Meta Platforms Inc. shares soared in after-hours trading Wednesday despite an earnings miss, as the Facebook parent company guided for potentially more revenue than Wall Street expected in the new year and promised more share repurchases amid cost cuts.
Meta
META,
+2.79%
said it hauled in $32.17 billion in fourth-quarter revenue, down from $33.67 billion a year ago but stronger than expectations. Earnings were $4.65 billion, or $1.76 a share, compared with $10.3 billion, or $3.67 a share, last year.
Analysts polled by FactSet expected Meta to post fourth-quarter revenue of $31.55 billion on earnings of $2.26 a share, and the beat on sales coincided with a revenue forecast that also met or exceeded expectations. Facebook Chief Financial Officer Susan Li projected first-quarter sales of $26 billion to $28.5 billion, while analysts on average were projecting first-quarter sales of $27.2 billion.
Shares jumped more than 18% in after-hours trading immediately following the release of the results, after closing with a 2.8% gain at $153.12.
Alphabet Inc.’s
GOOGL,
+1.61%
GOOG,
+1.56%
Google and Pinterest Inc.
PINS,
+1.56%
benefited from Meta’s results, with shares for each company rising 4% in extended trading Wednesday.
“Our community continues to grow and I’m pleased with the strong engagement across our apps. Facebook just reached the milestone of 2 billion daily actives,” Meta Chief Executive Mark Zuckerberg said in a statement announcing the results. “The progress we’re making on our AI discovery engine and Reels are major drivers of this. Beyond this, our management theme for 2023 is the ‘Year of Efficiency’ and we’re focused on becoming a stronger and more nimble organization.”
Read more: Snap suffers worst sales growth yet in holiday quarter, stock plunges after earnings miss
Facebook’s 2 billion-user milestone was slightly better than analysts expected for user growth on Meta’s core social network. Daily active users across all of Facebook’s apps neared, but did not crest, another round number, reaching 2.96 billion, up 5% from a year ago.
Meta has been navigating choppy ad waters as it copes with increasing competition from TikTok and fallout from changes in Apple Inc.’s
AAPL,
+0.79%
ad-tracking system in 2021 that punitively harmed Meta, costing it potentially billions of dollars in advertising sales. Meta has invested heavily in artificial-intelligence tools to rev up its ad-targeting systems and making better recommendations for users of its short-video product Reels, but it laid off thousands of workers after profit and revenue shrunk in recent quarters.
The cost cuts seemed to pay off Wednesday. While Facebook missed on its earnings, it noted that the costs of its layoffs and other restructuring totaled $4.2 billion and reduced the number by roughly $1.24 a share.
Meta executives said they now expect operating expenses to be $89 billion to $95 billion this year, down from previous guidance for $94 billion to $100 billion. Capital expenditures are expected to be $30 billion to $33 billion, down from previous guidance of $34 billion to $37 billion, as Meta cancels multiple data-center projects.
In a conference call with analysts late Wednesday, Zuckerberg called 2023 the “year of efficiency.”
“The reduced outlook reflects our updated plans for lower data-center construction spend in 2023 as we shift to a new data-center architecture that is more cost efficient and can support both AI and non-AI workloads,” Li said in her outlook commentary included in the release.
Meta expects to increase its spending on its own stock. The company’s board approved a $40 billion increase in its share-repurchase authorization; Meta spent nearly $28 billion on its own shares in 2022, and still had nearly $11 billion available for buybacks before that increase.
“Investors are cheering Meta’s plans to return more capital to shareholders despite worries over rising costs related to its metaverse spending,” said Jesse Cohen, senior analyst at Investing.com.
The results came a day after Snap Inc.
SNAP,
-10.29%
posted fourth-quarter revenue of $1.3 billion, flat from a year ago and the worst year-over-year sales growth Snap has ever reported. But they also arrived on the same day Facebook scored a major win in a California court. The company successfully fended off the Federal Trade Commission bid to win a preliminary injunction to block Meta’s planned acquisition of VR startup Within Unlimited.
Read more: Meta wins bid to buy VR startup Within Unlimited, beating U.S. FTC in court: report
Meta shares have plunged 53% over the past 12 months, while the broader S&P 500 index
SPX,
+1.05%
has tumbled 10% the past year.
banked historic profit last year as the pandemic receded and the war in Ukraine pushed oil prices to multiyear highs, with its shares climbing 53% for the year while other sectors tumbled.
The U.S. oil company in its quarterly earnings reported Friday that it collected $35.5 billion in its highest-ever annual profit in 2022, more than double the prior year and about one-third higher than its previous record in 2011. Almost $50 billion in cash streamed in from its oil-leveraged operations, another record that is underpinning plans to pay investors through a new $75 billion share-repurchase program over the next several years.
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That payout, announced Wednesday, is roughly equivalent to the stock-market value of companies such as the big-box retailer
Target Corp.
, the pharmaceutical firm
Moderna Inc.
and
Airbnb Inc.
Chevron, the second-largest U.S. oil company after
Exxon Mobil Corp.
, posted revenue of $246.3 billion, up from $162.5 billion the previous year. The San Ramon, Calif., company reported a fourth-quarter profit of $6.4 billion, up from $5.1 billion in the same period the prior year.
The fourth-quarter results came short of analyst expectations, and Chevron shares closed down more than 4% Friday.
For all of its recent winnings, though, Chevron and its rival oil-and-gas producers could face a rockier year in 2023, according to investors and analysts, if an anticipated slowdown in U.S. economic growth dents demand for oil, and if China’s reopening from strict Covid-19 restrictions unfolds slowly.
U.S. oil prices have held steady this year, but are off about 36% from last year’s peak. The industry is proceeding with caution, holding capital expenditures for 2023 below prepandemic levels and saying production will grow only modestly. Chevron has said it plans to spend about $17 billion in capital expenditures this year, up more than 25% from the prior year, but $3 billion less than it planned to spend in 2020 before Covid-19 took root.
Oil companies are still outperforming other sectors such as tech and finance, which have seen widespread job cuts in recent weeks. The energy segment of the S&P 500 index has climbed 43.7% over the past year, compared with a 6.7% drop for the broader index.
Chevron Chief Executive Mike Wirth said the company is unsure of what 2023 will bring after global energy supplies were squeezed because of geopolitical events last year, particularly in Europe following Russia’s invasion of Ukraine. He said markets appeared to be stabilizing.
“We certainly have seen a very unusual and volatile year in 2022,” Mr. Wirth said, noting the European energy crisis has proven less dire than anticipated thanks to milder winter weather, growing natural gas inventories in Europe. “China’s economy has been slow throughout the year, which looks to be turning around. It’s good that markets have calmed.”
Chevron projects its output in the Permian Basin of West Texas and New Mexico to grow at a slower pace this year.
Photo:
David Goldman/Associated Press
Chevron hit a record in U.S. oil-and-gas production in 2022, increasing 4% to about 1.2 million barrels of oil equivalent a day, stemming from its increased focus on capital investments in the Western Hemisphere, particularly in the Permian Basin of West Texas and New Mexico, where it boosted output 16% last year. Worldwide, Chevron’s oil-and-gas production was down 3.2% compared with the prior year, at 2.99 million barrels of oil-equivalent a day.
Its overall return on capital employed came in at 20%, it said.
“There aren’t many sectors generating the type of free cash flow that energy is right now,” said
Jeff Wyll,
an analyst at investment firm Neuberger Berman, which has invested in Chevron. “The sector really can’t be ignored. Given the supply-demand balance, you have to have some things go wrong here to see a pullback in oil prices.”
Even so, institutional investors have shown limited interest so far in returning to the energy sector, after years of poor returns and heightened concerns about their environmental impact prompted large financiers to sell off their stakes in oil-and-gas companies or stop investing in drillers outright.
Pete Bowden,
global head of industrial, energy and infrastructure banking at
Jefferies Financial Group Inc.,
said energy companies in the S&P 500 index are throwing off 12% of the group’s free-cash flow, but only account for about 5% of the index’s weighting—an indication their stock prices are lagging behind.
Investors’ concerns around environmental, social and governance-related issues are a constraint on the share prices of energy companies, “yet the earnings power of these businesses is superior to the earnings power of companies in other sectors,” he said.
Chevron and others have faced criticism from the Biden administration and others that they are giving priority to shareholder returns over pumping oil and gas at a time when global supplies are tight and Americans are feeling pain at the pump. On Thursday, the White House assailed Chevron’s $75 billion buyout program, saying the payout was proof the company could boost production but was choosing to reward investors instead.
Pierre Breber,
Chevron’s finance chief, said the company expects oil prices to be volatile but within a range needed to sustain its dividend and investments. There are some optimistic signs, he added, including that the U.S. economy grew faster than expected in the fourth quarter, at 2.9%.
“Supply is tight. Oil-field services are near capacity, and we continue to have sanctions on Russian production,” Mr. Breber said. “You’re seeing international flights out of China are way up, and low unemployment in the U.S.”
Mr. Breber said Chevron’s output in the Permian this year is expected to grow at a slower pace, around 10%, because it has exhausted much of its inventory of wells that it had drilled but hadn’t brought into production.
Exxon, which has typically posted quarterly earnings on the same day as Chevron, will report Tuesday. Analysts expect it will also post record profit for 2022, according to FactSet.
Both companies expect to slow their output growth this year in the Permian, considered their growth engine. The two U.S. oil majors, which had been growing output faster in the U.S. than most independent shale producers, are beginning to step up their focus on shareholder returns and allow output growth to ease, said Neal Dingmann, an analyst at Truist Securities.
“This has all been driven by investor requirements,” Mr. Dingmann said.
‘s team has been exploring using as much as $3 billion in potential new fundraising to help repay some of the $13 billion in debt tacked onto Twitter Inc. for his buyout of the company, people familiar with the matter said.
In December, Mr. Musk’s representatives discussed selling up to $3 billion in new Twitter shares, people familiar with the matter said.
Mr. Musk’s team has said to people familiar with the finances of the company that an equity raise, if successful, could be used to pay down an unsecured portion of the debt that carries the highest interest rate within the $13 billion Twitter loan package, people familiar with the matter said.
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Paying off the debt would provide welcome financial relief to Twitter, which has struggled to keep advertisers on the platform. In November, Mr. Musk said Twitter had suffered “a massive drop in revenue” and was losing over $4 million a day. He also said that month that bankruptcy was a possibility for the company, although Mr. Musk later shared more upbeat prospects for the company, saying he expects Twitter to be roughly cash-flow break-even in 2023 as he has slashed some 6,000 jobs.
The state of the fundraising talks couldn’t be learned. In mid-December, Mr. Musk’s team reached out to new and existing backers about raising new equity capital at the original Twitter takeover price.
Mr. Musk’s advisers had hoped to reach a deal to raise cash at the initial takeover price by the end of 2022, according to an email sent to prospective investors at the time. However, some prospective backers said they balked at the terms, given concerns about Twitter’s financial performance. The Musk team didn’t specify a funding amount or purpose for the fundraise in the email.
Fidelity, one of the co-investors that backed Mr. Musk’s takeover of Twitter, wrote down its stake in Twitter by 56% in November, public filings show, suggesting Mr. Musk would face an uphill battle raising funds at the original valuation from outside investors. The banks holding the $13 billion in debt that backed his takeover of the company haven’t yet received any formal notice of any repayments, people familiar with the matter said.
Layoffs Across the Tech Industry
Representatives for Mr. Musk didn’t respond to requests for comment.
Twitter’s unsecured bridge loans, which total $3 billion, are the most expensive portion of the $13 billion debt package Mr. Musk incurred as part of his $44 billion acquisition of the social-media company. They carry an interest rate of 10% plus the secured overnight financing rate, a benchmark interest rate that has shot up in recent months and currently sits at 4.3%.
With every quarter that passes without Twitter refinancing the debt, the interest rate goes up by an additional 0.50 percentage point, according to regulatory filings. Twitter’s first quarterly interest payment is due at the end of the month, the filings show.
Twitter’s annual interest burden has increased by over $100 million since he announced the takeover deal last April, as the overnight rate has increased. At the time of the announcement, the overnight rate was 0.3%.
Elon Musk has said that Twitter is losing over than $4 million a day.
Photo:
Marlena Sloss/Bloomberg News
Twitter’s total interest expense has been estimated to be roughly $1.25 billion a year, according to a December analysis by
Jeffrey Davies,
a former credit analyst and founder of data provider Enersection LLC. By that estimate, Twitter is incurring roughly $3.4 million every day in interest-payment obligations.
On Dec. 13, Mr. Musk tweeted “beware of debt in turbulent macroeconomic conditions, especially when Fed keeps raising rates.”
Repaying the unsecured bridge loans would leave Twitter with a debt burden that has much more manageable interest rates. Twitter’s $6.5 billion in term loans and $3 billion in secured bridge loans carry an annual interest burden of 4.75% and 6.75%, respectively, plus the overnight rate, according to public filings.
Tesla CEO Elon Musk is set to testify in a federal trial over tweets from 2018 in which he floated the possibility of taking the company private. WSJ’s Rebecca Elliott explains what to know about the trial. Illustration: Adele Morgan
A potential deal would also provide a degree of relief for the banks that backed Mr. Musk’s takeover of the social-media company and that intended to sell the debt to third-party investors but changed course after deteriorating market conditions sank Wall Street’s appetite for exposure to risky bonds and loans.
The $13 billion of Twitter debt on bank balance sheets, one of the biggest “hung deals” of all time, has helped contribute to a drag in the number of mergers and acquisitions as banks’ firepower to back deals is tied up.
Morgan Stanley,
the lead bank on Twitter’s debt deal, has approximately $807 million in unsecured bridge debt on its balance sheet, while
Bank of America Corp.
,
Barclays
PLC and MUFG Bank Ltd. each have approximately $623 million of exposure, according to public documents and calculations by The Wall Street Journal.
Each of the four banks have more than $2 billion in other Twitter debt commitments on their balance sheets separate from the unsecured bridge facility, including term loans and other secured debt, the documents show.
Representatives of those banks declined to comment.
—Corrie Driebusch, Alexa Corse and Laura Cooper contributed to this article.
Write to Berber Jin at berber.jin@wsj.com and Alexander Saeedy at alexander.saeedy@wsj.com
The Justice Department is seeking the breakup of Google’s business brokering digital advertising across much of the internet, a major expansion of the legal challenges the company faces to its business in the U.S. and abroad.
A lawsuit filed Tuesday, the Justice Department’s second against the
Alphabet Inc.
GOOG -1.98%
unit following one filed in 2020, alleges that Google abuses its role as one of the largest brokers, suppliers and online auctioneers of ads placed on websites and mobile applications. The filing promises a protracted court battle with wide-ranging implications for the digital-advertising industry.
Filed in federal court in Virginia, the case alleges that Google abuses monopoly power in the ad-tech industry, hurting web publishers and advertisers that try to use competing products. Eight states, including California and New York, joined the Justice Department’s lawsuit.
The lawsuit asks the court to unwind Google’s “anticompetitive acquisitions,” such as its 2008 purchase of ad-serving company DoubleClick, and calls for the divestiture of its ad exchange.
“For 15 years Google has pursued a course of anticompetitive conduct that has allowed it to halt the rise of rival technologies, manipulate auction mechanics, insulate itself from competition, and forced advertisers and publishers to use its tools,” Attorney General
Merrick Garland
said at a press conference Tuesday. “Google has engaged in exclusionary conduct that has severely weakened if not destroyed competition in the ad-tech industry.”
Attorney General Merrick Garland said Tuesday that the digital-advertising industry was harmed by Google’s allegedly monopolistic conduct.
Photo:
Al Drago/Bloomberg News
A Google spokesman said the lawsuit “attempts to pick winners and losers in the highly competitive advertising technology sector.”
“DOJ is doubling down on a flawed argument that would slow innovation, raise advertising fees, and make it harder for thousands of small businesses and publishers to grow,” the spokesman said.
By calling for specific divestitures from Google’s ad-tech business, the Justice Department lawsuit went further in seeking a breakup than some antitrust experts had expected. Shares of Alphabet fell by about 2% in trading on Tuesday.
Though largely invisible to internet users, the ad-tech tools controlled by Google facilitate much of the buying and selling of digital ads that helps fund online publishers. Google’s business includes a tool publishers can use to offer ad space, a product for advertisers to buy those slots and an exchange that automatically links bidders with webpages as they are being loaded for individual users.
Big tech companies such as Google are under a barrage from lawmakers and regulators across multiple continents who have targeted the companies’ dominance in online markets. Justice Department officials also are investigating
Apple Inc.
The Federal Trade Commission has sued
Meta Platforms Inc.’s
Facebook unit over antitrust allegations and
Microsoft Corp.
to block its planned $75 billion acquisition of
Activision Blizzard Inc.
President Biden recently urged lawmakers from both parties to unite behind legislation seeking to rein in tech giants. The European Union also has opened cases looking at alleged anticompetitive conduct by Google, Meta and other companies.
The Justice Department’s 2020 lawsuit against Google targeted its position in online search markets, including an agreement to make Google search the default in Apple’s Safari web browser. Google is fighting the case, which is expected to go to trial this year.
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Alphabet gets about 80% of its business from advertising. The Justice Department’s new suit targets the subset of that ad business that brokers the buying and selling of ads on other websites and apps. Google reported $31.7 billion in revenue in 2021 from that ad-brokering activity, or about 12% of Alphabet’s total revenue. Google distributes about 70% of that revenue to web publishers and developers.
Last year, Google offered to split off parts of its ad-tech business into a separate company under the Alphabet umbrella to fend off the most recent Justice Department investigation. DOJ officials rejected the offer and decided to pursue the lawsuit instead.
For years, Google has faced allegations from advertising- and media-industry executives, lawmakers and regulators that its presence at multiple points of the online ad-buying process harms publishers and gives it an unfair advantage over rivals. Google also operates the most popular search engine and the largest online video-streaming site, YouTube, giving rise to allegations it has tilted the market in its own favor.
Rivals say that Google’s power in digital advertising stems from a series of acquisitions Google used to build its ad-tech business, beginning with the company’s $3.1 billion purchase of DoubleClick. The FTC approved the merger in a controversial decision. Google went on to purchase a host of other startups including the mobile-advertising company AdMob.
“Having inserted itself into all aspects of the digital advertising marketplace, Google has used anticompetitive, exclusionary, and unlawful means to eliminate or severely diminish any threat to its dominance over digital advertising technologies,” the complaint read.
Google has said it has no plans to sell or exit the ad-tech business. It has also strongly contested claims in a lawsuit filed by state attorneys general, led by Texas, containing allegations similar to the Justice Department complaint. A federal judge denied the bulk of Google’s motion to dismiss the case last year, allowing it to proceed to the discovery stage and ultimately toward trial.
Google’s Android operating system is the most popular in the world—you can find Android code on everything from Peloton bikes to kitchen appliances and even NASA satellites. WSJ’s Dalvin Brown explains why it is the world’s most-used OS. Illustration: Rami Abukalam
Any divestiture of parts of Google’s ad-tech business would cause big ripple effects across the online advertising industry, which has recently shown signs of weakness as consumers dial back purchases in response to worsening economic conditions.
Breaking off parts of Google’s ad-tech business from the rest of the company could take years of litigation to resolve. Depending on the outcome of the case, ad-tech executives have said the results could range from a higher share of ad dollars flowing to publishers to lower overall spending because digital ads would be less efficient without Google brokering them.
The 149-page complaint makes detailed allegations about the internal workings of Google’s ad-tech operations. The suit alleges, for instance, that Google used anticompetitive tactics to build up the market share of its own ad server, which issues requests for advertisements on behalf of websites, and then used that market power to effectively push publishers into sending their ad inventory only to Google’s in-house ad exchange, AdX.
The Justice Department argues, in part, that this conduct locked out rival ad-tech providers, increasing prices for advertisers and costs of publishers.
“Google keeps at least thirty cents—and sometimes far more—of each advertising dollar flowing from advertisers to website publishers through Google’s ad tech tools,” the lawsuit alleges. “Google’s own internal documents concede that Google would earn far less in a competitive market.”
The lawsuit also alleges that Google executives worked to kill a rival online-bidding technology called “header bidding,” which the lawsuit says the company referred to internally as an “existential threat.” As part of a plan dubbed Project Poirot, the company allegedly changed its own ad-buying tools to underbid on behalf of advertisers when they turned to outside ad exchanges that used header bidding, so those rivals would lose more auctions and “dry out,” the complaint says.
At one point, Google also approached
Amazon.com Inc.,
to ask “what it would take for Amazon to stop investing in its header bidding product,” the complaint alleges, adding that Amazon rebuffed those requests.
“Google uses its dominion over digital advertising technology to funnel more transactions to its own ad tech products where it extracts inflated fees to line its own pockets at the expense of the advertisers and publishers it purportedly serves,” the complaint read.
The Justice Department case overlaps in some ways with the late 2020 lawsuit from the group of U.S. states led by Texas.
In Tuesday’s complaint, the Justice Department quotes some of the same internal communications as the Texas-led lawsuit, including how one Google executive compared the company’s control over ad-tech to the financial sector: “The analogy would be if Goldman or Citibank owned the NYSE,” referring to the New York Stock Exchange.
The case also shares similarities with an investigation that the EU’s top antitrust enforcer, the European Commission, opened in 2021, as well as one by the U.K.’s Competition and Markets Authority. Those probes are exploring allegations that Google favors its own ad-buying tools in the advertising auctions it runs, but also look at other elements of Google’s ad-tech business. The EU, for instance, is also looking at Google’s alleged exclusion of competitors from brokering ad-buys on its video site YouTube.
Mr. Garland said Tuesday that the Justice Department filed its own lawsuit because the federal government was harmed by Google’s allegedly monopolistic conduct. Federal agencies have since 2019 spent over $100 million on display ads, the complaint says. The government paid inflated fees and was harmed by manipulated advertising prices because of Google’s anticompetitive conduct, the lawsuit alleges.
Microsoft is deepening its partnership with OpenAI, the company behind ChatGPT and Dall-E. That has investors and analysts speculating whether Microsoft could challenge Google’s dominance in search. WSJ Heard on the Street columnist Dan Gallagher joins host Zoe Thomas to discuss how AI could affect search and at what cost.
Jonathan Kanter,
the assistant attorney general for antitrust, said while there are similarities with other lawsuits against Google, the Justice Department’s complaint is based on its own investigation that yielded “meticulous detail” about Google’s ad-tech business.
“We detail many facts, many episodes that in the individual and in the aggregate have maintained numerous monopolies,” Mr. Kanter said.
Google has attempted to settle the claims against its ad-tech business. In addition to offering to split off parts of its ad-tech business to avoid the Justice Department suit, the company last year discussed with the EU an offer to allow competitors to broker the sale of ads directly on the video service.
In 2021, the company agreed to give U.K. antitrust regulators effective veto power over elements of its plans to remove a technology called third-party cookies from its Chrome browser to settle an investigation there into the plan.
In France, Google agreed to pay a fine of 220 million euros, equivalent to about $239 million, and to improve data access to competing ad-tech companies, to not use its data in ways rivals couldn’t reproduce to settle a similar antitrust investigation in the country.
—Keach Hagey contributed to this article.
Write to Miles Kruppa at miles.kruppa@wsj.com and Sam Schechner at Sam.Schechner@wsj.com
has disclosed a nearly $7 billion offer to acquire
National Instruments Corp.
NATI 10.79%
, which it said it has been trying to buy for more than eight months.
Emerson, a St. Louis-based technology and engineering company, said it was offering $53 a share in cash for National Instruments, which it said represents an enterprise value of $7.6 billion. The offer represents a 32% premium over National Instruments’ closing price from last Thursday, the day before the Texas-based equipment and instrumentation company said its board was evaluating strategic alternatives and had already been approached by potential acquirers.
Emerson’s public proposal comes eight months after National Instruments rejected its offer for an acquisition at $48 a share, the company said. Emerson upped its bid to $53 a share in November, but now claims National Instruments has continued to spurn its advances.
National Instruments confirmed Tuesday that it had received Emerson’s offer but said it remains committed to the strategic review process it announced on Friday.
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By making the offer public, Emerson is hoping to win over shareholders who until now “have been unaware of this opportunity to realize an immediate cash premium,” Chief Executive
Lal Karsanbhai
said Tuesday in a conference call.
“Emerson urges NI shareholders to engage with their board to ensure this public strategic review process is not merely another delay tactic,” he said.
National Instruments’ shares jumped more than 10% to $52.04 by the close of the Tuesday market. Emerson’s shares meanwhile fell almost 7% to a low of nearly $91 in one of their steepest drops since June 2020, according to Dow Jones Market Data.
Emerson said that picking up National Instruments’ portfolio of electronic test and measurement offerings would bolster its automation business while also adding to its adjusted earnings within the first year. The company isn’t putting any financing conditions on the deal, saying it can fund the transaction with cash on hand and existing lines of credit.
On a call with analysts, the company detailed eight months of snubs from the National Instruments board that started in May, when Emerson said it reached out for an in-person meeting about a potential deal and was instead offered a phone call with management. Emerson sent a formal letter soon after with its all-cash $48-per-share offer, but National Instruments turned it down, the company said.
National Instruments continued to rebuff offers to negotiate privately in the months that followed, Emerson said.
Emerson also noted that National Instruments purchased more than two million of its own shares at an average weighted price of $40.25 during that time. Mr. Karsanbhai criticized the company on Tuesday for launching one of its largest-ever buybacks for a per-share price that was well below Emerson’s offer.
Emerson reached out with its improved offer on Nov. 3 to buy National Instruments for $53 a share, which marked a 45% premium to the company’s share price at market close that day. The National Instruments board responded at the time that it had formed a working group to evaluate the proposal and weigh its strategic options, but otherwise refused to engage with Emerson, Emerson said.
National Instruments said Tuesday that it welcomes Emerson’s participation in its strategic review process but also thinks that negotiating exclusively with the company “would be detrimental to shareholders.”
“NI notes Emerson’s expressed disappointment in this effort to maximize NI shareholder value,” the company said.
Disney ripped Nelson Peltz and his bid for a board seat Tuesday, as the entertainment giant’s proxy fight with the investor and his activist firm, Trian Fund Management, takes shape.
Disney said in a securities filing Tuesday that its board was where it needed to be to move the company forward. The company also defended CEO Bob Iger’s past acquisitions and said Peltz didn’t have an understanding of Disney’s business, lacked the skills to drive shareholder value and presented no strategy.
“Peltz has no track record in large cap media or tech, no solutions to offer for the evolving media landscape,” Disney said in an investor presentation that was released Tuesday.
Last week, Peltz laid out his case for a proxy fight with Disney on CNBC’s “Squawk on the Street” after Trian filed a preliminary proxy statement looking for a seat on the board.
Peltz raised issues with how shareholder value has eroded recently and Disney’s $71 billion acquisition of Fox in 2019. Trian has also called out what it called poor corporate governance, including failed succession planning and Disney’s lack of engagement with Trian in recent months.
A representative for Trian declined to comment on Tuesday.
Trian said it owns about 9.4 million shares valued at roughly $900 million, which it first accumulated months ago.
Disney preempted and opposed Trian last week when it announced that Mark Parker, the executive chairman of Nike, would become the new chairman of the board.
In Tuesday’s filing, the company defended the numerous acquisitions closed under now-returned CEO Iger, included Marvel and Lucasfilm, saying they enhanced the company’s value for shareholders and were transformative for the company.
Disney’s portfolio has meant it’s often led in the box office with Marvel films and “Star Wars” installments. Those assets have also provided much of the content for its marquee streaming service, Disney+.
As for its Fox acquisition, which Peltz took particular issue with in his presentation last week, Disney said Fox has broadened its intellectual property portfolio further and provided the company with a “deep bench” of talent, including Dana Walden, who’s been considered a contender as the next leader of the company.
When Iger made his shocking return to Disney’s helm in November, replacing his hand-picked successor Bob Chapek after a poor earnings report, he said he would only stay for two years to help look for his next successor. Newly appointed board chairman Parker will lead the process of finding a new CEO, the company said last week.
Disney noted on Tuesday that in addition to succession planning, it is in the midst of a cost-cutting plan and prioritizing streaming profitability.
Disney’s stock was rocky in 2022 as it came out of the early days of the pandemic when movie theaters and theme parks were closed. Slowing streaming subscriber growth also weighed on media stocks in the past year.
Peltz said on CNBC last week he’s been pushing for a board seat to get access to internal numbers and tell other members if and when they’re missing out on opportunities.
Disney on Tuesday contested some of Peltz’s claims about the parties’ conversations thus far.
The company said it had offered Peltz an information sharing agreement, meaning he would have met quarterly with both management and the board, rather than a board observer role as Peltz said. Otherwise, Disney pointed to numerous interactions between the company and Trian.
‘s immense wealth and borrowing power are now being tested as the
Tesla Inc.
TSLA -1.76%
shares that have fueled his fortune have sharply declined while he rushes to stabilize his massive personal investment in Twitter Inc.
The auto maker’s share value has nosedived 18% this week alone and more than 60% since he announced his plan to buy Twitter.
His ability to use his shares at Tesla to raise money, by selling or borrowing against them, has been complicated by their rapid downdraft in recent months.
Historically, Mr. Musk has been a cash-poor billionaire, depending upon so-called margin loans—borrowing backed up by his shares—for his personal expenses and business investmentswhile holding on to his Tesla shares and benefiting from their rising value.
But Tesla’s market value has fallen by about $700 billion this year, sinking his personal wealth along the way. The decline in Tesla’s valuation comes after years of growth that has allowed him to easily borrow money without having to cash out his shares.
Shares in Tesla have fallen around 65% in 2022, dinged, in part, by the higher interest-rate environment. Another issue relates to the reason he may need cash: Twitter. Tesla investors have been concerned that Mr. Musk’s attention is divided following his October takeover of the social-media company.
Late last year, just as Tesla’s stock price peaked, he began selling Tesla shares, totaling more than $39 billion including $3.5 billion last week. What his liquidity is like is unknown after what he said would be a more than $11 billion tax bill for 2021 and putting up roughly $25 billion in cash as part of buying Twitter.
Mr. Musk’s current Tesla holdings, not including exercisable options, total 424 million shares worth about $52billion at Friday’s closing price of $123.15 a share.
Simply put, if he could tap all of those shares as collateral under Tesla’s rules, he would be allowed to borrow about $13 billion. That is only a bit more than he planned to borrow in April as part of the original Twitter deal using just 40% of his shares as collateral, underscoring how his borrowing power has shrunk with the collapse of the car company’s share price. He later scrapped those proposed margin loans to fund the deal amid investor concerns over the risk.
A Tesla launch in Bangkok earlier this month.
Photo:
Vachira Vachira/Zuma Press
Mr. Musk and Tesla didn’t respond to a request for comment.
Tesla shares aren’t his only asset or only avenue to raise money. He also holds shares in Space Exploration and Technologies Corp., or SpaceX, and has ownership in startups such as the Boring Co. His level of personal indebtedness isn’t clear.
Mr. Musk is facing questions about whether Tesla, where he is also chief executive, is ready for a recession as he separately tries to stem losses at Twitter, cutting thousands of workers from his newly acquired social-media platform. Late Tuesday, he said drastic spending cuts at Twitter were required as the company was on track to bleed billions of dollars. His team had been seeking additional investment dollars for Twitter.
“We have an emergency fire drill on our hands,” Mr. Musk said during a public talk on Twitter Spaces. After taking those drastic efforts, he said, Twitter could break even next year.
While Twitter has rarely been profitable in the past decade, itsfinances were made more challenging by the debt Mr. Musk took on to fund his acquisition and by a decline in spending by advertisers worried about the erratic changes occurring under his leadership. Analysts estimate the debt expenses alone have added more than $1 billion in cost annually to a company that last year generated $5 billion in sales, mostly from ads.
Mr. Musk has been here before—mired in debt and burning cash as the global economy teeters—and emerged successfully.
Those successes and investor enthusiasm for his ventures made him rank as the world’s richest person for a time.The drop in Tesla’s value this year sent Mr. Musk’s ranking as the world’s richest man to No. 2 behind
Bernard Arnault,
the chairman and chief executive of luxury conglomerate LVMH Moët Hennessy Louis Vuitton. Mr. Musk’s fortune fell to an estimated $140 billion as of Thursday from a high of $340 billion a little more than a year ago, according to the Bloomberg Billionaires Index.
If he needs cash, Mr. Musk could always sell more Tesla shares, as he did recently. But, in the past, Mr. Musk, Tesla’s largest individual shareholder, has been reluctant to sell. At Tesla, Mr. Musk lacks the kind of dual class of stock ownership that gives founders at
Meta Platforms Inc.
or
Alphabet Inc.
controlling power. Instead, Mr. Musk’s large stake in Tesla, in the past,has effectively given him veto power over shareholder proposals thanks to the company’s supermajority vote requirement.
On Thursday, Mr. Musk said he sold some stock to make sure he had “powder dry…for a worst-case scenario” and said that he was done selling until probably 2025, though he’s made similar statements like that this year only to sell more.
“I’m somewhat paranoid having gone through two really intense recessions,” Mr. Musk said.
While he had used margin loans before, the idea of borrowing billions off the backs of Tesla shares to help Twitter carries risks.
Tesla’s board of directors has limited his borrowing power to essentially 25 cents on every dollar of share value, according to regulatory filings. As the shares fall in value, he must comply with the 25% limit. The risk to Tesla shareholders, as the company describes in its regulatory filings, is that he may have to unload a lot of shares at once to generate cash. He has never disclosed at what price he would need to pony up more collateral.
In recent days, Mr. Musk has swatted down the idea of margin loans altogether. In a tweet, Mr. Musk cautioned that such a move was unwise in this market. “When there are macroeconomic risks, it is generally wise to avoid using margin loans on any company, as stocks may move in ways that are decoupled from their long-term potential,” he wrote on Dec. 8.
As of the most recent public filing, Mr. Musk had pledged as collateral more than half of his Tesla holdings, excluding options he could exercise.
Pledging doesn’t necessarily indicate that actual borrowing against those shares has occurred, the filing said.
has signaled it plans to challenge the Federal Trade Commission’s lawsuit to block its $75 billion deal for
Activision
ATVI -0.38%
Blizzard Inc., and is expected to argue that it is an underdog in videogame developing.
The personal-computing company has been publicizing its position for months, saying the acquisition wouldn’t threaten competition in the industry because Microsoft trails rivals in videogame consoles and has a limited presence in mobile-game development. The company has also said it expects the industry to get more competitive in the future with the rise of cloud gaming.
Legal experts say Microsoft will likely build its case around those talking points as well as the fact that it is pursuing what is called a vertical merger, meaning it is buying a company in its supply chain as opposed to a direct competitor.
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The deal “is fundamentally good for gamers, good for consumers, good for game developers and good for competition,” said
Brad Smith,
Microsoft’s president and vice chair, at the company’s annual shareholders meeting Tuesday. “We will have to present this case to a judge in a court because this is a case in which I have great confidence.”
Microsoft has until Thursday to respond to the FTC’s suit, which was filed Dec. 8 in the agency’s administrative court.
In its complaint, the FTC alleged the deal is illegal because it would give Microsoft the ability to control how consumers access Activision’s games beyond the Redmond, Wash., company’s own Xbox consoles and subscription services. The company could raise prices or degrade Activision’s content for people who don’t use its hardware to access the developer’s games, or even cut off access to the games entirely, the FTC said.
“If you can control an important source of content like Activision Blizzard, you have a variety of tools to leverage at your disposal,” which could stifle competition, an agency official said earlier this month.
At the shareholder meeting, Mr. Smith challenged the FTC’s concerns that Microsoft’s chief rival, PlayStation maker
Sony Group Corp.
, would be harmed by the deal, saying Sony has too big a lead in the high-performance console space to warrant protection.
Microsoft Gaming CEO Phil Spencer discusses growth in cloud gaming, gaming subscriptions and the planned acquisition of Activision Blizzard.
He further argued that the FTC’s case largely hinges on a worry that Microsoft could one day make games from Activision’s “Call of Duty”—which has been a hit among PlayStation users—exclusive to its Xbox system. Mr. Smith said Sony has about four times as many exclusive games on its consoles today as Microsoft has on its gaming machines.
Sony didn’t respond to a request for comment.
Microsoft said it made a last-minute offer to keep “Call of Duty” games accessible to others through a legally binding consent decree, augmenting an offer that the company had made months earlier to keep it accessible for at least 10 years.
A hearing would take place in the FTC’s administrative court in August, unless a resolution is reached before then. After the case is heard, legal experts say it could take months before a decision is handed down, and the losing side can then appeal it with the full commission. If an appeal is filed, the commission reviews the entire record anew and hears oral arguments, before deciding to uphold or overturn the administrative law judge’s order. At that point, if Microsoft loses, the company can appeal the commission’s decision to a federal appeals court.
“This is no way a slam-dunk case for the FTC,” said
Eric Talley,
a professor at Columbia Law School. “Even if the odds are a little bit long, they’re showing they’re willing to kick the tires to budge legal precedent a little bit more in their favor.”
Microsoft recently made a last-minute move to augment its offer to keep Activision’s ‘Call of Duty’ games accessible to others.
Photo:
Martin Meissner/Associated Press
Some analysts said Microsoft might want to drop the acquisition, which the company values at $68.7 billion after adjusting for Activision’s net cash, to avoid executive distraction and expensive regulatory concessions. Microsoft has said it is committed to addressing regulators’ concerns.
While the litigation is continuing, Microsoft could offer the FTC additional commitments or implement them itself, said
Benjamin Sirota,
an antitrust attorney with the law firm Kobre & Kim LLP in New York. But to be satisfied, the government would have to enforce those commitments, which “takes resources and circumstances often change,” he said. The agency might also consider how “commitments that solve a competition problem now might not work in the future,” he added.
The FTC faces hurdles in its case because of the deal’s vertical-merger status, according to
David Hoppe,
mergers and acquisitions, tech and media attorney with Gamma Law in San Francisco.
“With these cases, it’s hard to prove consumer harm,” he said. “It’s not two competitors combining, in which case the harm to consumers is typically self-evident.”
The FTC has been clear about its intention to expand the scope of harm beyond a merger’s likely impact on consumer prices, Mr. Hoppe said. The agency might be concerned about actions that could indirectly put consumers at risk, he said, such as the misuse of sensitive competitor information by the combined enterprise. That information could give Microsoft a way to keep newcomers in videogame distribution from succeeding, which could result in fewer options for consumers, he said.
“It’s all about the network effect,” Mr. Hoppe said.
Write to Sarah E. Needleman at Sarah.Needleman@wsj.com
PLC, according to people familiar with the matter, in a takeover likely to be valued at well over $20 billion and mark the largest healthcare merger of the year.
The U.S. biotechnology company was the last of three suitors standing in an auction for Horizon, the people said, after French drugmaker
Sanofi SA
said Sunday it was out of the running.
A deal could be finalized by Monday assuming the talks with Amgen don’t fall apart, the people said.
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Horizon develops medicines to treat rare autoimmune and severe inflammatory diseases that are currently sold mostly in the U.S. Its biggest drug, Tepezza, is used to treat thyroid eye disease, an affliction characterized by progressive inflammation and damage to tissues around the eyes.
The company is Nasdaq-listed, but based in Ireland and has operations in Dublin, Deerfield, Ill., and a new facility in Rockville, Md.
Horizon said last month it was fielding takeover interest from Amgen, Sanofi and
Johnson & Johnson,
a disclosure prompted by a Wall Street Journal report.
Johnson & Johnson later said it had dropped out.
Last year, revenue from Tepezza more than doubled, driving Horizon’s overall net sales 47% higher to $3.23 billion. Horizon has said that annual global net sales of the drug are targeted to eventually peak at more than $4 billion as the company aims to win approval to sell it in Europe and Japan.
That type of growth is attractive to big drug companies—with many sitting on big piles of cash—that rely on acquisitions as a key strategy to expand sales. Many big drugmakers are looking for new sources of revenue to offset losses when some of their main products lose patent protection.
Analysts expect Amgen will lose sales when patents begin expiring on its big-selling osteoporosis drugs Prolia and Xgeva later this decade. The pair of drugs accounted for nearly $5.3 billion of Amgen’s $26 billion in revenue last year.
In October, Amgen completed a $3.7 billion deal for ChemoCentryx and its drug to treat a rare immune-system disease.
Adding Horizon would provide more rare immune-disease drugs to Amgen’s lineup, which also includes the biotech’s Enbrel and Otezla immune-disease therapies. Amgen could help sell more of Horizon’s products overseas, according to analysts.
Acquiring Horizon could add about $4 billion in new revenue for Amgen by 2024, according to Jefferies & Co.
Other big life-sciences companies have been inking deals in recent months.
Johnson & Johnson recently struck a $16.6 billion deal to acquire heart device maker Abiomed Inc. to bolster sales of its medical-gear division, which had been lagging behind those of its pharmaceutical unit.
Merck
& Co. followed with a deal of its own, agreeing to buy blood-cancer biotech
Imago BioSciences Inc.
for $1.35 billion, ahead of the patent expiration of its cancer immunotherapy Keytruda.
Pfizer Inc.,
meanwhile, agreed in August to buy Global Blood Therapeutics Inc. for $5.4 billion, in a deal that would give the big drugmaker a foothold in the treatment of sickle-cell disease.
A deal for Horizon would likely rank as the largest healthcare acquisition globally in 2022, ahead of the Johnson & Johnson-Abiomed tie-up. The selloff in stocks this year amid rising interest rates, while putting a damper on deal activity, has also made some companies more attractive targets. At the stock’s peak about a year ago, Horizon was valued at roughly $27 billion.
The shares, which fell sharply earlier this year, have surged since the possibility of a takeover surfaced, and the company now has a market value of about $22 billion.
Horizon’s other drugs include Krystexxa for treating gout, a form of inflammatory arthritis, and Ravicti for a rare, potentially life-threatening genetic disease known as urea cycle disorder that raises ammonia levels in the blood.
Drugs treating rare diseases have emerged as a large source of pharmaceutical sales because they can command high prices that health insurers have been willing to pay.
Write to Ben Dummett at ben.dummett@wsj.com, Dana Cimilluca at dana.cimilluca@wsj.com and Laura Cooper at laura.cooper@wsj.com
had been working for close to a year to calm regulators’ concerns about its acquisition of videogame developer
Activision Blizzard Inc.,
ATVI 0.54%
but the Federal Trade Commission’s suit to block the deal raised doubts about the company’s pledge not to shut out rivals.
The FTC this week took one of its biggest swings ever against a big technology company and sued to stop the planned $75 billion acquisition, setting the stage for a court challenge over a deal the antitrust agency said would harm competition.
The commission’s complaint said the deal is illegal because it would give Microsoft the ability to control how consumers beyond users of its own Xbox consoles and subscription services access Activision’s games. Microsoft has repeatedly said it wouldn’t engage in such actions. The FTC’s complaint accused Microsoft of reneging on a similar pledge to a European regulator in the past, a criticism the company disputes.
Earlier this week, as the possibility of a lawsuit grew, Microsoft touted the deal’s benefits to gamers through an op-ed article in The Wall Street Journal and announced an agreement to give a competitor access to one of Activision’s most popular games. The FTC filed its lawsuit on Thursday.
“The Proposed Acquisition, if consummated, may lessen competition substantially or tend to create a monopoly,” the FTC said in its complaint against Microsoft.
Executives at the Redmond, Wash., company have said it would take a long time to get all the approvals needed from regulators around the world, and it had given itself close to 18 months for the process. The deal could now miss Microsoft’s mid-2023 deadline, and some analysts said Microsoft might want to drop the acquisition.
Microsoft should “take the hint and give up the deal that, if completed, might end up a Pyrrhic victory of executive distraction and expensive regulatory concessions,” John Freeman, vice president at investment-research firm CFRA Research, wrote in a note to investors.
Competitors had expressed concerns the deal would block them from access to Activision games such as the popular ‘Call of Duty’ franchise.
Photo:
Allison Dinner/Associated Press
At stake is Microsoft’s big ambitions for its videogaming business, which had revenue of $16 billion in the company’s last fiscal year. That total represents less than 10% of Microsoft’s overall revenue. The business is a crucial part of Microsoft’s plans to diversify to attract more noncorporate customers.
The FTC’s move came after the company had avoided the brunt of the anti-tech backlash of recent years.
The suit represents a “somewhat meaningful setback” for Microsoft because of the company’s longtime lobbying efforts, said Stifel Nicolaus analyst Brad Reback. “They’ve worked very hard to stay on the right side of government agencies.”
Microsoft’s representative in Washington—its vice chairman and president,
Brad Smith
—has been building relationships in the capital for decades. He had helped cultivate an image of the software giant as one of the friendly technology leaders, an enviable position in a regulatory environment that has been increasingly hostile toward tech titans.
One of the longest-serving leaders inside Microsoft, Mr. Smith joined the company in 1993 and was a legal adviser through its bitter antitrust disputes with regulators worldwide in the 1990s.
“We have been committed since Day One to addressing competition concerns, including by offering earlier this week proposed concessions to the FTC,” Mr. Smith said after the lawsuit was filed. “While we believed in giving peace a chance, we have complete confidence in our case and welcome the opportunity to present our case in court.”
In its complaint, the FTC accused Microsoft of previously suppressing competition from rivals through its 2021 acquisition of ZeniMax Media Inc., parent of “Doom” developer Bethesda Softworks, despite giving assurances to European antitrust authorities that it would do otherwise. Microsoft said the FTC’s ZeniMax allegation is misinformed.
Brad Smith, Microsoft’s vice chairman and president, has been building relationships in Washington for decades.
Photo:
Zed Jameson/Bloomberg News
Microsoft officials have expressed confidence in closing the Activision deal, which it has valued at $68.7 billion after adjusting for Activision’s net cash. Lawmakers and industry representatives have said it would be hard for any of the biggest U.S. tech companies—including
Apple Inc.,
Amazon.com Inc.,
Google parent
Alphabet Inc.
or
Facebook
owner Meta Platforms Inc.—to win approval for a large acquisition in the current political environment.
In recent years, as government scrutiny and competition between the biggest tech companies have been increasing, Microsoft has tried to appease regulators.
For example, in May, Microsoft announced a set of principles it would abide by when dealing with cloud-service providers in Europe, hoping to assuage concerns its cloud business was hurting European cloud companies. The principles included pledges to work with European cloud providers and support the success of software vendors running on Microsoft’s cloud.
Amid concern the deal could hurt attempts to unionize at Activision or elsewhere in the gaming industry, Microsoft in June said it was open to working with any labor unions that want to organize.
As PlayStation maker
Sony Group Corp.
and others said they were concerned the acquisition could leave competitors locked out of Activision’s popular “Call of Duty” franchise, Microsoft this week said it would make it available for the first time on Nintendo Co.’s Switch gaming consoles for at least 10 years.
Microsoft this week also made its case to the public. “Blocking our acquisition would make the gaming industry less competitive and gamers worse off,” Mr. Smith, wrote in the Monday op-ed article in the Journal. “Think about how much better it is to stream a movie from your couch than drive to Blockbuster. We want to bring the same sort of innovation to the videogame industry.”
It is too soon to tell whether the FTC can succeed in blocking the acquisition. The agency likely will have to go before a federal judge, a process that could take months to unfold, said Eric Talley, a professor at Columbia Law School.
The case could be difficult for the regulator to win because courts have traditionally not seen deals among companies that specialize in different phases of the same industry’s production process—so-called vertical mergers—as competitive dangers, he said.
“It may require the commission to convince a judge to change the law somewhat,” he said. “That makes it a difficult case for the FTC to win, though they presumably knew this going in.”
Write to Sarah E. Needleman at Sarah.Needleman@wsj.com
