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Apr 11, 2022

The Weekly Scan April 11, 2022

By Stash Team

Find out what’s happening in the world of business this week

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Welcome to the Weekly Scan. Here’s what we’re following for the week of April 11, 2022.

Tweet this. Tesla CEO Elon Musk purchased a 9.2% stake in social media company Twitter last week, making him the largest shareholder there after acquiring more than 73.4 million shares, worth $2.89 billion. The news of Musk’s investment comes a few weeks after Musk’s tweets expressing doubts about Twitter’s commitment to free speech: “Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy. What should be done?” Industry observers have expressed concerns over the degree to which Musk plans to be an activist shareholder in Twitter.

  • The takeaway: Elon Musk, who has 80 million Twitter followers, has a complicated history with Twitter.  In 2018 his tweets figured prominently in a complaint brought by the Securities and Exchange Commission (SEC). The SEC said Musk used Twitter to say he would take Tesla private at $420 per share, a large premium to its trading price at the time. (Musk never took the company private.) As part of the settlement, Musk agreed to pay a $40 million fine, stepped down as Tesla chairman, and put in place a procedure to control his external communications. The settlement requires the SEC to approve Musk’s tweets about Tesla before sending them. His ownership stake, revealed in an SEC filing, could pose new regulatory challenges for Musk.

CNBC and WSJ

Russian roulette. Russia may be close to defaulting on $650 million worth of sovereign bonds, following new sanctions imposed by the U.S. that ban Russia from accessing dollars held in U.S. financial institutions. Russia makes payments on those bonds in dollars. Previously, the U.S. had frozen Russian assets in the U.S for its invasion of Ukraine. A new round of sanctions also blocks Americans from doing business with state-owned Russian or investing in Russia. The U.S. government is also levying sanctions on Russian officials and their family members, such as President Vladimir Putin’s adult children, Foreign Minister Sergey Lavrov’s wife and daughter, former President and Prime Minister Dmitry Medvedev and Prime Minister Mikhail Mishustin.

  • The takeaway: The goal of the latest sanctions is to make it more difficult for Russia to fund its military and potentially pressure Russia into defaulting on its debt. When Russia defaulted on its debt in 1998, it led to an economic crisis for the country.The new sanctions are also a response to Russia’s attack on civilians in Bucha, Ukraine, which prompted President Biden to again label Putin as a war criminal. Ukraine’s President Volodymyr Zelenskyy has criticized the response from Western countries, asking for more assistance beyond sanctions from the U.S. and Europe. 

Bloomberg and Politico

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Smells like JetBlue-Spirit. Budget carrier JetBlue Airways made an unsolicited bid to purchase low-fare competitor Spirit Airlines for $3.6 billion in cash, on April 4, 2022. If accepted, JetBlue would pay $33 per share to acquire the low-cost airline’s common stock. JetBlue claimed that the sale would make JetBlue “the most compelling national low-fare challenger to the four large dominant U.S. carriers.” The airline is also claiming that merging with Spirit could inspire those four airlines—Delta Air Lines, American Airlines, Southwest Airlines, and United Airlines—to lower their fares. Spirit said that it would respond to the proposal from JetBlue, but that first, its board of directors will need to review the proposal to make a decision in the best interest of shareholders and the company at large.

  • The takeaway: The bid to acquire Spirit poses a challenge to Frontier, which is also in talks to merge with Spirit. JetBlue says that its proposed acquisition would be “superior” to a merger with Frontier, since JetBlue is offering to pay a 50% premium on Spirit’s recent closing price. If Spirit and Frontier were to merge, people who own shares of Spirit would receive 1.9126 shares of Frontier stock plus $2.13 in cash. A merger between Spirit and Frontier would still need approval from regulators. For JetBlue’s part, the company said it would pay Spirit a “reverse break-up” fee should an acquisition be put to a stop by regulators. In 2021, the Department of Justice sued American Airlines and JetBlue over an agreement to sell each other’s seats on some flights. 

Washington Post

Union power. Workers at an Amazon warehouse in Staten Island, New York City became the first to successfully vote to unionize at the world’s largest retailer. Although more than 8,300 Amazon employees were eligible to vote, slightly more than half did. The vote passed by a 55% margin. Amazon is expected to contest the vote, saying on its company blog: “We’re disappointed with the outcome of the election in Staten Island because we believe having a direct relationship with the company is best for our employees.” Retail, Wholesale, and Department Store Union is predicted to lose in a close vote at another Amazon warehouse in Alabama. But the Staten Island victory could spur more attempts to organize at other locations.

  • The takeaway: The victory in Staten Island is considered a major victory for workers in the U.S., and comes during waning union participation nationally. In 2021, the percentage of people in unions in the U.S. fell to 10.3%, the lowest participation rate in decades, despite high demand for workers. Still, the success of a small union at an Amazon factory could indicate a broader interest in, and support of, unions. Labor organizations reportedly consider Amazon a threat to labor rights, because of its dominance across industries. It also employs nearly 1 million people in the U.S. Workers in the Staten Island location were represented by the Amazon Labor Union, started a year ago by a handful of employees.

New York Times

Other stories we’re following:

For the birds. Farmers in the U.S. are battling the deadliest outbreak of avian bird flu in seven years. The flu has spread to 24 states, and has killed 23 million chickens. The price of chicken is expected to climb as a result. 

Dimon in the rough. JPMorgan Chase’s CEO Jamie Dimon published his much anticipated yearly letter to investors, in which he expressed confidence in the U.S. economy, but said the country faced challenges at every turn, primarily from Russia’s invasion of Ukraine, which he said will slow global growth.

 Here’s what we covered last week in the Scan: 

  • The House of Representatives passed legislation on April 1, 2022 that would decriminalize the use of marijuana on a federal level.
  • Walmart announced it will stop selling cigarettes at some of its locations in Florida, Arkansas, California, and New Mexico. 
  • Hackers managed to steal roughly $622 million in cryptocurrency from the blockchain-based gaming network Ronin Network on March 23, 2022. 
  • UnitedHealth Group announced plans to acquire home healthcare provider LHC Group for about $5.4 billion cash.

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