added about 250,000 jobs in April, a decline from March but enough to keep the unemployment rate at a relatively robust 3.8 percent.
THE SPEED READING
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Calstrs, California’s large public pension fund, reportedly had to delay the release of its latest climate report because it miscalculated the carbon footprint of its $331 billion investment portfolio. (FT)
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“The Comfortable Problem of Mid-TV” (NYT)
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2024-04-29 12:32:43
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