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Twitter shareholders sue Elon Musk, alleging his antics have deflated stock price – CBC News

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Twitter shareholders have filed a lawsuit accusing Elon Musk of engaging in “unlawful conduct” aimed at sowing doubt about his bid to buy the social media company.

The lawsuit filed late Wednesday in the U.S. District Court for the Northern District of California claims the billionaire Tesla CEO has sought to drive down Twitter’s stock price because he wants to walk away from the deal or negotiate a substantially lower purchase price.

San Francisco-based Twitter is also named as a defendant in the lawsuit, which seeks class action status as well as compensation for damages.

A representative for Musk did not immediately respond to a message for comment on Thursday. Twitter declined to comment.

‘Take it or leave it’ offer

Musk last month offered to buy Twitter for $44 billion US, but later said the deal can’t go forward until the company provides information about how many accounts on the platform are spam or bots.

The lawsuit notes, however, that Musk waived due diligence for his “take it or leave it” offer to buy Twitter. That means he waived his right to look at the company’s non-public finances.

WATCH | Twitter deal ‘temporarily on hold,’ Musk says:

Elon Musk says $44B Twitter deal ‘temporarily on hold’

15 days ago

Duration 4:09

Elon Musk says his planned $44 billion US purchase of Twitter is ‘temporarily on hold’ pending details on spam and fake accounts on the social media platform, but he is ‘still committed to acquisition.’

In addition, the problem of bots and fake accounts on Twitter is nothing new. The company paid $809.5 million last year to settle claims it was overstating its growth rate and monthly user figures. Twitter has also disclosed its bot estimates to the Securities and Exchange Commission for years, while also cautioning that its estimate might be too low.

To fund some of the acquisition, Musk has been selling Tesla stock and shares in the electric carmaker have lost nearly a third of their value since the deal was announced on April 25.

In response to the plunging value of Tesla’s shares, the Twitter shareholders’ lawsuit claims Musk has been denigrating Twitter, violating both the non-disparagement and non-disclosure clauses of his contract with the company.

“In doing so, Musk hoped to drive down Twitter’s stock price and then use that as a pretext to attempt to re-negotiate the buyout,” according to the lawsuit.

Twitter’s shares closed Thursday at $39.54, 27 per cent below Musk’s $54.20 offer price.

High profile saga

Before announcing his bid to buy Twitter, Musk disclosed in early April that he had bought a nine per cent stake in the company. But the lawsuit says Musk did not disclose the stake within the timeframe required by the Securities and Exchange Commission.

And the lawsuit says his eventual disclosure of the stake to the SEC was “false and misleading” because he used a form meant for “passive investors” — which Musk at the time was not, because he had been offered a position on Twitter’s board and was interested in buying the company.

Musk benefited by more than $156 million US from his failure to disclose his increased stake on time, since Twitter’s stock price could have been higher had investors known Musk was increasing his holdings, the lawsuit claims.

“By delaying his disclosure of his stake in Twitter, Musk engaged in market manipulation and bought Twitter stock at an artificially low price,” the lawsuit says.

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Oil drops as hawkish Powell testimony amplifies recession fears – BNN

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Oil dropped as Federal Reserve Chair Jerome Powell’s testimony before a House committee heightened concerns of an impending recession.  

West Texas Intermediate dropped to near US$104 a barrel, with prices having shed more than 10 per cent in the last week. Powell said his commitment to fight inflation is “unconditional.” Warnings about a potential recession and economic slowdown have overshadowed oil market fundamentals that indicate a growing supply crunch. Crude’s recent swings have been too volatile for many traders. Open interest across the main futures contracts has fallen to the lowest since 2015 in recent days.  

“Future demand destruction from a possible looming recession is countering near-term real demand that remains very strong,” said Dennis Kissler, senior vice president of trading at BOK Financial. “As long as the fear of a recession remains, the near-term strong demand is keeping crude choppy.”

Updated statistics on the state of US inventories won’t be released this week. The Energy Information Administration’s stockpile report is delayed after a power disruption damaged some of the agency’s hardware.

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As a result, markets will have to rely on a US industry report to parse out weekly inventory data. The American Petroleum Institute reported crude holdings rose by 5.6 million barrels last week, while gasoline holdings also climbed, according to people familiar with the data.

Over the past two weeks, oil has been rapidly giving up gains in what’s been a volatile quarter as investors attempt to gauge the trajectory of the global economy and its impact on raw materials. There’s about a 50 per cent chance the world economy will succumb to a recession, according to Citigroup Inc. and Deutsche Bank AG.

Prices:

  • WTI August delivery fell US$1.92 to settle at US$104.27 in New York.
  • Brent for August settlement declined US$1.69 to settle at US$110.05 a barrel.

There’s still little consensus among major banks on the outlook for oil. Goldman Sachs Group Inc. said in a note Tuesday that demand is still running ahead of supply, while warning that the Fed “cannot print commodities.” Citi sees crude dropping through this year and beyond.

So far, there’s only been limited relief in refined product markets — where bigger surges have occurred. Diesel futures in Europe closed Wednesday at more than US$57 a barrel higher than crude, a record in data since 2011.

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Technology layoffs show high-flying sector not immune from slowdown – CBC News

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Canada’s technology sector has grown rapidly in recent years, as homegrown startups and foreign giants set about hiring hundreds of thousands of well-educated and talented workers. But that expansion has recently slowed to a crawl, as high inflation, interest rate hikes and a downturn for cryptocurrency have taken a lot of optimism out of the sector.

Chris Albinson, CEO of Waterloo-based incubator Communitech, says the pullback in the U.S. is more pronounced because there are more of what he calls “go for the moon” companies with dubious fundamentals suddenly finding themselves unable to adapt to the new reality.

Canadian tech companies are faring comparably better at the moment because generally speaking they are much better stewards of capital, he says, but that doesn’t mean there isn’t anxiety.

“There are some founders that were 18 years old when the last recession happened,” he told CBC News. “There’s going to be stress on the system, but I think they’re ultimately going to come out of that much stronger.”

Valuations for tech giants like Meta, Amazon, Apple and Netflix have cratered in recent weeks, and where once there was a fierce war for talent, many tech giants are implementing hiring freezes and even cutting staff.

U.S. streaming giant Netflix announced Thursday it’s cutting another 300 jobs, the second time in as many months it has announced layoffs of that size.

Crowdsourced website layoffs.fyi has documented more than 20,000 tech job cuts in the past two months alone, mostly in and around major U.S. technology hubs like Seattle and San Francisco.

While cutbacks in Canada are less dramatic, they are happening.

Canadian financial tech unicorn Wealthsimple laid off 13 per cent of its staff last week, citing “unprecedented” levels of volatility in explaining the cut of roughly 160 positions. “Many of our clients are living through a period of market uncertainty they’ve never experienced before,” CEO and founder Michael Katchen told staff in announcing the news.

Silver lining

Jacqueline Au was among those let go from the Toronto-based business. She suspected something might be up when she noticed the company started spending less on her department, marketing, earlier this year. “When that happens … it’s natural for the team to think, well, what’s gonna happen to my job, if we’re not spending any marketing money?”

It was her first time being laid off, and while she said it was unpleasant, she’s enjoying the time off to think about what her next career move may be. She enjoys the technology sector, she said, but she knows that more job cuts are coming so she’ll be choosy about who she signs on with next.

“I think that this is just the beginning, I think the industry is going to have to keep trimming the fat to stay afloat,” she told CBC News. “I think there’s going to be ups and downs, but winter is here to stay.”

Jacqueline Au was one of dozens of people who got laid off from fintech firm Wealthsimple earlier this year, and she thinks more layoffs are coming for the tech sector. (Jacqueline Au)

Vancouver-based Thinkific laid off about 20 per cent of its staff in April, and Sumeru Chatterjee was one of the 100 or so people let go. Originally from India, Chaterjee came to the U.S. to attend university and worked in various tech jobs for about a decade before making the leap to come to Canada in 2020.

“Last year, the general sentiment across the industry … was we need to grow, we need to rapidly expand our market lead to hire lots of people,” he told CBC News. “So the layoff was sort of a dramatic turn of events.”

He says the technology sector grew so quickly in the past decade largely by burning through venture capital cash to gain market share without having to worry about things like profits. “Normal business metrics like profitability and cash flow were … frowned upon almost, and I think a lot of people are reawakening to the fact that if you if you want to run a business, you need to have some fundamentals like a profitable business and customers that pay you.”

‘Surviving so you can thrive’

The mood from the stage of the Collision Conference in Toronto, where tens of thousands of technology lovers from more than 100 countries converged in person to discuss all things digital, was unabashedly positive this week. But on the sidelines, there were whispers of bursting bubbles.

Sumeru Chatterjee recently lost his job at a Vancouver-based technology company, and has since turned his attention to helping other technology workers network with each other. (Dillon Hodgin/CBC)

“Right now everyone who is innovating and/or investing in tech or in startups is trying to understand what exactly is happening in this moment,” said Deena Shakir, a partner at venture capital firm Lux Capital, based in Silicon Valley. “We’re the topic of conversation at every partner meeting, and every lunch and coffee.”

While she pushes back on the notion that the tech sector is back in a bubble, she adds one thing that’s clearly bursting are expectations of endless growth at the expense of profitability — which is a good thing, she says.

“We’ve been advising … our companies to think long term to make sure that they have enough capital reserves to weather this storm,” she said. “Surviving so you can thrive is an important mindset to think about.”

Survival is key in the cryptocurrency space, which was rocked when a $12 billion trading platform known as Celsius froze withdrawals earlier this month. That impacted major companies like Crypto.com and Coinbase. Though they ramped up during the pandemic, they’re now laying off thousands of workers in the U.S. and Canada, and rescinding job offers.

Deena Shakir is a partner at venture capital Lux, which invests in technology companies. (CBC)

Many crypto companies were scheduled to attend Collision in person, but Paddy Cosgrave, the conference’s founder and CEO, said many of them pulled out at the last minute. Celsius CEO Alex Mashinsky was one of those slated to attend, but didn’t.

“I can understand why [he] had to pull out,” Cosgrave said. “I think he’s got a major fight on his hands to sort this situation.”

Whatever dark cloud may be overhanging the crypto space, Cosgrave says it had no impact on overall attendance, which topped 35,000 — a zeal that makes perfect sense to him.

WATCH | Cryptocurrencies are in a freefall:

Bitcoin, other cryptocurrencies collapse as investors flee risky assets

11 days ago

Duration 1:55

Bitcoin and other cryptocurrencies are in freefall as investors flee risky assets amid rising interest rates. The world’s largest cryptocurrency trading platform, Binance, has also temporarily suspended cryptocurrency withdrawals.

“When things become uncertain, everybody goes searching for answers,” he said. “And certainly in the last few weeks, there’s been a lot of big questions about what exactly is going on in technology and in particular in crypto.”

While layoffs may be on the short term outlook, Cosgrave says the future for technology in Canada and abroad still looks bright.

“What happens when you lay off very smart software engineers? Many of them go and start new companies, and some of those companies are already here,” he said.

WATCH | Tech sector hit with layoffs, cutbacks:

Uncertainty hits big tech with downturns and layoffs

12 hours ago

Duration 2:03

After years of steady growth, global tech stocks and cryptocurrency prices are on a downturn, leading to layoffs and hiring freezes at notable companies.

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Is Canada heading into a recession? Here is what you need to know. – CP24 Toronto's Breaking News

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As gas prices and food costs continue to escalate and another interest rate hike is expected next month, many Canadians are wondering if a recession is coming and how to prepare for a possible economic downturn.

Sixty-eight per cent of Canadians believe the country is heading towards a recession, while 17 per cent believe it has already arrived, according to a new survey from Yahoo Canada/Maru Public Opinion released earlier this week.

However, 15 per cent of Canadians believe the concern about a recession happening now or later is exaggerated.

But if a recession were to occur, what does that mean for Canadians and how should they prepare for it?

 

WHAT IS A RECESSION?

A recession can simply be defined as a sustained decline in economic activity for at least six months. This could result from a decline in consumer spending, which in turn could cause sales to drop, businesses to cut costs and ultimately more layoffs.

Toronto shopping

“I think the simple rule of thumb is two straight quarters of economic contraction and production of goods and services,” Derek Burleton, deputy chief economist for TD Bank Group, told CP24.

“So we tend to refer to gross domestic product (GDP) as being that overall measure of activity. If we have two straight quarters of decline that passes the simple litmus test of recession.”

The country’s last recession was in 2020 during the height of the COVID-19 pandemic.

 

IS A RECESSION COMING?

With inflation at a nearly 40-year high and the Bank of Canada expected to raise its key interest rate next month, these factors could kick start another recession.

Statistics Canada said its consumer price index in May rose 7.7 per cent compared with a year ago, the fastest pace since January 1983.

“It’s not an oil price issue or food price issue, it’s widespread inflation across the economy, that tells us and that tells policymakers the economy has just been running too hot for too long. We have an inflation issue rooted in the psychology of Canadians and among businesses, and it’s going to have to be dealt with,” BMO Senior Economist Robert Kavcic told CP24.

Toronto gas

The Bank of Canada has said that Russia’s invasion of Ukraine, COVID-19 lockdowns in China and backlogged supply chains are fuelling “uncertainty” and higher prices for energy and food, prompting a need to increase interest rates to control inflation.

The central bank has hiked its key interest rate three times so far this year to bring it to 1.5 per cent.

But many economists, including Burleton and Kavcic, expect the central bank to raise its key rate once again by at least three quarters of a point next month to mirror the U.S. Federal Reserve’s recent interest rate hike.

Burleton said this hike could dampen consumer spending, which in turn could eventually ignite a recession.

“I mean as rates go up, the bigger the chance that economic activity will weaken next year but the Bank of Canada feels from a longer-term perspective if they can bring inflation down to their target that will serve Canadians the best over the medium to longer run. So unfortunately, it’s going to come at the cost of some output foregone over the next four to six quarters,” Burleton said.

BMO is not forecasting a recession but Kavcic said if “sticky price pressures” continue and the central bank has to continue raising rates then it will be a “big pill for the economy to swallow.”

“Our view on this is that we’re going to see economic growth really stall out through the latter stages of this year and the first half or so of next year.”

TD Bank is also not predicting a recession but said in its quarterly economic forecast that “there is a very thin margin for error if another shock hits economies.”

Burleton noted that Canadians are currently experiencing an unusual recovery after the recession in 2020 and that nothing “is a given at this stage.”

“The economy has shown me real resilience. We saw it with the April retail spending numbers. Our own high-frequency data internally…still shows resilience through May. So the economy is holding up in the first half. I guess the question is, to what extent it softens going forward.”

Burleton added that although risks are rising, he thinks a recession does not seem imminent.

 

HOW CAN CANADIANS PREPARE FOR A RECESSION?

In anticipation of a possible recession, 56 per cent of the respondents from Maru Public Opinion’s survey said they have set stricter priorities and reduced their spending in the past month.

Eighty-six per cent said they spent more on food this month compared to last month, while 82 per cent also said they spent more on gas.

grocery shopping

Burleton said it’s a smart move to put away additional savings in preparation of a potential recession.

“It’s probably not a bad thing to kind of start thinking about ways to protect yourself as a household in the event (of a recession). I think the good news is that based on aggregate data of the Canadian economy, a lot of households are holding on to additional deposits and savings…and we’re counting on some of that cushion to help defend against deeper outcomes in the economy going forward.”

Sixty-three per cent of survey respondents said food is the biggest expense that they have cut down on in the past month, followed by entertainment and clothing and footwear.

The Yahoo Canada/Maru Public Opinion survey was conducted between June 17 and 19 among a random selection of 1,515 Canadian adults who are Maru Voice Canada panelists. The survey has an estimated margin of error of +/- 2.5 per cent, 19 times out of 20.

With files from The Canadian Press

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