The hearts of Tesla shareholders must sink every time Elon Musk takes on another pet project. At least this one is with his own money, which wasn’t the case when the carmaker spent $1.5bn on bitcoins last year, but a 9.2% stake in Twitter has potential to become a serious distraction from the day job.
The near $3bn (£2.3bn) purchase has been structured as a passive investment, yet one doubts Musk intends to buy and hold for eternity. That’s not his style. Possible plot lines include a request for a seat on the board or even a full takeover bid in time, speculated analysts, not unreasonably. He can afford the latter.
Musk has said nothing about his intentions but it was impossible to miss the big tease beforehand. He flirted with the idea of launching his own social media platform and conducted an unscientific Twitter poll asking whether the platform “rigorously adheres” to principles of free speech. He sounds like a man on some sort of mission, not just one who is sore about past run-ins with US financial regulators over his tweeting activity.
The independent directors of Tesla are never likely to curb Musk’s extracurricular activities, particularly this one: the boss’s high public profile has saved the company a fortune in advertising dollars over the years. Equally, however, it’s hard to see any upside for the company if Musk gets sucked into toxic battles over social media’s role in the US political landscape. Leading the electric vehicle revolution is hard enough without unnecessary detours.
Ted Baker shouldn’t be afraid to say no to private equity
There were two directions Ted Baker could have taken after the exit of founder Ray Kelvin in 2019. One would have involved drift and more profits warnings – we’ve seen that script in the fashion industry a few times after founders go. Alternatively, the business could reorganise and concentrate on gritty everyday tasks such as getting off the discounting treadmill.
The latter, happily, seems to have happened under chief executive Rachel Osborne, who arrived as finance director and found herself propelled into the top job in no time. A massively dilutive £105m share placing at 75p in June 2020 to fix the balance sheet means the old £20-plus share price is never coming back, but, operationally, Ted Baker seems to getting a few basics correct. Sales were up 35% last year and damage to the brand seems minimal.
Interest from private equity is therefore unsurprising. At a market capitalisation of £270m-ish, Ted Baker makes an interesting bet. The balance sheet is clean these days, there’s a developing international presence, and e-commerce sales in the UK are already half the total in the last half-year. The post-lockdown trend towards smarter kit is also currently working in the company’s favour.
The board had already rebuffed approaches from New York-based Sycamore Partners at 130p and 137.5p. Now it’s received an improved offer from the same source and at least one other potential bidder has turned up. In the circumstances, switching to a formal sale process, which means not being tied by standard bid timetables, is a legitimate way to proceed.
But judging fair value for a business in recovery mode after a volatile lockdown trading period is not straightforward. Toscafund, with a 28% stake, will have a view, but one rather wants to knows how far the board thinks it could get under its own steam. Ted Baker doesn’t obviously need rescuing. If none of the bids is outright compelling, the directors should not be afraid to say no.
The Treasury doesn’t need a trendy NFT
There’s nothing wrong with the Treasury taking an exploratory walk around the crypto block if we’re talking about ‘stablecoins’, meaning crypto assets tied to a fiat currency as opposed to cryptocurrencies, which seem to be little more than vehicles for wild speculation. Stablecoins could indeed yield gains for businesses and consumers by lowering transaction costs as long as payments take place within a strong regulatory set-up.
Yet the chancellor, Rishi Sunak, rather undermines the idea of high-minded regulatory seriousness by having a dabble with a non-fungible token, or NFT. The Royal Mint has been asked to create an NFT “as an emblem of the forward-looking approach the UK is determined to take”. Don’t all rush at once. The Treasury would do better to stick to boring technical assessments of payment systems; it doesn’t need to perform faddish stunts.
