DealBook Briefing: Why Elon Musk Shouldn’t Blow Off Wall Street

Good Thursday morning. Just in: K.K.R. is converting into a corporation from a partnership to take advantage of the new tax law. Some links require subscriptions.

About that Tesla earnings call …

CNBC called it “bizarre.” Investors appeared to agree: Tesla’s shares fell over 5 percent in after-hours trading.

Let’s recap the highlights:

• Elon Musk dismissed a question from Sanford Bernstein’s Toni Sacconaghi about capital expenditures and said, “Boring, bonehead questions are not cool.”

• After RBC Capital Markets’s Joe Spak asked about Model 3 reservations, Mr. Musk said that he’d talk to retail investors because analysts’ questions were “so dry.”

• When asked if Tesla should keep its electric car charging network to itself as a strategic asset, Mr. Musk said, “I think moats are lame.”

Liam Denning of Bloomberg Opinion wrote, “Folks, this is not a good sign.” Rebecca Lindland of Kelley Blue Book told CNBC, “Elon, you’ve got to grow up.” And Peter Eavis tweeted this:

What Tesla actually reported: Another loss, and a pledge to reduce its cash burn.

Our question: If Tesla asks Wall Street for money again, what will the answer be?


Today’s DealBook Briefing was written by Andrew Ross Sorkin in New York, and Michael J. de la Merced and Amie Tsang in London.


Cambridge Analytica goes down, but a sequel is in the works

Customers fled after the Facebook controversy, forcing the consultancy to file for bankruptcy protection. But there’s a new company, Emerdata, that could essentially be Cambridge Analytica 2.0, according to the NYT.

A scene from the insolvency, from Melanie Ehrenkranz of Gizmodo:

Our picks? “Closing Time” by Semisonic and “It’s the End of the World As We Know It” by R.E.M.

Elsewhere in tech: Facebook fired an employee who bragged on Tinder about access to user information. Investors weren’t impressed by Spotify’s first financial report as a public company. Mark Pincus, Zynga’s founder, cut his voting power at the game maker — making it easier to sell. A senator asked Uber to waive its arbitration clause for women who say its drivers sexually assaulted them. Meituan Dianping, a Chinese food delivery and e-commerce company backed by Tencent, is investigating reports of a data breach.

The U.S. turns up the heat in its trade fight with China

The latest threat: a ban on government agencies and their contractors buying equipment from companies like Huawei and ZTE. Both companies’ phones are now banned from sale on U.S. military bases worldwide. (Meanwhile, President Xi Jinping’s tightening grip on his country’s tech giants may hurt their global competitiveness.)

Some members of this week’s U.S. delegation to China are striking a tough tone. Peter Navarro, a hard-line trade adviser, told the NYT, “The discussions will take place in Beijing; the decisions will take place in Washington.”

One problem: That delegation is split over how to negotiate, and even what to ask for. And Beijing has continued counter-ounching, including by apparently halting purchases of U.S. soybeans.

Elsewhere in trade: The U.S. and Brazil disagree over whether they have a tariff deal.

He said it: “Free trade is now under assault,” Stanley Druckenmiller writes in a WSJ op-ed that says the Trump administration is similar to its predecessor when it comes to economic policy.

The political flyaround

• Rudy Giuliani said that President Trump reimbursed Michael Cohen the $130,000 paid to Stormy Daniels, contradicting both men. Summer Zervos, a former “Apprentice” contestant who has accused Mr. Trump of sexual assault, has subpoenaed recordings of the show.

• Ty Cobb is out of the White House’s special counsel legal team; Emmet Flood, who helped fight the Clinton impeachment, is in. Donald Trump sided with House Republicans over his own Justice Department when it comes to the Russia investigation.

• The Fed held interest rates steady yesterday, showing little worry about an uptick in inflation. (NYT)

• A former lobbyist for foreign governments helped plan an Australia trip, later canceled, for Scott Pruitt, and sought to disguise his role. (NYT)

China’s biggest unicorn heads to the public markets

Xiaomi, one of the world’s biggest smartphone makers, has filed to go public in Hong Kong. It’s expected to raise about $10 billion at a market valuation of $80 billion or more, according Cate Cadell and Julie Zhu of Reuters, who say it’s China’s biggest tech I.P.O. since Alibaba — a huge win for the Hong Kong Stock Exchange.

Your Xiaomi cribsheet: Much of its growth has come outside China, particularly in India. But the gross profit margins on its devices are just about 8.8 percent. (The latest iPhones’ margins: an estimated 60 percent.)

The deals flyaround

• Marcelo Claure stepped aside as Sprint’s C.E.O. to become its executive chairman and the C.O.O. of its parent company, SoftBank of Japan. But it’s still him, not SoftBank’s Masa Son, leading the push for regulatory approval of the T-Mobile deal. And SoftBank’s talks to invest in Swiss Re reportedly stalled.

• “Never think about mergers and acquisitions as a way to solve a problem,” Bernardo Hees, the C.E.O. of Burger King, told Corner Office. (NYT)

• Richard Branson is reportedly setting up his first private equity fund. (FT)

• Apollo Global Management reportedly approached Xerox as a potential buyer, casting further doubt on its Fujifilm deal. (Reuters)

• Today in activism: Elliott Management wants compensation from the South Korea over its fight with Samsung C&T. The London-based activist fund Amber Group is pushing for changes at the French media company Lagardère Group.

• The $702 million worth of bonds that WeWork sold last week have dropped in price to as low as 95.25 cents on the dollar, which may make future borrowing harder.

• How the merger of the parent companies of Crock-Pots and Sharpies went wrong. (WSJ)

• Motivate, which runs Citi Bike and other bike-sharing programs, has held talks to sell itself to Lyft. (The Information)

• Zola, a wedding registry start-up, has raised $100 million from investors led by Comcast Ventures and Goldman Sachs. (Bloomberg)

Telegram called off its I.C.O. That’s not a bad thing.

The secure messaging service — under pressure from authoritarian governments like Russia and Iran — has reportedly scrapped the token sale after raising $1.7 billion from less than 200 private investors. Paul Vigna of the WSJ suggests another reason:

Elsewhere in cryptocurrencies: Goldman Sachs is setting up the first Bitcoin trading desk at a Wall Street bank. A verbal fight over the future of digital money broke out at the Milken Institute Global Conference. Speaking of which …

The Milken Institute Global Conference wrap-up

Everyone was optimistic, with one executive declaring that “the rules of economic cycles may no longer apply.” But many hedge fund managers are more concerned with survival. Others worry that it will be harder to coordinate a global response to the next geopolitical crisis.

Revolving door

• Subway Restaurants’s C.E.O., Suzanne Greco, is stepping down. (Bloomberg)

• Standard Chartered has reportedly hired Richard Horrocks-Taylor, most recently RBC Capital Markets’s head of European metals and mining investment banking. (FT)

• BlackRock has hired Steve Lessar and Konnin Tam from Goldman Sachs to bolster its business investing in private equity firms. (Bloomberg)

The speed read

• A former employee’s lawsuit against Harvey Weinstein could open the door to criminal charges. (NYT)

• The two black men arrested in a Starbucks settled with Philadelphia for $1 each and $200,000 to help young entrepreneurs. (NYT)

• Meet Jamie Martin, the man who sniffs out fakes for Sotheby’s. (NYT)

• Inside the world’s most elite traders’ club. A Brevan Howard founder’s new investment firm manages more money now than his old one.

• Blackstone profited by selling to Chinese deal-makers. Now it’s poised to buy those assets back. (Bloomberg)

• Deutsche Bank agreed to pay a former executive, Colin Fan, about $6 million to settle a lawsuit over withheld bonuses. (WSJ)

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