Mr. Musk Goes to Washington

D.C. diplomacy, Musk style

Elon Musk showed up in Washington yesterday to meet with House Speaker Kevin McCarthy, setting off speculation about what the billionaire C.E.O. of Twitter, Tesla and SpaceX was up to.

Happy birthday, Mr. Speaker. Mr. McCarthy, a California Republican, was tight-lipped when he spoke to reporters after their conversation, saying only that they were old friends and that Mr. Musk had come to offer his best wishes on Mr. McCarthy’s 58th birthday.

But Mr. Musk indicated that the visit was all about business, and that it included a chat with the top House Democrat, Hakeem Jeffries of New York. “Just met with @SpeakerMcCarthy & @RepJeffries to discuss ensuring that this platform is fair to both parties,” Mr. Musk tweeted (though he reportedly didn’t have a scheduled meeting with the Democrat and met him in passing in Mr. McCarthy’s office).

Mr. Musk and Mr. McCarthy go way back. The Twitter boss supported the Republican in his drawn-out bid to become speaker this month and spoke at a G.O.P. retreat that Mr. McCarthy hosted in Wyoming last summer. Mr. McCarthy has stood up for Mr. Musk, too, telling the Biden administration to stop picking on him after he bought Twitter.

One of Mr. McCarthy’s first moves as speaker was to form a new panel on the supposed “weaponization” of the government to investigate President Biden’s efforts to pressure social media platforms. The decision was partly inspired by the so-called Twitter Files, internal documents Mr. Musk released to a few independent journalists, including some about the company’s handling of reporting on Hunter Biden ahead of the 2020 presidential election, when Jack Dorsey was running the company.

The House is investigating Twitter. The Oversight Committee is planning a hearing on the Hunter Biden issue. Conservatives contend that the Twitter Files are an example of a wider campaign by the left to suppress unfavorable information on social media and smother voices on the right. Mr. Musk, a self-proclaimed free-speech absolutist, has vowed to rectify this now that he owns the company.

Mr. Musk isn’t the only ally the speaker has spoken up for. Mr. McCarthy tried to use his position to push the company to reinstate the personal account of Representative Marjorie Taylor Greene of Georgia after she was kicked off the platform last year for violating its coronavirus misinformation policy. The revelation prompted the blog Techdirt to ask: Where are the Twitter Files for Mr. McCarthy?

Mr. Musk’s mission to build out a fair platform comes as the company is still facing blowback from his leadership. More than 500 advertisers have reportedly paused spending since he took over, with ad revenue down about 40 percent on concerns about content moderation.

HERE’S WHAT’S HAPPENING

Elliott reportedly prepares for a board fight at Salesforce. The hedge fund is interviewing candidates to nominate as directors for the business software giant, according to The Wall Street Journal. Salesforce is said to be weighing its own board shake-up — including the potential addition of Mason Morfit, the C.E.O. of the activist fund ValueAct, Bloomberg reports.

Bed Bath & Beyond says it’s in default. The troubled home goods retailer said it had defaulted on some debt payments, and warned it did “not have sufficient resources” to pay its obligations. The Times reports that the company may file for bankruptcy within weeks.

The Adani Group continues to buckle after a short seller takes aim. Shares in companies controlled by the Indian billionaire Gautam Adani have fallen as much as 20 percent since Hindenburg Research accused the conglomerate of fraud. The veteran short seller Bill Ackman tweeted that he found Hindenburg’s report “highly credible.”

Intel shares drop after a disappointing quarter. The chip giant’s stock is down 8 percent in premarket trading after it reported falling sales and a bigger-than-expected loss. Don’t expect good news anytime soon: Intel predicted another loss in the current quarter and declined to provide a full-year forecast.

Stripe hires banks to help it weigh going public. The payment processing company tapped Goldman Sachs and JPMorgan Chase to consider options for a public offering over the next 12 months. It’s a tall ask with the I.P.O. market in the doldrums; bankers tell DealBook they don’t expect it to recover any time soon.

Why markets will zero in on today’s inflation data

Investors have been in a buying mood so far, pushing the S&P 500 and Nasdaq Composite to a new high for 2023 yesterday. A big test of that conviction will come today at 8:30 a.m. Eastern when the Commerce Department releases new data on the personal consumption expenditures price index, the Fed’s preferred inflation gauge.

Economists expect more good news. They are forecasting that the P.C.E. rose 4.4 percent on an annual basis last month, which is still too high for the Fed’s liking, but down sharply from the 6.3 percent reading in August.

If so, that would add more fuel to investor speculation that the Fed will begin to ease up on, or even end, its policy of interest rate increases by midyear. Markets rose after yesterday’s gross domestic product data showed that the U.S. economy grew more than expected in the fourth quarter.

The tech-heavy Nasdaq has now gained 10.8 percent this year. Tech stocks (and, particularly, high-growth ones) have historically performed better when inflation moderates and bond yields fall. On cue, the yield on 10-year Treasury notes has fallen by 31 basis points this year as investors pour money into long-dated sovereign bonds.

Even still, recession fears persist. Market watchers are closely tracking bond yields for signs of an inverted yield curve — this time, involving interest rates on 10-year bonds falling below 2-year notes.

“An inverted yield curve means the government can borrow for 10 years at a cheaper interest rate than it can for two years or even three months, which typically only happens ahead of or during a recession,” Bill Adams, chief economist for Comerica Bank, warned in a note to clients yesterday.

Blackstone’s up-and-down quarter

Blackstone’s fourth-quarter earnings report yesterday presented a mixed picture of the investment giant’s performance — including more news about investment funds that have been in Wall Street’s focus for weeks.

Investors still want to pull money from Blackstone’s real estate funds. Executives said they’re working through a backlog of requests to withdraw money from the Blackstone Real Estate Income Trust, or Breit,a huge nontraded fund meant for wealthy individuals, after an increase in such requests last year. But the firm also disclosed that it faces over $5 billion in requests to withdraw money from BPP, a fund aimed at institutional investors.

Blackstone is still limiting redemption requests, though the firm pointed to a $4 billion investment in Breit by the investment manager for the University of California — and an additional $500 million the system pledged on Wednesday. It also reported that Breit had posted an 8.4 percent return for 2022. (Jon Gray, Blackstone’s president, added that concern about redemptions had been overblown: “The media has created a different narrative, but the customers are fundamentally happy,” he told analysts.)

The firm also fell short of an ambitious fund-raising goal. Assets under management rose to $974.7 billion last year, up 11 percent year-on-year. But that’s still shy of the $1 trillion that Blackstone had expected to reach in 2022.

Still, investors appeared undeterred: Blackstone’s shares rose more than 5 percent yesterday.

“If you’re being sued, you don’t have to welcome them into your home.”

— James Dolan, Madison Square Garden’s C.E.O., on the company’s much-criticized use of facial-recognition technology to keep opposing lawyers out of its venue. The comments came in a rambling 17-minute interview in which Mr. Dolan also threatened to impose a beer ban at a New York Rangers game.

The McDonald’s ruling everyone is talking about

A landmark Delaware chancery court ruling this week could put a whole new rank of company officials in the legal firing line for breaches of fiduciary duties — not just the board.

“Duty of oversight” extends beyond directors. Vice Chancellor J. Travis Laster ruled that David Fairhurst, former global chief people officer at McDonald’s, could be sued by shareholders who accused him of allowing a “culture of sexual misconduct and harassment to develop” at the company. (Mr. Fairhurst took on the role shortly after Steve Easterbrook became C.E.O., and both men were fired following allegations of inappropriate behavior.) When it comes to breaches of fiduciary duties — like so-called “duty of oversight” — Delaware courts have typically ruled that the buck stops with the board. Fairhurst had sought that very legal protection, but Mr. Laster, in a first-of-its-kind ruling for the court, rejected the argument.

This has huge implications for officer liability. Giving company executives the “duty of oversight,” given that they manage much of a company’s daily operations, means they can be sued for big money — millions, or even billions. (Many of these lawsuits would be covered by directors and insurance liability, said Kevin LaCroix, a lawyer who specializes in such matters.)

Several lawyers told DealBook that, in this case, the level of oversight responsibility is defined so broadly that it opens the floodgates to lawsuits. What happens, for example, to the chief information security officer whose company is hacked? Expect a rash of reports from corporate law firms criticizing the decision.

Others argued that perhaps courts have for too long given executives the benefit of the doubt, and that the threat of eye-popping shareholder lawsuits is far more powerful in ensuring rightful duty than, say, the possibility of a $10,000 settlement in an employment lawsuit (a more typical remedy for something like allowing a corrosive culture).

What do you think? Should liability extend beyond the board? Email us at [email protected].

THE SPEED READ

Deals

• The F.T.C. reportedly sued to block Microsoft’s $69 billion takeover of Activision Blizzard in December in part to dissuade European counterparts from agreeing to accept the deal with some conditions. (Bloomberg)

• The venture firm New Enterprise Associates raised $6.2 billion for its two latest investment funds. (Axios)

• How Shearman & Sterling went from being one of Wall Street’s top law firms to seeking a merger partner to compete against fast-growing competitors. (Law.com)

Policy

• The F.D.A. asked Congress for more power to oversee CBD products. (NYT)

• Mayor Eric Adams of New York City said Uber and Lyft would be required to operate a zero-emissions fleet of ride-hailing vehicles in the city by 2030. (The Verge)

Best of the rest

• Shares in BuzzFeed more than doubled after the publisher said it would use technology from ChatGPT’s creator to help create content like quizzes. (WSJ)

• In an age of blockbusters and shrinking streaming budgets, is the Sundance Film Festival still relevant? (NYT)

• “If we’re good, we’re good”: Here’s the teaser for the next season of “Succession.” (HBO)

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