Power Lunch - Elon Musk’s surprise move 10/4/22

Episode Date: October 4, 2022

A dramatic twist in one of the most contentious takeovers in recent memory. Elon Musk reportedly offers to buy Twitter at the original price just days before the trial. The stock surges before being halted. Why now? What happens next? And how does it change the media landscape? Hosted by Simplecast, an AdsWizz company. See https://pcm.adswizz.com for information about our collection and use of personal data for advertising.

Welcome everybody to Power Lunch, along with Melissa Lee. I'm Tyler Matheson, and here's what's ahead on this very busy newsday. Twitter shares halted, as John just mentioned, midday surge. Elon Musk reportedly changing course, and that puts it mildly, proposing to go through with the deal to acquire the company, Twitter, at the initial price he offered months and months ago. We will have details on this developing story. Plus, the Fed pivot trade, stocks rally, the dollar weakens.

yields pulling back just a bit, but is the market anticipating something that might not happen? Melissa, welcome home. Thank you very much. It's great to be back, especially on a day when we are seeing stocks rally across the board. In fact, the S&P 500 on track for its best two-day gain in two years, we're at 5% in two days. Take a look at the gains across the board here. We've got the Dow higher by 2.4%. S&P 500.

We're about 12 points off the session highs right now up 2.7%. The NASAC gaining the most of the three majors up by almost three. percent right now. And a big reason behind this rally is the decline that we've seen across the yield, particularly in the 10-year yield. 10-year yield 3.623 percent right now, far cry from where we were one week ago, two-year note at 4.11. And in corporate news, as Tyler had mentioned, we're watching shares at Twitter. They are spiking. They're now halted right now on those reports that Tesla CEO Elon Musk plans to go ahead with his deal to acquire the company for 5420 a share. it's trading well below that, 4793.

That's a whole other ball of wax, Tyler. Absolutely. And as Melissa was just pointing out to me, what did you say a few moments ago, Melissa, about the interest rates when this deal was started? When the deal, when Elon Musk first proposed to buy Twitter, the 10-year yield was at 2.83%. So the world has changed,

but according to these reports, the price has not changed if he actually goes through with this. At that number. So Twitter is in the news, in the bull's eye today, and this could spell a dramatic finish to a dramatic takeover story, one of the biggest of all time. Twitter locked in a legal battle with Musk over the acquisition that was announced back in April. David Faber has been reporting on this surprise move and is with us now. What's going on, David? I mean, this seems like he has just folded, given what he must

perceive to be a very bleak set of circumstances in the Delaware. Chair Chancery Court? All true. It appears he has folded and done so, not even with the settlement, Tyler, which, you know, we all could have imagined would have occurred prior to the beginning of the trial on the 17th. And his attorney's calling and saying, all right, can we talk? Maybe we'll offer 50. No, that's not this. This is just saying, all right, I'll pay the price that I originally agreed to back on April, whatever it was, April 25th, before I not soon after got Byers remorse, it would seem, or at least that would be the argument of Twitter's lawyers, and said, I want out of here. Of course, he had a different case, but it was not a case that they seemed to be making particularly well thus far, at least based on what we've been able to see occur in that court prior to, of course, the actual beginning of the trial, which, as I said, was slated to begin the 17th of this month.

Let me tell you what we know, Tyler, because it is somewhat confusing right now. People are sort of wondering, well, what is exactly going on? Last night, Mr. Musk, or his attorneys sent a letter to Twitter's Board of Directors, also sent a letter into the court saying, we want to buy the company on the original terms, 5420. And if we do so, obviously, we expect the litigation will end, and that'll be the end of it. And so, by the way, Mr. Musk will not need to be deposed later this week. And a lot of everything else would come to a halt. What would move forward is the deal on the terms that Twitter agree.

to months ago. Twitter, and you can't blame them for this, my understanding is sort of, well, kind of disbelieving almost, saying, all right, that sounds great, but we just want to make sure that if we let you out of this litigation, there isn't something here that's going to happen that we're going to feel very badly about, that you're going to be serious and actually close the deal. And so, you know, they're going to most likely appear in front of Chancellor McCormick,

try and iron this out, hammer it out, make sure it's done, but it does appear to be. And that's where we stand. The news pending that we have on Twitter's shares, you know, at some point this letter may get released. It might even be in a 13D filing from Mr. Musk, remember he is or was, is one of the largest shareholders, is the largest single shareholder in Twitter, and has been now for quite some time. That was how this whole thing began. but maybe he'll amend his D and say, yep, that's it. We agreed, and the letter will be attached.

So we're waiting for that and, you know, potentially for this to see the light of the day either in the court. And then we would expect we'll get the actual official news. And then as I've been saying, Tyler, this deal could close very quickly. The banks have 15 days to market the debt if they want to, but they don't necessarily have to. They could waive that. All the approvals are done. So, you know, this thing can close in a matter of days you can see Elon Musk. Once they get it all signed off on, you can see Elon Musk owning Twitter. And Melissa, you mentioned the financing and how the markets have changed. I did want to refer people back to it because Morgan Stanley and the banks that are financing here are certainly going to take a quick look back and say, okay, that's what we got to sell now.

$6.5 billion term loan at 475 basis points above LIBOR, 3 billion secured bridge and 3 billion unsecured bridge. As you kind of reference, Melissa, you know, things can change a bit in the markets. And so what's the ultimate price going to be? And where's the wiggle room there in terms of what LIBOR plus 475 right now adds up to? Is that enough? Probably not. And so they may have to sell some of that debt down at a discount, which means taking a bit of a loss. And then the $7 billion equity commitment that Musk got from all those people,

Larry Ellison, Mark Andreessen, they better get ready to write their checks because it could be only days away that they actually have to do that. So, Tyler, that's where things stand right now. David, why do you think Twitter shares are still trading well below 5420? What's your guess? Well, they were because there was some uncertainty about what all this meant, and then they were halted. So my expectation would be when we see the letter and we resume trading, they will trade very close to 5420. You know, given all the twists and turns here, you can't blame Twitter.

and or investors to some extent for being a bit concerned that, well, what am I missing here? But that's what happened, Melissa. You know, we had a headline. I think it was Bloomberg that first reported it. Kudos to them in terms of this letter. Then many of us sort of got a bit of the background here as to what was going on. But by then the shares were halted news pending, and that's where they've stayed. So it is trading, as you point out, at a significant spread.

That will tighten very quickly, one would expect, when it reopens. because when it reopens, we'll have actually seen the news, or at least some version of it being that letter that I've referenced a number of times. One other thing, you know, you follow Tesla closely, obviously, Melissa, and, you know, he sold a lot of it to fund this, but according to Robert Frank, whose tract is very closely his math, he might need to sell or at least raise another couple of billion dollars for his 31 billion, or I should say, $25 billion check that he's, going to have to write here for this. You know, you've got $32 billion roughly in equity and then $13 billion in debt. Let's call it. Those are rough numbers. David Faber, thank you very much. As always, fantastic reporting. We appreciate it. David Faber. For more on this story and why it is happening now, let's welcome in Alex Cantorwitz, founder of Big Technology and CNBC contributor. Alex, welcome. Good to have you with us. I guess as I was listening to David and pondering the McClure

curial Mr. Musk, I'm wondering whether it is your instinct that this is the end of it. Oh, that is really tough to call it the end because I feel like we've been at the end so many different times when Musk signed the deal to close. Then we thought, okay, he's protesting this deal or the U.S. courts strong enough to enforce it. So right now, you know, looking at him saying, okay, I'm ready to settle and not even settle. Pay the full $54.20. Yeah. You know, pay it. Am I going to say? say this is the end? No, only because I leave open the window to be continued, to continue to be surprised here. And I think if you shut that window, you know, you've been disappointed a number of times.

So I don't know exactly what it's going to be. But at this point, I would say, who knows, I wouldn't say it's certain until that deal is signed and Twitter is fully in must possession. Continue to be surprised in that the price might not be 5420, in that the deal might not actually close, in that the court case goes through. what, Alex? I mean, I think Twitter is trying to go to Musk and being like, you know, let's be sure that you actually want to do this so you don't play games, which David just said. You know, is there a place where Musk does say, okay, I'm going to make the deal in this, then says gotcha. You know, I'm not 100% sure. Again, like right now it seems certain,

but even if you're 98% sure that the deal is going to go through, that 2% speaks loudly right now. And as David was pointing out, and Melissa raised also, The financial markets have changed a lot since this deal was first announced in April. And he is not the only interested party in this deal. He has finance backing from, as David pointed out, Larry Ellison, Mark Andreessen, presumably others. One wonders how much their appetite to go through with this deal at the full $54 a share price, what their appetite is like. Right. That's going to be really interesting. Could you imagine Musk calling up Larry Ellison and being like, hey, Larry, listen. So you pledged that $2 billion to me for this piece of junk company that I've disparaged in public for the past, you know, however many months caused many of the employees to leave, not shown any strategic direction for where it's going. So about that $2 billion, which even Larry Ellison isn't a non, you know, meaningful sum of money. And that's going to those are going to be tough conversations to have. And we'll see. I mean, this is going to be a test. to Musk's ability to be the entrepreneur of our generation. If this does go through, is he going to

come through for those Larry Ellisons and Mark Andresens who've put their blind faith in him? It's going to be a real test of his legacy. Well, let's say it does go through, Alex. Let's a little fast forward, not even too much out into the future. David says, you know, the deal could close in a matter of days at this point. You know, what can Elon Musk do? Because when he took, when he first made that offer, he had sort of, you know, blue skies, right? It could Twitter can be anything. It's a great platform, et cetera. As you mentioned, he's disparaged the company, the platform for months and months on end at this point. As a leader, what do you think he could do to sort of save this platform and redeem its reputation? Well, the question is whether it really

needed saving when he came in. And of course, Twitter is a mess. I think any communications platform that has a large chunk of humanity on it, sharing their thoughts without any filter is going to be a mess. I don't think there's any solving that. So Elon's approach to try to get in on all the speech ideas, you know, I don't think that's going to really, you know, make a huge difference. Now, I do think that, you know, he is an entrepreneur. He is someone who comes up with these wacky ideas, and sometimes those ideas pan out. You know, let's send a, you know, a spaceship up and then land it, you know, on the way down and reuse it again. I mean, that's wild stuff. So if Elon comes up with Elon level ideas and finds the people willing to execute for him, you know, for Twitter,

then I think there's a chance that Twitter's going to be in a better spot than it is today. Of course, it's really at a low spot now, so it's not going to take very much. But this is going to be a test of his ability as an entrepreneur to really show us the person that many people believe that he is. Maybe we can put up a chart of Tesla stock right now and take a look at that. And the question for you, Alex, is if this deal does get consummated at the full price, what does it mean for Tesla? Because if Mr. Musk has to write a $25 billion check, one could argue, I suppose, that every dollar, of capital that he is putting into Twitter is a dollar of capital that he doesn't have to put into Tesla.

And every minute of attention he puts into Twitter is a minute of attention he's not putting into Tesla, which I think is important. So I think there's two things that could happen here, right? First, once this deal is signed and goes through hypothetically, right? We still don't know. But once it goes through, you know, you might see a drawdown in Tesla right away. I think the bigger question is what happens to Tesla long term or Tesla investors going to stick with Elon if he can't.

show that he can turn Twitter around. And by that, I mean, you know, Tesla, of course, is a very impressive success story as a business, but on the stock market, part of it is a story. And part of that story, or a good chunk of that story is the fact that Elon Musk is a generational entrepreneur and when he touches turns to gold. And if he goes and buys Twitter and can't do the same thing that he's done to that company like he's done to Tesla and like he's done to SpaceX, there are going to be questions about Elon's wisdom and brilliance and his ability to prolong that, over time. Really?

And so the guy can send a spaceship, you know, in outer space, reuse the rockets, et cetera. He could build an electric car company. He could co-found PayPal. I mean, and then because of Twitter, his reputation will be at risk? I think, look, I don't think that you can, okay, here's what I'll say. Those companies right now, the spaceship company, the car company are valued above what they would be. There's a must premium on it, no doubt.

So I don't think like his reputation as someone who can build these companies is going to be gone. But the question is what happens to that Musk premium on the stock? And yeah, for sure. If he messes Twitter up, the Musk premium, which is predicated on him being this generational genius, it comes down a bit. I don't think it goes away completely. But there's risk there, no doubt. Interesting. Alex Cantorwitz.

Thanks. Appreciate your time. Thank you. Thank you. Our next guest owns both Twitter and Tesla personally. Let's bring in Jack Ablin, Crescent Capital founding partner. and CIO. Wow, Jack, now what? What do you think about, you know, is the deal going to close, you think? And what happens to Tesla shares? They're still higher, by the way, in today's session.

Yeah, I noticed that. Yeah, I think that it is a risk to Tesla shares near term if Musk needs to raise more capital. I also think it's a risk to the debt holders, you know, 13 billion of debt predicated down a $54 stock price may be slightly over levered based on where Twitter ultimately trades. But I think wrapping this thing up, I think, is probably good news overall for shareholders of Twitter, certainly. And Tesla will say probably, at least at this stage. Are you going to hit the bid on Twitter shares when they reopen, Jack? Right.

Possibly. That laugh tells me yes. I mean, you've been waiting, right? I mean, how long have you been holding Twitter shares? I'm just curious. I mean, were you holding them prior to Elon Musk's bid? Well, I don't, I mean, it isn't like I hold it in a brokerage accounts. It's part of a managed account I have with Crescent.

Crescent has it in Tesla and Twitter shares in some thematic portfolios that we launched in October of 2020. So that's where it dates back to. All right. Do you buy the idea that by the prior guest that if this doesn't work out and Twitter doesn't get righted by Mr. Musk, that he has high reputational risk attached to this and that that that Musk premium might come out of Tesla and other stocks that he's involved in? Yeah, I mean, I think Alex raised an interesting point there. Look, he's a, you know, he's a great manager. He's a mercurial guy. You know, this may have just been a whim that he, you know, the dog that caught the car.

So I don't know what will ultimately happen with Twitter. I'm not sure if they start charging a monthly fee that I'm going to be on board and continue to follow Twitter. I'm not sure. But, yeah, I think that. the reputation will certainly be dented, but not killed. In terms of broader markets, Jack, I want to get your take on the rally that we've seen over the past couple of days. It's really predicated on the reversal that we've seen, a sharp reversal in yields as well as the dollar index. Do you think that reversal is lasting?

Because I feel like that is a foundation as to whether or not you believe this rally can continue. Absolutely. If you look at the move that we've seen in equities, even year to date, down the 22 percent, whatever it was, It was entirely explained by the two plus percent move in the 10-year treasury yield. I mean, almost to the percentage point. And so we're seeing now rates reverse and we're seeing markets rally. Here's the problem. And by the way, we believe that rates should be a lot lower. We have a copper gold model that's been pushing rates, suggesting rates should be going higher since 2019.

It finally hit that number. and now it's come down with copper castating and, of course, gold, you know, lower, but at least relatively holding its own. That model now suggests the tender treasury yield should be 2.2%, not 3.6 or 3.7 where it is today. If we were to drop that much, the S&P 500 would rally between 25 and 30%, depending on what earnings expectations are. But here's the problem, the Fed. The Fed holds trillions of 10-year treasury notes. And if they believe that this market's getting ahead of itself, that the wealth effect associated with this rally is going to impede their ability to combat inflation, they're going to start dumping 10-year notes, and they're going to try to push that 10-year yield

back higher. So I wouldn't declare victory on this, you know, on this market yet. What I'm watching is the dollar. Once the dollar rolls over, as investors believe that there's light at the end, end of the tightening tunnel, then I would say, all clear, let's take equity market risk. In fact, we would take equity market risk in non-dollar equity markets. Very interesting. Great to speak with you. Thank you. Jack Abil. Thank you. All righty, coming up, will weaker U.S. economic data convince the Fed to moderate its aggressive rate hiking path? That was sort of implicit in what Jack was just talking about there. Some say that if the Fed doesn't slow down, it risks a global recession. Plus, our retail power playbook, a big challenge for the industry is excess inventory this fall,

but there is one stock that could benefit from that. As we head to a break, make a look at shares of Hasbro, which dropped sharply midday after issuing a downbeat third quarter revenue outlook, and it cut its full year outlook as well. Power Lunch will be right back. All right, welcome back to Power Lunch. Stocks are rallying, at least in part, on the hope that the Fed will moderate its aggressive rate hiking path. The Reserve Bank of Australia did overnight, 25 basis points less than expected in rate hikes. United Nations Conference on Trade and Development calling on central banks to cut it out, stop hiking rates.

If monetary tightening in the advanced economies continues over the coming year, however, a global recession is more likely. And even if it is looser than the 1980s, it was almost unavoidably harm potential growth rate in the developing economies. So says a UN arm. But today the San Francisco Fed president said that further rate hikes are needed to beat inflation back and that those policies got to be held in place until, quote, truly done. For more on the disconnect and the dispute, the Fed and the economy, Tiffany Wilding, North American economist at Pimco. Tiffany, always good to see you.

Thank you for joining us. What is your base case about rates and the global economy and what central bankers are likely to do? Yeah, well, first, thanks for having me. So, you know, I think it's very clear that underlying inflationary pressures do appear more entrenched. And that's the case, I think, not only in the U.S., but in other large developed markets. However, you have central banks that, you know, very much focused on that and have embarked on the most aggressive rate hiking path that we've seen in several decades.

We think that probably continues over the next couple of quarters, you know, but nevertheless probably ends in, you know, relatively mild, but maybe a bit more prolonged recessions over the large, you know, developed markets as a result of the fact that you still have elevated inflation that sort of limits the, you know, the usual counter-sick local policy response. So if I'm inferring correctly from what you're saying, and part of my job here is to put words in other people's mouths, you understand that, of course, is that those who are saying, hey, maybe the Fed is closer than we think to stepping back off the break, or at least not slamming it on as hard.

You're not really in that camp, at least not yet. Yeah, I mean, I certainly think eventually the tradeoff that the Fed faces will be quite different. You know, in a world, think fast forward to next year. We do think we're probably going to be in a recession in the United States. Unemployment is rising. Inflation's coming down. the tradeoff that the central bank faces, the Fed faces is very different then than it is now of high inflation and low unemployment. Yeah, so I think eventually, sure, but as of right now,

you know, I do think that you will probably still get further aggressive rate hikes, again, at least over the next quarter or so, you know, because inflationary pressures do still appear to be relatively elevated. The situation that you described, Tiffany, in terms of where we will be in, say, a year or so, it sounds like a stackflationary environment. Is that what you're implying? Well, you know, ultimately, I think headline inflation will start to move down. I think the key issue here, though, is that, you know, despite the easing in commodities that we've seen easing in some of the supply chain issues, underlying inflationary pressures do feel a bit more entrenched. You know,

so although we get headline inflation coming down, what's happening right now is the Fed is reacting, you know, to what they're seeing underlying that. And they are very aggressively reacting to that. And so, you know, I think, again, ultimately, because monetary policy works through long and variable lags, you know, ultimately this probably does end in recession to get inflation back to target. You know, but, but as I mentioned, once the unemployment rate starts going up, you know, for the Fed, and we think it does rise, you know, maybe to 5%, maybe a bit above next year, you know, again, that tradeoff is going to be much different for the Fed. Real quick, how do you explain what's happened in rates over the past couple of days?

Is it merely that we've gone from September to October? Is it something else? The 10-year has come off the boil, as it were. So has the two-year. Why do you think that is? Yeah, well, I mean, I think some of it is the result of, you know, you've had a lot of noise around some of the issues. that are going on in the United Kingdom.

Obviously, that's created a lot of market volatility and some risk aversion. In addition to that, we've just seen a lot of financial conditions tightening today, this year. The Fed has been successful at really tightening financial conditions. And because, again, monetary policy works through lags, I think it's reasonable for the market to kind of take a pause, given what we've seen,

and to assess the impact on the economy that that's going to have. Very interesting. Tiffany, thank you so much. Appreciate that. Thank you. Great to have you with us. Coming up, OPEC Plus, set to meet tomorrow with the group expected to announce production cuts. The report's sending crew to hire in the past two days, just as consumers were starting to get some relief at the pump. We've got the latest on what to expect as we had to break.

Twitter shares still halted as David Faber reports that Elon Musk is reviving his proposal at the original price just days before the trial is set to begin. Lots more on this developing story straight ahead. Power Lunch is back in two. Welcome back to Power Lunch. I'm Bertha Coombs, and here's your CNBC News update at this hour. A Michigan judge has dropped charges against seven people in the Flint Water scandal. Among the seven are two former state health officials blamed for deaths from Legionnaires disease. In New York, a judge says Steve Bannon is unlikely to stand trial until late next year on charges he defrauded. donors who gave money to build a wall on the U.S. border with Mexico. Prosecutors say Bannon promised all donations would go to constructing the wall, but instead, he allegedly enriched himself and his friends.

Bannon denies the charges and has pleaded not guilty. And one of country music's greatest icon has died. Loretta Lynn, whose song spoke to the American working class, especially women, was 90 years old. Lynn's best-known song, of course, was the 1970s. coal miner's daughter, an ode to her father who died of black lung disease. Melissa, you know, I think my favorite title might be, you're the reason our kids are ugly. Our kids are ugly.

It's such a classic country title, isn't it? It really is. It's the raw truth, right? It's the beauty of country music. Bertha, thank you. Bertha Coombs. I head on the show, Domino's hired by more than 4% today. UBS upgrading the delivery chain to a buy saying,

concerns are overblown. The stock is down more than 40% this year. Plus, our power playbook. We're breaking down retail, a key sector hit by both inflation and supply chain issues this year. What name should you be watching heading into your end? Less than 90 minutes left in the trading day. We want to get you caught up on the markets of your stocks, bonds, commodities, and your fourth quarter playbook in the retail space. We begin with the stock of the day. Bob Pisani is at the Twitter post at the NYS. Bob. And haven't been here in a while here standing out front. Take a look here. Twitter 4793 here. That was halted at 1204.

Useful to remind everybody we've actually had two trading halts today. Let me just show you what happened. 1204 we were trading regularly here, $43 here, 1205. We were halted for volatility. And what happens in volatility is you're halted if it's 5% above or below the average price for the last five minutes. So you get halted and it's automatic. It's not a company halt. Resumed five minutes later, 1210, then 1213, halted again, this time different. news pending. What's that? That means the company called the New York Stock Exchange and said, stop trading. We have a news announcement. We'll announce it whenever we get to it. Now, what's going on? We're waiting for the news announcement to come out. Important thing is here,

we are waiting for the company. That's what we're doing right now. So let's keep moving here and talk about the markets overall right off the highs for the day. The important thing is we've got big moves up in some of the big cyclical stocks here that we're dealing things. So industrials, tech stocks, metal stocks really doing well today. You see Caterpillar roaring here. Chevron up, Walt Disney also on the upside. Lacking of the consumer staples names, defensive names here, most of them pharmaceutical names here. S&P 500, you know we moved 160 points since yesterday at 10 a.m, that's when those ISM numbers came out. The important thing is generally the ISM numbers were favor for the Federal Reserve's position. Guys, back to you. Thank you, Bopassani. Now to the bond market

where lower yields are helping equities once again. Rick Santelli is tracking all the action. Rick, I've waited all day. I've wanted to ask you since the beginning of the day about the Bank of Australia's gift to the doves. Yeah, you know, the Bank of Australia seems to have a lot of common sense with regard to their approach. And even though they still raise these smaller amounts,

certainly has set things on fire with respect to buying of equities, a global scenario. Hard to argue with their logic, Melissa Lee. And I'm sure that the post-mortem of the, the Fed a couple years down the road will probably correlate with that, but they're not going to let us see it or share it with us at this point in time. Look at a two day of tens. Here's what jumps out of me. Melissa Lee's right. Yields have come down dramatically, but they're starting to consolidate. As a matter of fact, we have twos through tens right now, slightly lower in yield, but we have 20s and 30s, higher in yield and lower in price, and we do see the consolidation. See the right side of that chart today? It's dovetailing into the bottom of yesterday's range. Now, if we look at what's going on with regard to Boons, they closed today at 187. That's a two-week low yield. Giltz, by the way, closed at 386, a one-and-a-half-week low yield.

But today, Strong Dollar ended on the 27th. That was the high close at 114. Look at it now, barely above 110.30. That means it's down almost 4% just since the 27th. And remember, Strong Dollar was good for imports. lived here, but it was bad for overseas profits. Well, the multinationals are enjoying a rally. I think it's one of the reasons my sources say stocks are going up and quickly, Euro versus dollar, over two week high today and pound versus dollar, a three week high today. The dollar may have

peaked. Melissa Lee, back to you. Rick Santelli, thank you. Oil is closing for the day as OPEC Plus gets ready to meet tomorrow with production cuts expected to be announced. PIPA Stevens with a look at the numbers. PIPA. Hey, Melissa, the energy market squarely focused on OPEC plus's meeting in Vienna tomorrow with optimism around a production cut, pushing Brent crude back above $91. Now, U.S. oil is now up about 9% over the last two sessions, prompting Deutsche Bank to say an output cut is already priced in. The firm said the much more important thing to watch is guidance around additional cuts

further down the line. And, of course, there's the wild card of Saudi Arabia, which could disqualmie, which could decide to cut production on top of the group's cut. Let's check on prices. WTI up 3.3% at 86, 36, brand crude at 9169 for a gain of 3.2%. We are also seeing a pop in gasoline futures on the heels of general market optimism and what that means for gasoline demand. Gas buddies Patrick DeHan saying gas prices in some lower price states could start to creep up. And finally, energy stocks once again leading the S&P gaining about 4%. Melissa. All right. Pippa. Thank you, Pippa Stevens. Let's get to retail now. In our retail power playbook, the sector is down about 33% this year,

drag lower by names like Best Buy, Target, and TjX. Are any beaten down retail names buys in Q4? Let's bring in Simeon Segal, BMO Capital Market, Senior Retail Analyst. Samian, great to have you with us. I feel like there are two potential worries here. One is a consumer going to spend? And then what are retailers going to do? And how will they manage inventory, names like Walmart, Target, as well as Nike? Because the consumers could actually get a lot of great bargains. ahead of the holiday shopping season. Yeah, I agree to be here, and I agree with that. Totally. I think the question is there is excess inventory. We know that. Nike just reminded

us of that last week. But then the question, on the other hand, is do these brands need to promote? And I think that, and you and I've talked about this, brands that maintain the brand equity, brands that say I'm not going to promote, I'll just sit on that inventory because my balance sheet allows for it, they may actually walk out with better margins on the other side. And so I think that the barbell strategy that we like is there will be excess inventory, which means the off-pricers will win. TJX will benefit. But on the other hand, there are certain companies saying we're not going to give up all that margin for market share.

And you have the CEO of Capri, for example, saying they like where they stand. They're willing to hold back. And that's not going to be a discount story. So as we move into the holiday season, what kind of holiday season are you looking for? I think that people bought a lot of things during COVID. I think that depending on your replenishment, I think that everyone said, you know what, I'm not going to shop at a 12-month time period with stimulus last year, pent up demand. And I think we're dealing with the overhang.

And I think that companies need to internalize that not everyone needs the same things they bought last year. So I actually think Holiday might be a little bit light on the top line, and that can be okay. The question is, do the companies do what they normally do when top lines light and just throw promotions at the discount? counter. Yeah. Exactly. And so that's why I think it pays to be strategic. I think this is a very different period than we've had in the past. Normally, if your product doesn't move, you cut it immediately. I just don't think that's the right move for everyone. You like Planet Fitness. Is that a holiday thing or is that just, you know, people are eating extra cookies and turkey legs and you got to go to the gym? Just anticipating those resolutions starting early, you know. I think what's interesting

with fitness is on the back of all of this. You're now seeing the members. You're now seeing the members. grow, you're seeing market share gain. They're sort of the off price of gyms. I mean, if you think about it, it's like there's a lot of similarities to TJX. And I think what we'll find is that as that keeps going, the stock has been knocked down with the collective consumer perspective. But at the end of the day, this is a business that's healthier than it was beforehand and they continue to push forward. So I think that would be another interesting one to watch. Simian, thank you. Good to see you. Simeon, good to see you. Up next, Simeon, good to see you. Up next, Twitter continues to be halted as David Faber reports that Elon Musk plans to go through with his out.

acquisition at $54.20 a share. So what does it mean with a social media landscape and what is Musk's end game? Power Lunch will be right back. We'll talk about that and more in just a moment. Welcome back to Power Lunch, everybody. Twitter soaring on reports Elon Musk proposed to buy the, has proposed to buy the company at the original price he offered back in April, potentially ending one of the most contentious takeovers in recent memory. Julia Borson takes a look at what this means for Twitter and the social social. media landscape. Julia, good to see you. Put it all into context for us. How valuable really is Twitter? I think of it as sort of fourth in a three company race or fifth in a four company race. I'm not sure.

Or maybe it's just on its own race, Tyler, but one thing's for sure is that the company that it appears that Elon Musk is going to be buying for $44 billion faces far more headwinds now than it did when he originally made the deal to buy it for that price tag five and a half months ago. Now, take a look at the massive decline and value of other social stocks since the April 14th date when the deal was announced. Now, since then, meta shares are down 34%. Snap shares are down about 68%. Now, if anything, Twitter arguably has larger problems with growing engagement and driving revenue in light of fears of a broader ad contract. And also, it has smaller scale. Plus, after the departure of key talent, the fundamentals of Twitter have been pressured,

entirely pressured, whether it's about employee churn or all of the external pressures of the legal drama since the announcement of the deal. So the question now is what's next for Twitter if Elon Musk does indeed buy it. Now, he's going to be reckoning with that employee churn and morale issues after this drawn-out drama. He's also going to be facing a contracting ad market. Now, Musk originally said that he wanted to cut Twitter's reliance on advertising to less than 50%. He wanted to build a payments business that he said would generate $15 million in revenue next year. He also talked about a new subscription service he wanted to create, and also he laid out his goals to grow the company's reach by about four times to 931 million users by 2028. Now, those were his goals back when he first was talking about the deal.

The question is now whether after months of disparaging Twitter, Musk's plan for the platform has changed. Tyler? Julia, thank you very much. Julia Borsden reporting. John Fort now joins us to continue the conversation. John, welcome your impressions here of Musk, Twitter, Tesla, and this whole stew. This is a mess.

I mean, this is a dumpster fire. And you say it's one of the most content. contentious acquisitions, but Twitter said, yes, like at the beginning, and that's when it got contentious. They said, okay, go ahead and buy us, right? I think that there's some important lessons from here. The first one being that geniuses make horrible investments too. Elon Musk bought near the top and didn't do his research, apparently, because he later said, oh, I had no idea it had all these issues, but I agreed to buy this thing with no due diligence. It's like somebody with their, you know, TD Ameritrade account or whatever, just going, oh, sounds good, let me buy

it, right? So even though he's got it. all this money, or maybe because he's got all this money, he did that. Also, overpromising works until it doesn't. Elon Musk has tended, even in Tesla, to say, here's what I can deliver. Then he doesn't deliver it. But in those cases, the upside, the innovation that he's got going, is so much worse than being a little late, right? This time, maybe the balance is more off. But I think the questions that I have now are, how is owning Twitter going to affect Elon Musk's other interests, including Tesla, when it comes to China and the whole geopolitical, the EU, other geopolitical interests that he's got.

And how is this blunder? Because frankly, I think it is one. He didn't intend to buy it for this much, right? It's going to affect his ability to raise capital, because occasionally he tends to need to do that. To raise capital for Tesla? For whatever he's raising it for, SpaceX, Tesla, the boring company. Why do you think what's going on with Twitter will impact the investment in terms of a capital raise in a Tesla or SpaceX. They're completely separate entities. Yes, but I think the reason why people were

willing to get into Twitter with him, the ones who were, is because they want to associate with him in these other things that have been successful. But we had Orlando Bravo at delivering Alpha last week and before that saying, hey, kind of happy I dodged that bullet, right? Didn't get into this deal. Is he going to want to get into the next Elon deal when it's clear how this one has panned out? Well, it's not yet clear. Maybe he makes it work. Maybe he delivers on all of those. hopes that he had for Twitter, but they seemed unrealistic at the time. As someone who's covered the space for a long time, they're even more of a long shot now. Even geniuses make investment mistakes. That is the phrase that I'm going to remember from a second. It could be the hubris

of the successful entrepreneur. Right. That's right. It's Midas. Who works until Midas's touch doesn't. Ouch. Yeah. John, great to see you, man. Coming up, Twitter may be taking the spotlight, but don't forget about Tesla the stock moving lower midday and reports must will go ahead with original bid for Twitter. We'll trade that next. Welcome back to Power Lunch. Check on the markets here. We are moving up back towards session highs here. S&P 500, 3784, up by 2.9 percent, being led higher by energy shares, which are up almost 4 percent. And technology, particularly semiconductors. Semiconductor, semiconductors seeing a very nice day up by about 4 percent on the week. They're higher by about 8 percent. All 30 Dow stocks, by the way, are in the green right now. We've got much more

power lunch right after this. Welcome back. Let's talk about the story of the afternoon. Twitter shares jumping 12% on news that Elon Musk wants to go forward with his original proposal. On the flip side, Tesla did lose some gains on the news before rebounding here up by 2.7% at the moment. Let's bring in Todd Gordon, New Age wealth advisors. Todd, Tesla is your top holding. Any concerns whatsoever that, as an earlier guest had pointed out, one minute spent on Twitter is a minute less spent on Tesla? Yeah, I saw that segment, Melissa.

And I'm kind of glad you pushed back to you saying that Elon's reputation as a CEO is staked on Twitter. I just don't see it. If anything, he shows that he delegates extremely well. And I think if you look at Twitter to start, I mean, you know, do you guys know it IPOed in 2013 at $45 a share? So if you've held, you know, working on nine years, you're up two, three bucks a share. So, you know, they're only at 436 million monthly active users. to compare that against even Snapchat, which has more, and that stock is in much worse shape.

TikTok, Instagram, YouTube, they're all a billion, billion and a half, two billion. So I think, you know, I think it's a good thing. I think he can delegate. I think it allowed him to get his message out clearly, which there's been a lot of confusion about what's actually happening at Tesla, what he's doing. You know, I've been on with you, Melissa, arguing the bull side of Tesla since like $170 pre-split and in shorts continue to be wrong on Tesla. I am bullish on it.

Do you feel as good about Tesla right now as you did when you woke up this morning? I do. I do. And I am not a Tesla fanboy. To be honest, I hate to say it. I still think the cars are ugly. But, you know, I love what he's doing. I'm sorry. I don't mean to offend anyone. But, you know, I think Elon is playing a different game than the other traditional automakers. He's playing a game where he's trying to win the autonomous driving and the driver assist program. And when he connects Starlink, the SpaceX satellites with the fleet, he has got 10 years ahead and tons of more miles driven where the other automakers are playing the EV game. So, you know, I continue to be bullish. I loved what he's doing. I think the stock has showed a lot of relative support in a very low tape.

It bottomed in May, and it's been significantly off the high. Got to leave it there, Todd. Thanks very much. And thank you for watching Power Lunch.