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CEO Daily: Wednesday, 6th July

My never-quite-retired Fortune colleague Carol Loomis lit a fire yesterday by suggesting Elon Musk erred in not publicly revealing news of the fatal crash of a Tesla using autopilot before selling $2 billion worth of Tesla stock in a public offering. I posted the story on Twitter with a comment: “Seems pretty material to me.”

 

Musk exploded. “Yes it was material to you,” he countered on Twitter. “BS article increased your advertising revenue. Just wasn’t material to TSLA, as shown by the market.” In a separate tweet, Musk went on: “If you care about auto deaths as material to stock prices, why no articles about 1M+/year deaths from auto companies?”

 

Before unpacking this, let me say I’m a Musk fan. I think it’s great to have an entrepreneur in this country – and an immigrant, no less – who literally aims for the stars. I even like the fact that he wants to merge Tesla and Solar City to create the first 21st century integrated energy company (despite the dodgy governance implications of doing the deal with his cousin.)

 

But there is a sense that Musk, like many in Silicon Valley, believes he can play by different rules. Carol Loomis has been asking tough questions of business leaders for, well, 60 years. (Watch Warren Buffett serenade her here.) Should Musk be immune from her queries?

 

Is the first death of a driver using Tesla’s self-driving technology any different than the million deaths a year in other cars? Yes, it is. Is it a reason to sell Tesla’s shares? Some shareholders clearly thought so, which is why the share price initially dropped when the news was announced. Others disagreed, and the price later recovered; but the news clearly moved the market. Is it fair game for one of the nation’s most respected financial journalists to suggest Musk should have revealed the news before the stock sale? Of course it is.

 

Take a deep breath and count to ten before you tweet, Elon. You haven’t escaped gravity yet.

 

News below.

Alan Murray
@alansmurray
alan.murray@fortune.com

Top News

Market Stress Turns Up Again

The pressure on financial markets in the wake of the U.K.’s vote to leave the EU keeps mounting. Flows into ‘safe haven’ assets pushed the yield on the 10-year Treasury to a new record low of 1.34% overnight, while the price of gold hits highest in over two years. The dollar also hit a new six-year high against the Chinese yuan. There are real signs of fear among European financials after three British open-ended real estate funds with over $13 billion in assets suspended redemptions over the last two days. Some Eurozone banks have significant exposure to U.K. commercial real estate—a sector that was long considered to be both safe and a relatively high yielder. Sterling’s 10% drop against the euro since the vote looks likely to cause some distress there. In addition to the well-documented problems of Italian banks, Deutsche Bank and Credit Suisse have both hit record lows. In the political arena, Home Secretary Theresa May emerged the clear favorite of Tory Party lawmakers to take over as Prime Minister, while her more enthusiastically pro-Brexit rivals divided support among themselves. Fortune

Clinton ‘Careless’, not Criminal

FBI Director James Comey said the agency won’t press charges against Hillary Clinton over her use of a personal e-mail server while she was Secretary of State, but didn’t hold back from calling her “extremely careless”. In doing so, he broke with the tradition of only commenting on open investigations in court, apparently without consulting his superiors in the Justice Department. Republican presidential candidate Donald Trump seized on Comey’s recommendation against pressing charges as evidence of a “rigged system”, while Democratic officials seethed at the fact that Comey had expressed any opinion at all. Clinton has expanded her lead over Trump in the polls to 13 points, according to Reuters.   Fortune,   Reuters

Comcast’s Rearguard Action

There have been times when a Trump-Clinton reconciliation looked only slightly less likely than an alliance between Netflix and Comcast, but the latter is exactly what happened yesterday. The deal announced by the two companies will make Netflix’s streaming service available through Comcast’s X1 set-top boxes from later this year. At first sight, it looks like Comcast is bowing before the wind, hoping that carrying Netflix will persuade customers to put off the day when they ‘cut the cord’, and hoping that its display of openness will incline the FCC to look more kindly on a cable sector that it plainly suspects of cartelling tendencies. Even so, the market thinks it will take more than that to hold the streaming tide back: Comcast’s shares ended down 0.4% yesterday.  Fortune

VW Partners with LG for Connected Car Project

Volkswagen has turned to Korea’s LG Group to help it develop a connected car platform, as it tries to carve out a future after the diesel emissions disaster. The two companies will work jointly to develop over “the next few years” technologies allowing drivers to control and monitor devices in their homes such as lights and security systems, as well as in-vehicle entertainment technologies and an alerting system for drivers providing “recommendations” based on real-time situations. It’s an intriguing expansion of LG’s work with automakers after last year’s deal with GM to supply battery cells and electric motors for the 2017 Chevrolet Bolt. In other news, VW was raided along with its rival Daimler and component maker Bosch Tuesday by German antitrust officials who suspect them of conspiring to depress steel prices. Reuters

 

Around the Water Cooler

Medivation Yields to Sanofi

Medivation, the San Francisco cancer drug specialist being pursued by Sanofi, finally agreed to open its books to the French company, as the French company raised its offer from $52.50 a share to $58, valuing the company at $10 billion. The move comes after Sanofi had started to appeal directly to Medivation’s shareholders over the heads of a board that was trying to squeeze counter-offers out of rivals Pfizer and Celgene. Medivation’s prime asset is its Xtandi drug for prostate cancer, along with Talazoparib and Pidilizumab, two other drugs still in development for treating breast and blood cancers, respectively. Fortune

Awash in Oil, For Now

The U.S. currently holds more recoverable oil reserves than Saudi Arabia or Russia, with unconventional shale oil accounting for half of that, according to a new estimate by consultants Rystad Energy. Texas alone holds more than 60 billion barrels of shale, nearly a quarter of a grand total of 264 billion barrels. Rystad estimates total global oil reserves at 2.092 trillion barrels, or around 70 years at current consumption levels. The report makes it clear that technology has completely altered the picture regarding global energy supply, but Rystad stresses that with the global car fleet set to double from 1 billion to 2 billion over the next 30 years, “oil alone cannot satisfy the growing need for individual transport.” Rystad

Mastercard Faces Big Class Action Suit

Mastercard has the dubious honor of becoming the first big company to test the strength of the U.K.’s new laws allowing class action lawsuits, according to the Financial Times. The U.K. changed its law last year to allow plaintiffs to bring collective actions after suffering losses in competition cases. The case in question is Mastercard’s battle with the European Commission over charges on the use of its debit and credit cards (‘interchange fees’). These were in place for over 16 years, and lawyers representing the plaintiffs want up to 19 billion pounds ($25 billion) in damages. The suit claims that as the EU has already declared the charges illegal, all it has to do is prove that consumers suffered loss. Mastercard will dispute the suit.  FT, metered access

Return of the $2.3 Billion Twinkie Maker

The company behind Twinkies and Ding Dongs is planning to go public this fall with a valuation of around $2.3 billion, a move that will complete a remarkable turnaround. Metropoulos & Co. and Apollo Global Management, the two investment firms that bought Hostess Brands out of liquidation in 2012, are set to make over 10 times their initial outlay of $185 million, according to The Wall Street Journal. They’ve already taken over $1 billion in dividends over the last two years. The new Hostess employs only 1,200 people compared to the 19,000 it had when it went into bankruptcy, but now has a gross margin of 43%. There’ll be no IPO, though. Instead, Hostess will be part-sold to a special-purpose acquisition recently floated by Gores Holdings Inc. Once that’s done, the vehicle will be renamed Hostess Brands Inc.  WSJ, subscription required