Twitter Takes Round 1 – The New York Times
The Twitter jumpsuit takes the fast lane
Twitter won its effort to expedite its trial with Elon Musk yesterday, in its lawsuit to force Musk to complete its $44 billion acquisition of the company. So many people tried to listen to the proceedings that the call capacity reached – and we hear that Wall Street advisers were crowded around loudspeakers.
This is a big win for Twitter. By granting an expedited hearing, Judge Kathaleen McCormick effectively dismissed the idea that the court needed to allow time to thoroughly consider whether Twitter had accurately counted the number of bots on its platform. She cited the “cloud of uncertainty” hanging over the company as the case remained undecided as the reason for her decision to expedite the trial. And in what may to be another good sign for Twitter, Judge McCormick said she wasn’t sure damages would be sufficient remedy for the social media company, which wants Musk to buy it, not pay damages- interests to leave.
Please see page 5. A central part of Musk’s claims is that Twitter’s disclosures about the percentage of active users on its platform who are bots are misleading, which would have a “significant adverse effect” on the company’s value. But Musk has yet to tell the court what, exactly, about Twitter’s revelations might be wrong. That became a problem when Musk’s attorney at Quinn Emanuel, Andy Rossman, took aim at page 5 of Twitter’s annual report, which explains his bot count. But Twitter’s attorney at Wachtell, Bill Savitt, in his rebuttal, noted that Twitter fills this page with hedges and warnings that the numbers might be wrong. (It reads, in part: “Our estimate of fake or spam accounts may not accurately represent the actual number of such accounts, and the actual number of fake or spam accounts may be higher than we have estimated.”) Of the Twitter disclosure, Savitt said, “It doesn’t require a recreation of all things known to mankind.” Judge McCormick apparently agreed.
Both sides are preparing for a trial in October. Over the next few weeks, they must agree on times for depositions and discovery. And Musk will have time to prepare for another hearing before Judge McCormick that month: a defense of his massive Tesla salary — money that could come in handy if she forces him to buy Twitter.
HERE’S WHAT HAPPENS
Netflix is losing fewer subscribers than expected. The streaming service announced yesterday that it lost nearly a million subscribers in the second quarter, far fewer than expected. Additionally, Netflix said some of its strategies to stem losses, such as an ad-supported option for consumers and a crackdown on password sharing, will boost revenue as early as next year.
A heroic act in an Indiana mall shooting renews the debate over gun access. Since a 22-year-old armed bystander killed a gunman two minutes into a shooting, the United States is once again debating the wisdom of easier access to guns. But an analysis of 433 active shooter attacks in the United States between 2000 and 2021 found that only 22 ended with a bystander shooting the attacker, according to Texas State University’s Advanced Law Enforcement Rapid Response Training Center.
The CHIPS Act passes a procedural hurdle in the Senate with more than 60 votes. The legislation, stalled for more than a year, gives chipmakers what they say is the help they need to build factories in the United States. The Senate is expected to formally vote today to pass the bill, which has been slimmed down and still needs to come back to the House before it can go to the President.
Intelligence agencies say Russia remains a threat in the election. Top FBI and National Security Agency officials warned yesterday that Russia could still seek to meddle or promote disinformation in the 2022 midterm races, even as it wages war in Ukraine . Iran and China also remained potent threats, officials said.
The House takes steps to protect same-sex marriage from being struck down by the Supreme Court. New legislation, which has garnered some Republican support, would recognize same-sex marriages at the federal level, but it faces an uncertain path in the Senate. The decision was a direct response to Judge Clarence Thomas’ concurring opinion in last month’s ruling that struck down federal abortion rights.
Loans that can haunt Silicon Valley
Tech workers have taken out loans in recent years based on the value of their startup stock. But as the start-up economy has deflated, it could come back to haunt them, writes Erin Griffith of The Times.
Start-up loans stem from how workers are typically paid. As part of their compensation, most employees of private technology companies receive stock options. This is where loans and other financing options come in. Seed shares are used as collateral for cash advances. The structure of the loans varies, but most providers charge interest and take a percentage of the worker’s stock when the business sells or goes public. Some are structured as contracts or investments.
This lending industry has exploded in recent years. Many providers were created in the mid-2010s as hot start-ups like Uber and Airbnb postponed initial public offerings of shares for as long as they could, reaching private market valuations in the tens of billions. of dollars.
The debate has ignited in Silicon Valley over the proliferation of loans backed by stakes in still-private start-ups. Proponents say the loans are necessary for employees to participate in the wealth-creating engine of technology. But critics say the loans create unnecessary risk in an already risky industry and are reminiscent of the dot-com era in the early 2000s, when many tech workers were badly burned by similar loans.
As the start-up economy deflates, these loans can be risky. While most are structured to be forgiven if a startup fails, employees could still face a tax bill because loan forgiveness is treated as taxable income.
“No one has thought about what happens when things go wrong,” said Rick Heitzmann, investor at FirstMark Capital. “Everyone thinks only of advantage.”
“The thing my parents always taught me was to be the first in and the last out. But there is no one else there.
— Alex Hyman, who described his internship at a Los Angeles entertainment agency this summer as part “Entourage” and part “The Office,” but found it more like “Home Alone.” This is a common experience in the era of remote bosses.
Mooch’s Crypto Problem
Anthony Scaramucci, famous for his 11-day tenure as former President Donald Trump’s communications director, is facing a massive exodus of investors from his funds.
Earlier this week, Bloomberg reported that Scaramucci’s SkyBridge Capital had halted withdrawals from one of its smaller funds, Legion Strategies, which holds just over $200 million. But Scaramucci is also struggling to retain investors in SkyBridge’s flagship fund, SkyBridge Multi-Advisor Hedge Fund Portfolios, which managed up to $2 billion at the end of March. His investments lost almost a quarter of their value in the second quarter.
Investors in SkyBridge’s flagship fund seek to raise up to $890 million, or about half the money he held at the end of last month, Scaramucci told DealBook. But many of these investors will be locked into the fund for some time. According to its rules, investors in the Multi-Adviser fund are only allowed to withdraw money during certain windows. These used to happen four times a year, but SkyBridge reduced them to twice a year in 2020, after big losses at the start of the pandemic. Earlier this month, SkyBridge told investors they would collectively only receive around 16% of the requested money. The letter said it was issuing investor notes that would be paid no later than October.
Scaramucci’s losses come just over a year after SkyBridge’s pivot to crypto. SkyBridge’s flagship fund, which Scaramucci acquired from Citigroup, has long specialized in buying and selling stakes in other hedge funds. For a time, this, combined with strong performance in the years following the 2008 financial crisis, made Scaramucci one of the most powerful players in the hedge fund industry.
Scaramucci says he is still a longtime supporter of crypto. The fund manager says around 22% of its flagship fund remained in crypto and related investments at the end of last month. “I’m not smart enough to time the market,” he told DealBook. “But we’ve done an awful lot of research and we think anyone who’s done it will see that blockchain technology is good and represents the future.”
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