Ye Poses a Test for a Post-Musk Twitter

The banks’ debt commitments appear to prevent him from altering the deal in “material” ways. That could give banks a “decent argument” to push for revised debt arrangements, since judges often view price as material, said Eric Talley, a professor at Columbia Law School. Regardless of what happened in recent weeks, a price cut may now be even less likely. Twitter is asking Musk for interest on every extra day the deal drags on past last month’s shareholder vote endorsing the transaction. That means it is costing Musk more than $54.20 with each passing day.

A rough quarter awaits investors

It’s earnings season, with the SP 500 heavyweights PepsiCo and Delta Air Lines and the big banks set to report third-quarter results this week. Investors’ big fear: Companies will reveal that the combination of inflation and slowing economic growth has eaten into profits.

It’s a mixed picture. Just 65 companies in the SP 500 have warned that third-quarter results are likely to disappoint, according to the market data firm FactSet, while 41 companies have delivered earnings upgrades. And SP 500 companies are expected to report that on average, revenue jumped by nearly 9 percent last quarter. But profits are only expected to grow by 2.4 percent, the most lackluster increase since the worst days of the Covid pandemic in 2020.

Almost all of the earnings growth is coming from the energy sector. Of the 11 sectors in the SP 500, only four — energy, airlines, real estate and consumer discretionary industries like restaurants and hotels — are expected to show overall growth. The bottom lines of energy companies are expected to jump an average of 117 percent versus a year ago, which is the biggest increase of any sector. Without the 21 energy companies in the SP 500, the bottom lines of the remaining companies would actually drop, by 4.2 percent on average, according to Bank of America.

The strong dollar is bad news for multinational companies. Although the recent rise in the dollar is a boon to U.S. travelers, it’s bad news for exports, which make up about 40 percent of sales for SP 500 companies. A strong dollar means American goods are more expensive to overseas buyers, and less profitable back home when foreign revenues are converted into dollars. John Butters, a senior earnings analyst at FactSet, says that of companies fessing up to earnings problems, about half have pointed to the dollar as a contributing factor.

Article source: https://www.nytimes.com/2022/10/10/business/dealbook/ye-kanye-west-elon-musk-twitter-instagram-ban.html