National

Pro Rata

Axios Pro Rata

Fidelity Investments didn't change the carrying value of its Twitter shares during the month of January, according to a new disclosure.

Why it matters: The investment firm previously marked Twitter stock down by more than 60% during the first two reporting months after Elon Musk's $44 billion takeover, which Fidelity helped to finance.

This included a 56% markdown at the end of November 2022 and a subsequent 9.6% markdown last December.

Fidelity reports these numbers on a lag, so February data won't be available until next month.

What to know: Fidelity, despite being a shareholder in Twitter, does not necessarily have access to proprietary data like revenue. Nor does it explain exactly how it values privately held companies, although assumptions are that its calculation relies heavily on public market comps.

Snap, which Twitter was regularly compared to while still public, saw its shares gain 11.56% during January.

Fidelity stops marking down Elon Musk's Twitter

Fidelity previously had marked Twitter stock down by more than 60% since Elon Musk's takeover.

Marlena Sloss/Bloomberg via Getty Images.

Twitter

Elon Musk

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

A San Francisco jury on Friday found Elon Musk and Tesla not liable in a trial over a 2018 tweet in which Musk wrote that he had “funding secured” to take the electric carmaker private..

Why it matters: This is a victory for Musk, who has openly pushed back on the U.S. Securities and Exchange Commission's argument that he broke the law (and imposed a number of sanctions on him). 

“Thank goodness, the wisdom of the people has prevailed,” Musk said.

“I am deeply appreciative of the jury’s unanimous finding of innocence in the Tesla 420 take-private case,” he added.

The big picture: Musk has played fast and loose with his business-related tweets over the years — at times getting away with claiming they're just social media posts, and at times getting in trouble with the law.

Flashback: In August 2018, Musk tweeted that he had "funding secured" to take Tesla private at $420 a share.

Musk has since claimed (including during the trial in a San Francisco federal court) that he believed Saudi Arabia's sovereign wealth fund had committed to back the effort, and that more broadly securing capital wouldn't be a barrier in any case.

Still, investors sued him and Tesla for fraud, alleging that he knowingly or recklessly made the public claims, and cause them investment losses.

What's at stake for Musk in shareholder trial over 2018 Tesla tweets

Elon Musk admits Tesla investors would rely on "funding secured" tweet

Elon Musk wins securities fraud case over 2018 tweet

This is a victory for Musk, who has openly pushed back on the SEC's argument that he broke the law.

Fidelity again cuts its Twitter valuation

Fidelity believes Twitter has lost more than 60% of its value under Elon Musk.

Illustration of a heartbeat line creating a partial twitter logo in between beats

In a San Francisco federal courtroom earlier this week, a jury was told its job isn’t to determine whether Tesla CEO Elon Musk’s 2018 tweets about taking the company private were false. 

Rather, the group must decide on his state of mind at the time.

Why it matters: The legal concept of scienter, or the required state of mind to be held liable for certain actions, is central to white-collar crimes like fraud.

Catch up quick: Musk’s trial kicked off on Wednesday, with both sides giving opening statements to the jurors. Importantly, the jury is to assume that Musk’s tweets were false statements and he acted recklessly in posting them.

But jurors will have to determine whether he (and separately, Tesla) knew these statements were false, as well as whether they were material. That is, could they influence investors’ actions and cause financial damage.

What they’re saying: “[Musk] knew that no investors had confirmed support for the transaction going private,” the plaintiffs' lawyer told the jury after describing meetings Musk held with Saudi Arabia’s public pension fund.

“Yet [he] tweeted out on Aug. 7: investor support confirmed — past tense,” he added.

The other side: “What Mr. Musk was communicating was that he was serious about wanting to take Tesla private,” Musk’s attorney told jurors, and that the CEO’s understanding was that funding wouldn’t be an issue — only potentially getting shareholder approval.

He added: “Because of the circumstances, because of the leak [in the press about a possible take-private deal], because Mr. Musk was thinking out loud, he tweeted the wrong words. In his mind, funding was secured.”

Be smart: “Scienter is [a] really straightforward concept: It denotes the fact that conduct is intentional and meant to be done,” Dorsey & Whitney partner Thomas Gorman tells Axios.

There are three elements to proving fraud: that the statements were false, that the person knew they were false, and that the statements were material.

In some cases, merely proving that the defendant acted extremely recklessly — that is, with disregard for whether their statements are true — is enough to prove scienter.

Between the lines: “At trial, the way you prove that somebody knew a thing or recklessly acted is through emails,” says Barnes & Thornburg partner David Slovick. “[There's] almost always an email or an internal report … or they have the testimony of somebody inside.”

Elsewhere in Silicon Valley, there's another case where the legal principle may apply. Disgraced former FTX CEO Sam Bankman-Fried took his ongoing commentary on “what happened” to newsletter service Substack, creating two posts this week.

His insistence on continuing to talk publicly about the company has been universally baffling, given all the lawsuits he’s facing. But this could all be about… you guessed it: scienter.

From the earliest days of FTX’s collapse, Bankman-Fried has claimed that he didn’t realize the true condition of the company’s financials and that he had long stepped away from the day-to-day management of Alameda Research’s trading activities.

Yes, but: Already, bits and pieces in court documents are contradicting any claims that he didn’t know, or believed otherwise.

For example, former Alameda CEO Caroline Ellison said in her plea hearing that she and Bankman-Fried created misleading financial statements last year for Alameda's lenders.

Meanwhile, government documents recently obtained by the NYT show that a senior FTX engineer brought to Bankman-Fried’s attention Alameda’s inappropriate use of funds, but was told that “it was OK.”

A spokesman for Bankman-Fried declined to comment.

The bottom line: Who knew what, and when, is the name of the fraud prosecuting game. 

For Elon Musk, fraud isn't just about false statements

A jury is being asked to decide Musk's state of mind when he tweeted "funding secured."

Illustration of a brain with abstract shapes and money elements.

Lawsuits

Finish Line

Axios Finish Line

As Elon Musk has thrown himself into running Twitter day-to-day and rebuilding the platform in his vision, his other companies have struggled with challenges of their own.

Why it matters: Musk's acquisition of Twitter could mark a major milestone in his career — the moment his cross-industry empire became too big and too complicated for him to run every company. 

What's happening: Each of Musk's companies is facing serious challenges. 

Tesla is facing a series of lawsuits, including one that went to trial this week over a 2018 tweet saying he secured funding to take the car company private, sending its stock price on a roller coaster ride.

Separately, a Tesla shareholder sued Musk over his compensation package from the company, which is potentially worth more than $55 billion. Musk denies having a role in putting it together. 

And a Tesla investor filed a complaint alleging that Musk has done irreparable damage to the company’s reputation.

Meanwhile, the Tesla stock price has fallen nearly 46% in the last six months. 

Now, a growing number of competitors are threatening Tesla's global EV dominance and putting it in an unfamiliar position — one of defense, Axios' Hope King reports.

SpaceX is facing a National Labor Relations Board investigation into a wrongful termination complaint filed by several former employees. 

They were fired after writing a letter that expressed concern about the impact of Musk's tweets on the company's reputation and environment. 

The Boring Company, according to reporting from the Wall Street Journal, has dropped the ball on several agreements to build out transportation infrastructure for American cities.

Neuralink, Musk's brain technology company, is reportedly facing a federal probe after roughly 1,500 test animals died. 

The big picture: There are still investors, not to mention other CEOs and fellow Twitter users, who believe in Musk's takeover of Twitter and who see him as a once-in-a-generation entrepreneur. 

In a recent interview at the New York Times Dealbook conference, Netflix CEO Reed Hastings described Musk as "the bravest, most creative person on the planet." Hastings added, "What he's done in multiple areas is phenomenal."

Yes, but: To some observers of Musk's empire, it doesn't seem he can give each of his companies the attention it needs from its chief executive if he's so focused on Twitter. 

What they're saying: Author and academic Tom Nichols tells the Axios How It Happened podcast, "It will become tiring and exhausting and it's already hurting his other business."

What to watch: whether Musk follows through on the results of a poll he conducted of Twitter users last month — 57.5% said he should step down.

Editor's note: This article has been corrected to say that a Tesla shareholder sued Musk over a compensation package potentially worth more than $55 billion, not $55 million.

Elon Musk vs. Twitter: Cracks in the Empire

As Musk has thrown himself into running Twitter, the challenges facing his companies have mounted.

Illustration of a cracked cellphone with the twitter logo in the center

How It Happened

Podcasts

Elon Musk will try to defend himself against claims of securities fraud over 2018 tweets saying he had secured funding to take Tesla private in a trial that began this week in a San Francisco federal court.

The big picture: The trial comes at a perilous time for Musk and Tesla, which missed its goal of achieving 50% growth year-over-year in 2022 and has recently drastically cut vehicle prices. It also comes after Musk's chaotic first few months as CEO of Twitter, which he acquired for $44 billion.

Tesla's stock price has also recently plummeted, experiencing a dramatic 65% plunge last year, though it is still much higher than when Musk tweeted in 2018. 

Musk faces a separate trial stemming from a lawsuit brought by another Tesla shareholder over his multi-billion dollar pay package in 2018.

Musk abruptly claimed in a series of tweets in August 2018 that he had secured enough funding to take Tesla private at $420 per share.

The company's stock spiked on Musk's tweet, but then sank after his proposal came to nothing and he backtracked on it.

Musk was later sued by the U.S. Securities and Exchange Commission, which accused him of knowingly making false and misleading statements. 

In September 2018, Musk settled the SEC lawsuit, agreeing to step down as Tesla's chairman, while remaining as CEO.

He also agreed to pay a $20 million penalty, and comply with procedures on future communications related to the company. Yet, he did not have to admit to or deny the SEC's allegation.

Musk, who may have identified his potential successor as Tesla's CEO, has denied wrongdoing in public and court statements, claiming he was coerced into making the deal with the SEC, but an attempt to have the deal scrapped failed last year.

The trial started on Jan. 17, 2023 with jury selection in U.S. District Court in San Francisco. 

Investors who brought a class-action lawsuit claim Musk had not in fact lined up the money to take Tesla private in 2018.

Investors accuse Musk for allegedly committing securities fraud, claiming he knew he did not have the funding to take the company private when posting the 2018 tweets but did so as an attempt to manipulate Tesla's stock price and ruin plans for short-sellers.

U.S. District Judge Edward Chen, who is hearing the case, ruled in a pre-trial judgment last year that Musk's statements were inaccurate and reckless, significantly damaging his and Tesla's legal defense.

Musk recently lost his bid to have the trial moved out of San Francisco, claiming negative local news coverage has made potential jurors biased against him.

Musk and Tesla may be forced to pay billions of dollars in damages to investors if a jury finds he knew the statements were false and caused financial harm to company shareholders.

The trial comes at a time when shareholders are losing faith in Musk and it is expected to shed some light on his management style from a witness lineup that includes top Tesla executives and Silicon Valley stars, such as Oracle co-founder Larry Elison and James Murdoch, the son of media mogul Rupert Murdoch, per AP.

The trial may also shed light on Musk’s relationship with his brother, Kimbal, who is also on the list of potential witnesses.

Elon Musk's Tesla price cut comes as favorability falls among the public

Elon Musk no longer in top spot on Forbes' real-time billionaires list

He may be forced to pay billions of dollars in damages to investors depending on the trial's outcome.

Elon Musk during a SpaceX presentation in Boca Chica, Texas, in February 2022.

Elon Musk during a SpaceX presentation in Boca Chica, Texas, in February 2022. Photo: Jonathan Newton/The Washington Post via Getty Images

Closer

Axios Closer

Tesla has made significant cuts to the prices of new electric vehicle models in the U.S., according to listings on its website.

Driving the news: Elon Musk's firm has cut the price of its bestselling Model Y and Model 3 vehicles, along with its Model X sport utility vehicles and Model S luxury sedans.

The price changes could enable some buyers to qualify for the $7,500 federal tax credit that can be applied to many electric vehicle models.

The big picture: The price cuts come as Tesla experiences a declining market share and analysts say the firm is facing a "significant demand problem."

The company saw its stock plunge 65% in 2022, marking its worst-ever annual drop.

Our thought bubble: The latest price cuts, along with those in Germany, China and other Asian countries, add to the worries of a demand slowdown for Tesla at a time when investors are already casting doubt on Musk’s leadership abilities, with Twitter taking more of his focus.

Worth noting: Some investors, including Cathie Wood, have suggested price cuts could be welcome amid growing competition, especially as higher volumes could reduce production costs and make up for smaller margins.

On the other hand, growing competition could push the company into a pricing war with other EV startups, particularly in China.

As for his attention and focus, Musk has said he hasn't missed "a single important Tesla meeting" since taking over Twitter.

Be smart: In "addition to the $13,000 price drop, the base Model Y is another $7,500 cheaper for those who qualify for the full tax credit, meaning a Model Y ordered today could be more than $20k cheaper than one ordered yesterday — assuming delivery is taken before mid-March, when the tax credit is expected to be reduced to $3,750," Electrek noted. 

What to watch: How angry recent customers might be. In China, customers who missed out on new deals have been protesting and demanding rebates.

Tesla missed analyst estimates for fourth quarter deliveries, and the company will report full year financial results for 2022 on Jan. 25.

Editor's note: This article has been updated with additional details throughout.

Tesla cuts prices on new models in U.S.

The cuts add to the worries of a demand slowdown for Tesla at a time when investors are casting doubt on Musk’s leadership abilities.

Photo taken on Oct. 26, 2020 shows the Tesla China-made Model 3 vehicles at its gigafactory in Shanghai, east China. 

New vehicles at the Tesla Gigafactory in Shanghai, China, in 2020. Photo: Ding Ting/Xinhua via Getty Images

Tesla

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

World

Generate

Axios Generate

Tesla's future sales could help answer a defining question of the social media age: how much Twitter reflects the real world versus distorting it.

The big picture: Elon Musk's Twitter purchase in October is amplifying his rightward shift. Think support for Ron DeSantis, belittling trans people and more. 

His politics enrage online progressives, and there's evidence of people vowing not to buy Teslas.

Driving the news: Tesla yesterday reported 405,278 deliveries in Q4, a record that nonetheless fell short of analysts' expectations. 

But it's an incomplete snapshot of buyer sentiment. Musk's Twitter purchase only closed in late October, and also the numbers partially reflect orders before Q4.

The intrigue: It's hard to know how much the online drama will spill into consumer behavior going forward.

It's a cousin of a question that has roiled Democrats: whether strategists confuse Twitter sentiment with the party's wider electorate.

Threat level: Signs of consumers abandoning Tesla are largely anecdotal, though a mid-November Morning Consult survey found erosion of Tesla's favorability among Democrats.

"If the Tesla brand becomes increasingly right-leaning, that could put it out of alignment with core electric vehicle purchasing profiles," it notes.

The intrigue: Brand image is just one thing worrying Tesla investors as the share price has plummeted.

There are also concerns about Twitter distracting Musk, and wider economic headwinds, to name just two.

What they're saying: "We believe early signs of any brand deterioration related to Musk could be seen in the 4Q numbers, but ultimately 2023 will be the barometer year for Tesla," Wedbush Securities analyst Dan Ives said via email.

"Musk opened up the political firestorm and that’s not a good thing when selling to the masses."

Yes, but: Isolating the effect of Musk's politics on Tesla sales is tricky. 

"Among the challenges to defining shifts in Tesla demand is the larger car-buying atmosphere, where demand is universally dropping," iSeeCars.com executive analyst Karl Brauer said via email.

He also said that while Musk may turn off some buyers, there may be new interest from people "previously apathetic" about Musk and Tesla or unaware of him.

The real-world effect of Elon Musk's online drama

Elon Musk's political statements could alienate potential Tesla buyers.

Illustration of the twitter logo hanging from a rear view mirror. 

Electric vehicles

Tesla's stock plunged by 9% on Tuesday, poised to end 2022 on a grim note after having shed over 70% of value this year.

Why it matters: Investors are expressing dissatisfaction with Elon Musk by punishing Tesla's shares, with the billionaire distracted by his tumultuous buyout of Twitter. 

Meanwhile, Tesla is facing challenges associated with a slowing global economy and reported troubles in China, its largest market.

Driving the news: A rout in blue chip and technology shares, and the failure of traditional year-end "Santa Claus" rally to materialize, has helped Tesla's market losses snowball, with the stock having fallen for seven consecutive days.  

On Tuesday, a report that Chinese production was being halted accelerated the dramatic selloff.

Tesla's declines have caused the stock to crash out of the S&P 500's top 10 most valued companies, Bloomberg notes. 

Zoom out: During the pandemic, Tesla could seemingly do no wrong, muscling its way into the exclusive club of companies worth over $1 trillion. A relentless bear market has conspired with concerns about a distracted Musk, and a weaker environment for electric vehicles overall, to shave billions from Tesla's market capitalization.

The intrigue: With the House that Elon built seemingly on fire — and the polarizing billionaire's own net worth suffering as a result — Musk is actively seeking a full-time CEO to helm Twitter. But a concrete timetable has yet to be revealed. 

What they're saying: "At the same time that Tesla is cutting prices and inventory is starting to build globally in face of a likely global recession, Musk is viewed as "asleep at the wheel" from a leadership perspective for Tesla at the time investors need a CEO to navigate this Category 5 storm," Dan Ives, Wedbush's veteran tech analyst, wrote in a research note on Tuesday.

The bottom line: Everyone, including faithful Tesla investors, are wondering where the bottom is. Until Musk designates a successor at Twitter, an end to the rout might not be in sight. 

Tesla stock walloped by "Category 5" storm as woes mount

The company's stock plunged by 9% on Tuesday, poised to end 2022 on a grim note.

Illustration of a flat tire leaking air with the Tesla logo on it

Media Trends

Axios Media Trends

Elon Musk tweeted Tuesday evening that he would resign as Twitter's CEO "as soon as I find someone foolish enough to take the job."

Why it matters: Musk’s day-to-day involvement with Twitter has so far been chaotic and unpredictable, but it’s unclear if a new leader will be able to address the company’s business and morale problems under Musk’s ownership.

The big picture: After a turbulent week, Musk had polled his followers on whether he should stay or go, and 57% urged him to quit.

Yes, but: Musk had already told the world last month that he did not plan to run Twitter for long after his purchase of the company and expected to hand it over to a successor.

Between the lines: Musk's Tuesday tweet also said that, once he steps down as CEO, "I will just run the software & servers teams."

Those engineering teams are the heart of any online platform's business, and running them is at least a full-time job.

Thought bubble: Investors at Tesla, Musk's biggest company and the source of his wealth, want him to extricate himself from his involvement with Twitter — but it doesn't sound like he really intends to leave.

If Musk sticks around to run Twitter engineering, the new CEO will have to negotiate being Musk's boss — and the company will still have to deal with his chaotic presence. 

Musk says he will step down as Twitter CEO after poll

Twitter's owner tweeted he would step down as soon as he finds someone "foolish enough to take the job."

Illustration of the Twitter bird flying past Elon Musk, leaving droppings on his shoulder. 

Photo illustration: Maura Losch. Photo: Jim Watson/AFP via Getty Images

A majority of respondents — 57.5% — to a Twitter poll posted by Elon Musk on Sunday said that he should "step down as head" of Twitter.

Why it matters: His potential resignation as the head of Twitter could end one of the most chaotic and controversial tenures ever for a CEO of a major U.S. company.

Details: The poll, which launched Sunday at 6:20pm ET, concluded with a majority of the more than 17.5 million respondents saying Musk should step down.

Musk has amassed more than 120 million followers on the platform, making him one of its biggest voices.

"As the saying goes, be careful what you wish, as you might get it," Musk tweeted Sunday after posting the poll.

Between the lines: News of Musk's resignation wouldn't be shocking, considering he has long dismissed the value of corporate titles — and had recently assured anxious Tesla investors that he planned to step down eventually.

"The question is not finding a CEO, the question is finding a CEO who can keep Twitter alive," Musk tweeted Sunday. He also suggested that the company was on "the fast lane to bankruptcy since May," even though the company at the time had more than $2 billion of cash in the bank.

But, but, but: Musk still owns Twitter, so any new CEO still would report to him.

The big picture: Musk's potentially brief tenure as CEO was marred by daily controversies that drove lots of bad press and caused advertisers to flee the platform.

The billionaire businessman had to delay the launch of Twitter's new subscription product following a botched initial rollout.

A slew of world leaders and celebrities left Twitter, citing the chaos around Musk's ownership.

Just yesterday, Musk said users no longer would be able to mention other social media accounts in their profiles, leading to the temporary suspension of Y Combinator founder Paul Graham.

The suspension of journalists last week was a near-breaking point for the media, which has long relied on Twitter to grow audiences.

To many, the arbitrary bans suggested that Musk's "free speech" values don't apply equally to accounts that post things Musk doesn't like.

Twitter poll: Majority says Musk should step down as CEO

Musk still owns Twitter, so any new CEO still would report to him.