Tech Brew Ride Home - Tue. 04/26 – Twitter, Now Under New Management

Episode Date: April 26, 2022

You did it, you crazy son of a bitch, you did it. You know what that’s referring to, of course. Fidelity lets you allocate some of your 401(k) to bitcoin. More Bored Apes got swiped. And with the F-150 Lightning actually shipping today, another glimpse at the precarious reality of the electric car revolution. Links: Twitter accepts Elon Musk’s buyout deal (CNBC) Elon Musk buys Twitter (Platformer/Casey Newton) From punchline to deal in under 2 weeks: how Elon Musk won his Twitter prize (Financial Times) Fidelity to Allow Retirement Savers to Put Bitcoin in 401(k) Accounts (WSJ) Bored Ape Instagram account hacked: NFTs worth $2.8 million stolen (The Block) SoftBank Cuts Back Spending, Leaving Startups Desperate for Cash (Bloomberg) THE F-150 LIGHTNING IS FINALLY SHIPPING — IS FORD READY? (The Verge) 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 ride home for Tuesday, April 26, 2022. I'm Brian McCullough today. I bet you can guess what that's referring to, of course. Also, Fidelity lets you allocate some of your 401k to Bitcoin. More bored apes got swiped. And with the F-150 Lightning actually shipping today, another glimpse at the precarious reality that is the electric car revolution. Here's what you miss today in the world of tech. Well, it looks like it's done and dusted. You probably heard that Twitter yesterday, agreed to be acquired by, quote, an entity wholly owned by Elon Musk for $54.20 per share in cash. The around $44 billion deal requires shareholder and regulatory approval, but I've read that the

board, Twitter's board, actually voted unanimously to accept the deal. Free speech is the bedrock of a functioning democracy and Twitter is the Digital Town Square, where matters vital to the future of humanity are debated. Elon Musk said in a statement included in the press release announcing the deal. I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans. Twitter has tremendous potential.

I look forward to working with the company and the community of users to unlock it, end quote. There's not really much in terms of new hard news other than that the deal went through to share with you. though believe me, I have plenty of color to share. Former President Trump said that regardless of Elon Musk's Twitter purchase, quote, I am not going on Twitter, I am going to stay on truth, end quote. By the way, truth's stock closed down 12.9% yesterday, because, you know, maybe Twitter is about to become what truth was hoping to become.

Who knows? Twitter CEO Parag Agarwal and Chairman Brett Taylor told employees at an internal meeting that the company will keep operating as usual. Sources say the deal could take up to six months to finalize. This is quoting from Casey Newton's newsletter this morning. After the announcement, sentiment in the public Slack channels remained largely concerned and negative employees told me, I was kind of surprised how much people seemed like they were giving up, one told me, big bummer, end quote. But in one-on-one discussions, responses were more tempered.

Some employees I've spoken with are open to the idea that a private Twitter run by Musk stands a better chance of improving the service than would a public company beholden to its shareholders. They like the fact that he wants to eliminate harmful bots and bring more clarity to how recommendation algorithms work. At the same time, many Twitter employees receive half or more of their compensation in stock. At an all-hands meeting on Monday afternoon, they were told that employees will not receive equity once the company goes private. As a result, one person told me, quote, group chats are scrambling to see if working at Twitter makes economic sense. first and foremost, end quote. The deal is expected to take around six months to close,

and at that time, it seems likely that CEO Parag Agrawal will leave the company, although he did not say so when addressing employees today. Agrawal did say there would not be layoffs in the near term, though he would not comment on whether there would be a hiring freeze. There is, however, a partial freeze on new features, although I'm told that's fairly standard during moments when there's a lot of attention on Twitter and the company doesn't want to introduce any new bugs. In the meantime, hiring will be harder. There seems to be at least some likelihood that the company will see significant attrition, particularly in the leadership ranks and on the health teams that work to fight harassment and abuse. On the plus side,

the company's earnings report Thursday no longer has the potential to further tank its stock. Beyond that, as with everything related to the Twitter-Musk story over the past month, it's extremely difficult to predict, end quote. Yeah, I've seen several people say, I guess this upcoming Twitter earnings report was either going to be so bad or at least so anemic that the board figured it had to take a deal, given how much similar stocks like Snap have been down year to date. I've heard several people say that had Elon not done what he did, Twitter stock would be trading in the 30s right now. So $54 a share might have looked pretty good. I've also heard people speculate that Elon might bring Jack Dorsey back as CEO, which, I mean,

Jack did vote in favor of this. Jack has been tweeting in favor of this as well. And you know, who else is probably happy to see Twitter taken private? Jack Dorsey, who got a cool billion bucks out of this deal, and also who was chased out of the CEO job by activist shareholders. I'm not saying Jack coming back will happen, but I can see the angle here for how it would make sense for Elon to bring Jack back in some capacity. And remember, Elon and Jack are friends. Finally, there's some behind-the-scenes color from the FT, quote. Morgan Stanley, the Wall Street Investment Bank, was instrumental in helping Musk line up the financing at breakneck speed, according to people close to Musk and Twitter's board.

The lender contacted rivals on Easter Sunday when some bankers were on holiday with family and told them they would need to commit by Wednesday, the people added. Chief executives at some lenders were quickly briefed on the discussion so they could decide if their banks would join in financing must deal, people involved in the negotiations said. Morgan Stanley's leveraged finance team led by banker Andrew Earls held a series of due diligence calls on the takeover code name Project X, people briefed on the call said. The whole street was running around like crazy, said one banker involved in the deal. In the end, seven banks agreed to finance $13 billion of traditional loans, with another five

joining forces to finalize the $12.5 billion margin loan. For many, the loans secured against Musk's Tesla shares was the easiest part of the transaction to get on board with, given Musk's wealth and that Tesla stock trades. at a furious pace. More importantly, it was the $21 billion of equity that Musk promised to commit personally that turned the tide and led banks to scramble for a piece of the action. Everyone did the careful analysis around it, but at the end of the day, it's the equity check. There's never been an equity check like this, one person involved in the sale negotiation said. The board's concerns around financing were allayed and the shareholders decided that it was in their

best interest to advocate for this transaction, said a person with direct knowledge of the matter. several large shareholders called members of Twitter's board on Friday and Saturday to press directors to take Musk's offer seriously, said people briefed on the conversations. Although Twitter's share price hit an all-time peak of almost $80 during the pandemic as consumers spent more hours on the platform, many big investors had acquired the stock when it was trading at about $20 a share. On Sunday, Musk communicated directly with Twitter's chair Brett Taylor, allowing them to set the tone and guidelines to reach an amicable agreement with protections and guarantees in place to safe guard shareholders, end quote. And quoting from Casey Newton one more time. As Matt Levine noted today,

once Musk made his offer, the whole thing proceeded fairly normally. As a negotiating tactic, the board put in place a poison pill to prevent Musk from acquiring any more of the company, that forced Musk to prove that he actually had the financing to get the deal done. He did so, and the board considered its options. Ultimately, the 38% premium that Musk offered over its current stock price struck members as the best deal they could likely get. In the end, it was just business. Twitter has long been an underperformer and former executives I spoke with today. We're relieved that the company now had a real chance to make radical change. As a private company, beholden only to the interests of one man, Twitter may be able to transform itself in ways that it never could

while it had to report quarterly earnings. The $44 billion question, though, is transform into what, end quote. Fidelity will now let retirement savers put Bitcoin into their 401k accounts starting later this year. It's the first major retirement plan provider to do this, quoting the Wall Street Journal. Employees won't be able to start adding cryptocurrencies to their nest eggs right away, but later this year, the 23,000 companies that use Fidelity to administer their retirement plans will have the option to put Bitcoin on the menu. The endorsement of the nation's largest retirement plan providers suggest crypto investing is moving further into the mainstream, but it remains to be seen whether employers will

embrace it for their workers. Fidelity's move comes a month after the Labor Department expressed concerns about including cryptocurrencies and retirement plans. It is also an uneasy time for the stock market with the S&P 500 down almost 10% this year, in part due to rising interest rates. Bitcoin is notoriously volatile and has lost more than 40% of its value since its November high. There is a need for a diverse set of products and investment solutions for our investors, said Dave Gray, head of workplace retirement offerings and platforms at the Boston-based company. We fully expect that cryptocurrency is going to shape the way future generations think about investing for the near-term and long-term,

end quote. Under the plan, Fidelity would let savers allocate as much as 20% of their nest eggs to Bitcoin, though that threshold could be lowered by plan sponsors. Mr. Grace said it would be limited to Bitcoin initially, but he expects other digital assets to be made available in the future. Crypto investing has been virtually non-existent in 401K plans to date. One small company that caters to cater to smaller 401K plans is allowing workers in some of the plans it administers to invest up to 5% of their 401k contributions in Bitcoin and some other cryptocurrencies. Fidelity's embrace of Bitcoin could prompt wider acceptance among employers. We have seen growing and organic interests from clients, especially those with younger employees.

Mr. Gray said, adding that, quote, a number are in the evaluation process from a wide spectrum of industries, end quote. Putting crypto in your retirement plan. All right, but, you know, caveat mTOR because crypto, right? For example, another day, another one of these. a hacker stole 91 NFTs worth at least $2.8 million through a fishing attack, which compromised Bored Ape Yacht Club's Instagram and promoted a malicious mint link, quoting the block. There is no mint going on today.

It looks like Bored Ape Yacht Club Instagram was hacked. Do not mint anything. Click links or link your wallet to anything, tweeted the official Bored Ape Yacht Club account. When the Instagram account was accessed, it was used to post a fake update claiming that there was a land drop, and users had to connect their wallets to claim the airdrop. This was taking advantage of the BoredApe Roadmap, which includes a Metaverse game that will contain virtual land. When users connected to their wallets and likely approved a transaction, the website stole their NFTs. According to blockchain data, the hacker's wallet, which has been identified with this fishing attack, holds 91 NFTs. According to data from

Xerion, the NFTs are worth at least $2.8 million based on the floor prices of the respective collections. Among the stolen items are four board apes, six mutant apes, and three board ape kennel club NFTs, the latter two being official derivative projects. The hacker also stole one clone X and items from other up-and-coming collections like 8-bit, alien friend, and toxic skull club, among others, end quote. Sources say soft bank's stricter investment criteria, which it is now implementing on Masasan's orders, has led to tepid continued support for some cash-strap startups in its portfolio, including camera startup light, quoting Bloomberg. SoftBank owns about 30% of light through its vision fund, which led an injection of $121 million

into the advanced camera developer in 2018. SoftBank's continued support is critical for the cash-strap startup, which had been spending millions of dollars to expand into self-driving tech at SoftBank's urging. Hurt by plunging tech valuation, SoftBank is walking away from some of its loss-making portfolio firms to comply with stricter investment criteria, said the people who asked not to be identified because the matter was not public. Many of the two Vision Fund's portfolio of 300-plus companies are loss-making. The Japanese investment firm offered to contribute money if Light could find another investor to lead the next fundraising round, one of the people said,

but with its biggest backer offering only a token amount, other investors were wary about stepping in, the person said. The Redwood City-California-based startup has hired a consulting firm to explore options, including winding down operations. The adoption of prudence at SoftBanks Vision Fund, which rewrote the rules of venture capital by deploying billions of dollars from the Sarban wealth funds of Saudi Arabia and Abu Dhabi into startups, is an about face from its past freewheeling largesse. The company next month may report its biggest ever quarterly loss on the plunging value of its most valuable holdings, including South Korea's coupang and China's D.D. Global. Estimated Kirk Budry, an analyst at Redex Research, end quote.

Finally, today, the new electric F-150 Lightning is shipping its first vehicles to to owners today, though only a relative handful. The situation is explained in this neat interview between Nilai Patel and Ford CEO Jim Farley. I'm sharing this today from a newly opened file, which I've labeled. The electric car revolution is happening right now, but might it also be about to hit a supply-constrained wall? Quote, we should send everyone to a customer who's never bought a Ford before, Farley tells me in a short interview last week. My opinion is we should go for it, end quote. After, he ships out all 200,000 pre-orders, of course. Demand for the lightning has been so strong that Ford's invested $950 million into factory expansion, added 750 jobs, and doubled

production, but some pre-order customers will still be waiting until 2023 to get their trucks, and Ford's website says no more 22 lightnings are available. The plant had built around 1,800 lightnings when we spoke, and Farley said that while Ford will be on plan with its capacity, capacity goals, he simply laughs and says, no, when asked if production will meet demand anytime soon. There simply aren't enough batteries to build Ford's goal of 150,000 lightnings a year. But even then, Farley says he's confident that the battery plant in Georgia, Ford operates in partnership with SK battery, will be able to scale up. I think we're in good shape for batteries, and that seems to be the biggest gaining issue to get to 150,000 units, he says.

As for the rest, well, the lightning is heavily based on the existing F-150, so there's a lot of existing manufacturing capacity. The seats and the instrument panel, that's something we've been building for two years now, Farley reminds me. It's true even for chips, which have been in a perpetual worldwide shortage since the pandemic began. Ford makes around a million F-series trucks a year, which means it buys a lot of chips, and Farley has prioritized making sure the lightning gets the chips it needs out of that supply. I don't see the chips as a constraint for lightning, says Farley. I definitely see it as a constraint for our company, but we're not going to produce 20% less lightings because we got 20% less chips for the F series, end quote. Farley says Ford will have to stay

focused on pre-orders for six months to a year, but he wants to aggressively market the lightning to people shopping for other truck brands. Truck owners are famously loyal, of course, but Farley thinks having an actual EV truck people can buy will entice switchers. If you're offering something and it can be bought, that's a pretty big advantage, he says. And if you have a year in the market essentially to yourself, you got to get after it, end quote. thing for you today, although I do have this classified ad. Take a listen. I've got some news from our first portfolio company, Grupa. Grupa, who is helping fast-growing company skill their engineering by leveraging underutilized Fang teams. Remember, they're the ones that let you angel invest in

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Get in touch. Side note. This role includes managing elite engineers all around the world. Finally, if you have a get shit done mentality, email me at Brian at ridehomefund.com, and I'll make sure your application gets to the top of the pile. Want to be the head of engineering at Grupa? Email me at Brian at ridehomefund.com.