Good morning. Andrew here in Washington this morning. Lauren Hirsch and I broke news yesterday about Paramount’s offers to buy Warner Bros. Discovery. One included a carrot to the media company’s chief, David Zaslav: an offer to make him co-C.E.O. and co-chair of the combined entertainment empire. The question is how much pressure Warner Bros. Discovery shareholders put on the board to do a deal — and whether other suitors emerge with credible bids. We’ve got a lot more below on that scoop, as well as on Elon Musk’s raw words about investor advisory firms that oppose his pay package. (Was this newsletter forwarded to you? Sign up here.)
A plea to Tesla investorsShares in Tesla are down in premarket trading today after the electric vehicle giant said that its quarterly profit had tumbled. But anyone who listened to Elon Musk’s discussion about the results heard mostly positive notes about the company’s future — which he then pivoted into a trillion-dollar question: his proposed pay package. First, the numbers: Tesla’s profit fell 37 percent in the third quarter after it offered bigger discounts on models to lift sales. Revenue did increase, jumping 12 percent, to a record $28.1 billion. (Analysts said another big factor behind the bump was last month’s expiration of a federal E.V. credit that spurred purchases.) Tesla also collected a lot less from selling carbon credits, a major source of revenue, after the Trump administration gutted clean-air regulations. Musk urged investors to look beyond the short term. Tesla was making strides in technology that he had described as key to the company’s future, including artificial intelligence, autonomous driving and robots. If the self-driving software in particular comes to life as he predicts, he told analysts yesterday, Tesla sales will soar: I think people just don’t quite appreciate the degree to which this will take off — honestly, it’s going to be like a shock wave. It’s worth noting that Musk has made big promises about autonomous driving before and hasn’t yet delivered. That led to Musk’s pitch: his proposed compensation package, in which he would be given enormous amounts of shares if Tesla hits a series of financial and operational milestones. The proposal would bolster his control of Tesla to about 29 percent if all went well, and would be worth roughly $1 trillion. Musk framed his argument around his need for more personal control to ensure that his vision was brought to life properly. (But not so much that he couldn’t be fired “if I go insane,” he said.) Speaking about the fleet of robots that Tesla plans to build, Musk said: “If I go ahead and build this enormous robot army, can I just be ousted at some point in the future?” He also railed against I.S.S. and Glass Lewis, the big shareholder advisory firms that have recommended that Tesla investors reject the package. “Those guys are corporate terrorists,” he said in a lengthy monologue at the end of the analyst call. In other words, Musk argues, Tesla depends on him. He has made that point repeatedly: When a shareholder criticized the pay package on X on Sunday, the billionaire replied that Tesla was worth more than all other auto companies combined. “Which of those CEOs would you like to run Tesla?” Musk added. “It won’t be me.” Skeptics have to decide whether he’s bluffing.
Oil prices surge after the White House takes aim at Russian producers. Brent crude, the global benchmark, rose nearly 5 percent this morning after President Trump announced sanctions on Rosneft and Lukoil, the harshest penalties by the U.S. against Russian oil companies since Moscow invaded Ukraine in 2022. (The E.U. also plans to ban Russian liquefied natural gas imports.) Economists will watch for how it affects inflation. The Trump administration is said to weigh investments in quantum computing. Shares in IonQ, Rigetti Computing and D-Wave Quantum soared in premarket trading after a Wall Street Journal report that they are in talks to give the Trump administration equity stakes in exchange for federal funding. Quantum computing, which has shown some recent breakthroughs, could become the latest sector in which the administration invests directly out of national interest. Bankers could take home record bonuses this year, a new report finds. Profits at publicly traded Wall Street institutions are on track to hit a high in 2025, according to Thomas DiNapoli, the New York State comptroller. That bodes well for bankers and traders — and for New York, which expects to take a big cut from those bonuses in the form of taxes. Inside Paramount’s quest for Warner Bros. DiscoveryFor the past month, many on Wall Street have wondered just what was happening behind the scenes since word of Paramount’s intent to bid for Warner Bros. Discovery emerged. Lauren Hirsch and Andrew got the inside scoop for The Times. And it turns out that David Ellison, Paramount’s C.E.O., has been busy making his case for a deal. Paramount made three takeover offers in four weeks, according to a letter that Ellison sent to the board of Warner Bros. Discovery. He first bid $19 a share, then moved up to $22 in late September. Paramount’s most recent bid, on Oct. 13, offered $23.50 a share in cash and stock. That represented an 87 percent premium to Warner Bros. Discovery’s share price before word of Paramount’s intentions leaked. Paramount made other changes to its offers over time. It increased the proportion of cash offered to Warner Bros. Discovery shareholders to 80 percent from 60 percent. And it raised how much it would pay if a deal were blocked by regulators to $2.1 billion from $2 billion. Ellison also made a pitch to David Zaslav, Warner Bros. Discovery’s C.E.O., whom some in the entertainment business believe may not want to give up his perch as a media mogul. In one of Paramount’s offers, Ellison told Zaslav that he could stay on as co-C.E.O. and co-chairman of the combined company. A key part of the pitch: Only Paramount can get a deal done. Ellison wrote that other rivals “would need to overcome significant (perhaps insurmountable) hurdles given their dominant market positions.” Take Amazon, which has been evaluating an offer:
What’s next? Warner Bros. Discovery plans to ask bidders to sign nondisclosure agreements to gain access to more financial information as soon as this week, Bloomberg reports. Can anyone else persuade the company that they can do better? Beyond meme maniaShares in Beyond Meat are sinking in premarket trading after a meme-stock frenzy that shot them up 1,000 percent over four days. It is the latest example of a rally fueled by online cheerleaders, only to crash hard. Some market watchers saw the stock’s recent run as yet another reason to worry. It follows investors, especially day traders, taking on record amounts of margin debt and speculating more on unprofitable companies like Beyond Meat. A recap: Investors bailed on Beyond Meat yesterday afternoon after its nosebleed-inducing run. Why the stock ran up in the first place remains uncertain. Was it day traders trying to squeeze short sellers, who borrow shares in a company, hoping to repay them when their price has fallen? Or was it enthusiasm over the fake meat producer’s new distribution deal with Walmart? Social media chatter clearly played a role. A Dubai-based trader, known online as “Capybara Stocks,” was among those who trumpeted Beyond Meat’s market potential to his followers. Others soon got excited:
Meme-stock rallies have “become a feature of the market,” said Garrett DeSimone, the head of quantitative research at OptionMetrics. Investment pros, he added, have “come to understand how these new meme-stock bubbles build up and how to properly hedge them.” That said, they may be more primed to happen under the Trump administration, Ivan Cosovic, the managing director of Breakout Point, a market data firm, told DealBook. Washington’s moves to invest directly in certain industries have “given retail investors new narratives” to promote stocks. For instance, Cosovic said there had been a spike in chatter around quantum computing stocks after The Wall Street Journal reported on the administration’s interest in the sector. C.E.O.s’ political worriesCorporate leaders aren’t feeling optimistic about the state of things. But they’re also not ready to get too vocal about it. Ten months into the second Trump administration, 44 percent of chief executives say global prosperity is “moderately decreasing,” according to a new survey of more than 1,200 global C.E.O.s by Egon Zehnder, an executive search and advisory firm. That’s compared with 8 percent who say it is “significantly increasing,” Jordyn Holman writes. Nearly three-fourths of business leaders said they felt responsibility for shaping “global prosperity and stability.” About 32 percent said they could do so within their operations and 40 percent saying they should engage externally. But few C.E.O.s have taken a public stance. Unlike in Trump’s first term, when C.E.O.s regularly posted on social media about their displeasure with his policies, many have remained mum on recent presidential actions like steep tariffs and ICE raids that have disrupted their operations. The survey was conducted between Sept. 4 and Sept. 23. So what’s going on? German Herrera, the managing partner for Egon Zehnder’s U.S. business, who helped field the survey, said it doesn’t show C.E.O.s are necessarily feeling that they will act, but that they should. “In conversations, what I’m gathering is that they’re hesitant to take a stance because that might backfire and might get them in a hot seat,” he said. Almost none of the surveyed C.E.O.s felt they should stay out of politics completely. Though 25 percent said their main responsibility is to shareholders and financial performance, only 3 percent said they should leave global issues to governments and international institutions. “What you’re hearing from leaders is we need to compensate for the things that the government is not doing,” Herrera said. “If the government would be doing a good job in ‘X,’ then the responsibility for the business community would be less.” We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
Deals
Technology and artificial intelligence
Best of the rest
Thanks for reading! We’ll see you tomorrow. We’d like your feedback. Please email thoughts and suggestions to dealbook@nytimes.com.
|
