Tech Brew Ride Home - Mon. 04/04 – Elon Musk To Take Twitter Private? Funding Secured?

Episode Date: April 4, 2022

So, Elon Musk has taken a 9.2% stake in Twitter. I’d point out that the last time Twitter had an activist investor, it led to Jack Dorsey stepping down as CEO. Is drone delivery suddenly, and rapidly, becoming a reality? The nation of the United Kingdom is going to issue an NFT. And Mark Gurman’s math on how an Apple subscription would work. Sponsors: Grammarly.com/techmeme Links: Elon Musk Takes 9.2% Stake in Twitter After Hinting at Shake-Up (Bloomberg) Alphabet's Wing will begin drone deliveries in Dallas-Fort Worth on April 7th (Engadget) AMD Returns to Deal Making with $1.9 Billion Purchase of Chip Specialist Pensando (WSJ) NFTs to be launched by the Treasury later this year in crypto push (City AM) It’s a big day at the State Department for U.S. cyberdiplomacy (Washington Post) Why Apple Is Preparing to Let You Subscribe to Your iPhone (Bloomberg) Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech Meme Right Home for Monday, April 4th, 2022. I'm Brian McCullough today. So Elon Musk has taken a 9.2% stake in Twitter.

I point out that last time Twitter had an activist investor, it led to Jack Dorsey stepping down as CEO. Is drone delivery suddenly and rapidly becoming a reality? The nation of the United Kingdom is going to issue an NFT and Mark German's math on how an Apple subscription would work. Here's what you missed today in the world of tech. Something, something, what version of the Matrix were in and all that. According to a filing, Elon Musk has taken a 9.2% passive stake in Twitter, worth around $2.89 billion, thus becoming Twitter's largest shareholder. Twitter shares rose about 26% in pre-market trading on the news, quoting Bloomberg.

Musk, 50, pulled his more than 80 million followers on Twitter last month, asking them whether the company adheres to the principles of free speech. After more than 70% said no, he asked whether a new platform was needed and said he was giving serious thought to starting his own. Musk has been one of the biggest personalities on Twitter and has regularly run into trouble on the platform. The Tesla chief executive officer is currently seeking to exit a 2018 deal with the U.S. Securities and Exchange Commission that puts controls in place related to his tweeting about the electric car maker. The announcement will be yet another major test for new Twitter CEO, Paraga. Agrawal, who replaced Jack Dorsey after he unexpectedly resigned in November.

Agrawal vowed to increase accountability, make decisions faster, and to improve product execution. The company set ambitious goals for growth, including increasing annual revenue to $7.5 billion and getting to 315 million daily users by the end of 2023. Musk posted a cryptic meme in December after Twitter announced that Agarwal was taking over from Dorsey as Twitter's CEO. It depicted Agriwal as Soviet dictator Joseph Stalin and Dorsey as Soviet secret police head, Nikolai Yejjjjov, being shoved into water. Twitter is particularly vulnerable to outside pressure because unlike Google, Facebook, Amazon, and Snap, the company's founders don't have special voting control over its future.

The company has just recovered from activist pressure by Elliott Management that started in 2020, which led Dorsey, who was serving his second stint as CEO of Twitter, to set a succession plan. It is unclear what Musk is planning with his stake. The filing with the SEC shows that the date of the event that triggered the disclosure was March 14th. The type of form used often indicates the investor isn't seeking to acquire control of a company or to influence who controls it. Musk, already the world's richest person, according to the Bloomberg Billionaire's Index, has made about $1.1 billion on his holding of Twitter since mid-March, based on the pop in Twitter's shares in early trading Monday.

Musk has also lambasted Twitter's recent development of profile pictures linked to non-fungible tokens, saying the social media company has the wrong priorities, end quote. So, obviously, the tweets and discourse that this news generated this morning, I mean, I could quote you just an endless cavalcade of takes, but when in doubt, I like to go with, you know, some of my old reliables, like Dar Obasanjo, quote, Elon Musk wasn't kidding about wanting to change how Twitter works and is now putting his money to work. I expect being an eventual activist shareholder is more fruitful than building a rival service, but he's, just crazy enough to do both. After all, he can't afford it, end quote. Then the great Howard

Linson, quote, Elon basically running his own digital country now with his own centralized media platform, Twitter, and currency, doge. Pretty, pretty, pretty smart, end quote. But here's someone I don't think I've ever quoted before. Ivan LeKay, who tweeted, Elon Musk to increase tweets to 420 characters, end quote. Get it? 420, not only, the obvious joke about weed and the number of characters in a tweet, but also referencing the infamous tweet from Musk himself about taking Tesla Private at $420 a share. But since we are joking about Elon's reputation for being a Jedi master-level meme lord, I got to say he actually missed one of the greatest potential troll opportunities of all time. I mean, last Friday was

April 1st. If somehow this news could have come out on April Fool's Day, man, he'd have full control of Twitter already because the collective brains of the Twitter sphere would have exploded trying to figure out if that had been a joke or not. Something for us to keep our eye on going forward all at once, actual deployment of self-driving car tech and drone tech into the real world seems to be happening in a meaningful way. I miss being able to tell you about true driverless Waymo trips beginning soon in San Francisco, although at least for now only for Waymo employees. And I gave you some big drone news last week from Texas, but now there's more.

Alphabet's Wing Division will begin drone delivery services in the Dallas-Fort Worth area on April 7th, starting with Walgreens' health and wellness products. Are some of our podcast wagers about to start coming true? Quoting and Gadgett. Wing's primary launch customer is Walgreens, which will deliver health and wellness products directly to customers' homes. For that, it will use a new operational model where drones are staged at one of its own store parking lots rather than a wing facility. It will also be delivering ice cream from Bluebell Creameries, easy vet prescription pet medications, and first aid kits from Texas Health. This will be America's most scalable drone delivery operation to date as Walgreens team members will process their own orders and load packages onto drones themselves, while Wing oversees the delivery from a remote location, the company said. In a press release and video from last year, Wing explained exactly how that would work.

Quote, the aircraft will arrive in small containers that serve as tiny hangers, allowing each store to quickly and easily deploy a small dedicated fleet from its parking lot or on its roof or in small spaces adjacent to the building, end quote. Wing uses a hybrid multi-rotor slash fixed wing drone of its own design. It can carry packages no heavier than 3.3 pounds on round trips up to around. 10 kilometers or six miles away. The drones are autonomous, but are monitored by pilots who can take control if something goes awry. There are redundant motors, batteries, and navigation systems to help prevent accidents. Wing has been doing drone deliveries in Australia, its launch market, since early 2019, and started making drone deliveries in the U.S. later that year. The company noted it has made

200,000 real deliveries to date, but those were largely done in smaller communities, so the city launch is a big deal. This is an important milestone for Wing and drone delivery in the U.S., the company said in a press release. Deliveries will start on April 7th for, quote, tens of thousands of homes in Frisco and Little Elm, both north of Dallas. I do want to set clear expectations. Not everyone who lives within range of our drones will be able to order on day one. We're going to invite customers in groups to make sure everyone has a good first experience with drone delivery, said Wing CTO Adam Woodworth, end quote. This seemingly came out of nowhere, UK Chancellor Rishi Sunak has asked the Royal Mint to create an NFT, set to be issued

by the summer, quoting City AM. John Glenn, the economic secretary for the Treasury today, confirmed that the Chancellor has asked the Royal Mint to issue NFTs later this year. The move signals the Treasury's intention to create a welcoming environment for crypto assets in the UK, Glenn said. I'm announcing today the Chancellor has asked the Royal Mint to create a non-fungible token announced Glenn at the Innovate Finance Conference in London today. There is a genuine opportunity to build on our strengths in fintech, seize the capitalist energy, which has already made UK financial services what it is, and use it to unleash the potential of crypto technologies, Glenn commented. It's not going to happen overnight, but we think by making this country a

hospitable place for crypto, we can attract investment, generate waves of new jobs, and create a wave of groundbreaking new products and services, Glenn added, end quote. Anyone willing to take any on what these NFTs could be of. Big Ben. I don't know, the Queens, what is it, Diamond Jubilee is coming up. The U.S. State Department has announced the Bureau of Cyberspace and digital policy, starting with more than 60 staff and with plans to add around 30 more, quoting the Washington Post. The Bureau, which will be led by a Senate-confirmed ambassador, will, quote, address the national security challenges, economic opportunities, and implications for U.S. values associated with cyberspace, digital technologies, and digital policy,

according to an announcement seen by the Cybersecurity 202. It has more than 60 staffers who mostly come from its cyber coordination and international communications offices, and the State Department plans to add 30 new positions in the Bureau this year, a State Department spokesperson said. It also, quote, requested funding to support additional positions in its budget request for the next year, the spokesperson said. The Bureau is a signal that the Biden administration is focused on elevating cyber diplomacy amid the war in Ukraine and a year of devastating ransomware hacks. Secretary of State Anthony Blinken is expected to cite attacks on critical organizations like colonial pipeline, the war in Ukraine, and competing visions for the future

of the internet in a speech today, end quote. I continue to be amazed at how completely wide open and, I don't know, exciting the chip space continues to be. AMD has announced plans to acquire networking chipmaker Pensando for $1.9 billion in cash, aiming to compete with Nvidia and Intel's Data Center tech, quoting the Wall Street Journal. The proposed deal which AMD disclosed Monday would add to its product palette as semiconductor vendors reposition their offerings to take advantage of growing demand for chips. Pensando would give AMD capabilities in the fields of networking, security, and other services aimed at the data center market, which has grown explosively as companies embrace digital tools.

Pensando produces chips and software designed to speed data flow and lower operating costs for big server farms, AMD said. There has been a rush of dealmaking in the chip industry in recent years, including AMD's own $35 billion purchase of Chipmaker Xilinks, which closed in February. Graphics chip giant Nvidia pursued British chip design firm Arm, but called off the blockbuster transaction in February amid regulatory challenges. Chipmaker Intel has sold its memory chipbizabeth. in China to South Korea's S.K. Heenix, while Qualcomm last year agreed to buy Swedish

autonomous driving specialist Vionnier. The deal-making Bonanza has taken shape against a backdrop of soaring demand for computers, phones, cars, and other devices that need chips to operate. The shift toward working from home during the pandemic led more people to buy computers and use internet services that run on chips from AMD and its peers. Semiconductor sales last year surpassed $500 billion for the first time, and some industry analysts and executives expect them to roughly double to $1 trillion within the decade, end quote. Finally, today, when he joined us on the Twitter space recently, Mark Gurman hinted at the math that would make what seems to be an inevitable Apple Prime-esque subscription service work.

Well, in his newsletter this week, he actually penciled it all out explicitly. Quote, the average iPhone user upgrades the device every three years. That's actually a less frequent rate than about a decade ago when carriers push subsidies and discounts every two years. According to Counterpoint Research, the average iPhone sales price is about $825. That means Apple is generating a bit over $800 from the typical iPhone customer every three years. That's exactly why Apple is working on a subscription service. What if it could boost that $800 to north of $1,000 and get the old phone back to sell on the secondary market? Apple can.

Let me break it down. I'll use the starting prices for the iPhone 13, Pro, and Pro Max. $799, $999, $999, and $1,099, and pick monthly price points of $35, $45, and $50 as examples. I chose these levels because they undercut the pricing of the old iPhone upgrade program by a few dollars. More on that below. Here's how much Apple would generate over three years from the monthly subscription compared with the upfront price. An iPhone 13 at $35 a month would generate $1,260 over three years instead of $799. An iPhone 13 Pro at $45 a month would generate $1,620 instead of $999, and an iPhone 13-Pro max at $50 a month would generate $1,800 instead of $1,09.

This is obviously just back of the envelope math, but Apple is suddenly able to generate significantly more money per consumer. and the benefit for consumers would be not having to shell out hundreds of dollars up front for a new iPhone. They'd also get the latest model every year instead of every three years. The company could make additional money if the program is tied to its high margin Apple One, digital services bundles and AppleCare. Even if Apple charges less per month than my suggested levels, it will benefit from the steady influx of older phones, which it can turn around and sell again.

The company also generates 40% plus margins on iPhone hardware, so it's a lucrative business to expand. In the long term, Apple will be raking in much more cash than without a subscription offering. The iPhone has a fairly low attrition rate, and users in this program may very well stick around for a decade or more. That's more than $4,000 in revenue per customer per decade just on iPhones in the $35 per month scenario. But a question that many readers have asked is how this program would differ from the iPhone upgrade program or carrier installment plans. The best comparison I can think of is financing versus leasing a car. When you finance a car, you are paying off the entire price of the vehicle over, let's say, 72 months. When your payments are

done, you now fully own the car and it's yours to keep. When you lease a car, perhaps over 36 months, you're paying the dealer a portion of the vehicle's value, but you have to give it back when the term is over. The iPhone upgrade program and carrier installment plans rely on the financing approach as you are spreading out the cost of the iPhone over 24 months. Once you're done paying off the device, it's yours for good. One wrinkle, however, is you can swap out the device if you so choose once you've paid off half of it after 12 months. The iPhone hardware subscription is more like a lease

because you are paying a fee that is not simply the cost of the iPhone split up over two years. You're paying off a portion of the value of the iPhone, but you never fully own it. And you can replace it when a new version comes out, just like with a car lease, end quote. FYI, it is a new quarter, so the Ride Home Rolling Fund has fresh capital to deploy. Any and all early stage startups, if you'd like to have the Mutant Podcast Army behind you, please get in touch at Brian at Ride Home Fund.com.

And a reminder also that even if you are not yourself a founder of an exciting early stage company, but you know of one and can put me in touch with them, I'll share Kerry with you. Last quarter, three of our investments came from referrals that will earn the people doing the referring a small percentage of the upside of these companies without having to invest any money themselves. But as thanks for connecting me with the companies we eventually invested in. Again, Brian at ridehomefund.com for more info. Talk to you tomorrow.