Good morning. Join us tomorrow for the DealBook Summit. Andrew will host a series of conversations with newsmakers including Ken Griffin, the founder and C.E.O. of Citadel; Sundar Pichai, the C.E.O. of Google; and Alex Cooper, the host of the “Call Her Daddy” podcast. Apply to attend in person here. In today’s newsletter: the options for Elon Musk after another defeat in Delaware; whether Intel will pursue a big deal after its C.E.O.’s exit; and a scoop on Paul, Weiss leaving mainland China. (Was this newsletter forwarded to you? Sign up here.)
What now for Musk and Tesla?Elon Musk has been on a winning streak since the election. But a Delaware judge just dealt the Tesla C.E.O. a blow, refusing to reinstate his huge pay package despite investors approving the compensation by a wide margin in June. Tesla said it would appeal the verdict. But it’s unclear if or how Musk will escalate the fight, especially given that he now has powerful allies in Washington as President-elect Donald Trump prepares to take office. A recap: In 2018, Tesla set out several performance milestones that Musk needed to hit to qualify for a huge grant of stock options. He did, becoming eligible for compensation that is now valued at $100 billion. But Chancellor Kathaleen McCormick of the Delaware Court of Chancery voided the plan, agreeing with a shareholder who argued that Tesla’s board was too beholden to the company’s chief when it devised the package. Winning the June vote didn’t guarantee a payout for Musk. Yes, the compensation plan was backed by holders of 72 percent of Tesla shares not owned by himself or his brother, Kimbal Musk. The wide support suggested that the automaker’s shareholders believed that the company’s fortunes were tied to keeping its C.E.O. happy. (Tesla’s shares were down about 1 percent in extended hours trading.) But in yesterday’s ruling, McCormick said that the new shareholder vote didn’t resolve the issues she had with the plan. How would an appeal play out? Tesla and Musk signaled they would ask the Delaware Supreme Court to review the case. Meanwhile, Tesla’s board could draft a new pay deal under the jurisdiction of Texas, where the company has its headquarters, though Tesla would take a big accounting hit. Ann Lipton, a business law professor at Tulane University Law School, told DealBook in an email that the reasoning in McCormick’s ruling yesterday was strong and unlikely to be reversed, but that her original decision would be under the microscope. Could Musk flex his new political muscle to punish Delaware? Since McCormick’s ruling in January, the Tesla chief has moved the automaker’s corporate home to Texas and campaigned to have other companies reincorporate elsewhere. “Absolute corruption,” he wrote on X of yesterday’s decision. Musk may now have the ear of Trump and congressional Republicans, but Lipton said that any efforts by Washington to punish Delaware would probably require new legislation. Musk’s threats were potentially counterproductive, Lipton added: The state’s Supreme Court “can’t rule in his favor without looking cowed,” she said. Worth noting:
U.S. Steel shares tumble after Donald Trump vowed to block Nippon Steel’s $15 billion takeover bid. The president-elect reaffirmed yesterday that he would bar a foreign company from buying the American steel maker, his first comments on the deal since the election. Trump, President Biden and Vice President Kamala Harris have all indicated opposition to the deal, but some analysts believed a sale was possible once the 2024 campaign ended. China bans sales of some minerals to the United States. Beijing said a number of materials that are used to make advanced semiconductors and could be used in military applications could no longer be exported to the country. The curbs were announced a day after Washington announced broader restrictions on sales of advanced chips to China. BlackRock agrees to acquire a big private credit lender for $12 billion. The money-management titan said today it would buy HPS Investment Partners in an all-stock deal. The transaction is the latest major takeover by BlackRock this year, as it seeks to expand its offerings in alternative assets. Intel at a crossroadsThe sudden departure of Pat Gelsinger as Intel’s C.E.O. thrusts the onetime titan of chip making into even more uncertainty. A big question is whether a change in leadership opens up potential deal making. That said, even asset sales may not be enough by themselves to fix what’s ailing the company. The backstory: Over the weekend, Intel’s board told Gelsinger — who became C.E.O. in 2021 after his predecessor was ousted amid investor dissatisfaction — that his efforts to catch up to chip-making rivals including Taiwan Semiconductor Manufacturing Company and Samsung weren’t moving fast enough. Bloomberg reports that Gelsinger was given the option to retire or be forced out. The board also worried about Intel’s stock price, which has fallen over 50 percent this year, and uncertainty over whether the company was making sufficient progress in both semiconductor manufacturing and designing advanced chips like those produced by Nvidia. Some Intel watchers see deal making as a path forward. Gelsinger was open to some M.&A., including selling a stake in the Altera division that makes reprogrammable chips. But some analysts and former board members urged bigger transactions, like spinning out the chip-manufacturing foundry division that has been a key business focus (and that helped Intel win billions in government grants via the CHIPS and Science Act). Others have raised the prospect of Intel selling assets like its core chip design business to competitors such as Qualcomm and Broadcom, which had signaled interest before, or its 88 percent stake in Mobileye, which makes chips for autonomous vehicles. It could help that Frank Yeary, Intel’s interim executive chair, is a longtime deal maker. But M.&A. could be tricky. Doing a deal with Qualcomm or Broadcom — which reportedly aren’t as keen on a transaction — would require approval by antitrust regulators in the United States and elsewhere. That’s not a given, though Intel could argue that such a move would strengthen an American tech giant against international competition. And the Biden administration’s deal to invest billions in Intel includes restrictions that could affect the chipmaker’s ability to sell stakes in the foundry unit if the company doesn’t own at least 50.1 percent of the business. Intel may just have to trudge along for a while. Analysts at Bernstein wrote to investors that “the situation here seems likely to keep getting worse before it gets better, and the ultimate fate of the company seems even more uncertain.” “I feel like an M.M.A. fighter who keeps getting inflation in a choke hold, waiting for it to tap out, yet it keeps slipping out of my grasp at the last minute.”— Christopher Waller, a Fed governor, using a mixed martial arts metaphor yesterday to flag his concerns that progress to bring down inflation has stalled. Waller added that he was still open to voting for an interest-rate cut at the central bank’s meeting this month. A reminder: Jerome Powell, the Fed chair, will talk to Andrew at tomorrow’s DealBook Summit. Exclusive: Paul, Weiss to close its Beijing officePaul, Weiss, Rifkind, Wharton & Garrison, which calls itself one of the first foreign law firms to establish an office in mainland China, is closing its Beijing office, two people with knowledge of the decision told DealBook’s Lauren Hirsch. The closure of the office, which has one partner in Beijing and several associates, at the end of the year is the latest departure of a big U.S. firm from the country. It has become difficult for many U.S. firms to do business in China. Paul, Weiss joins a number of big law firms that have closed offices there, including WilmerHale, Weil, Gotshal & Manges and Skadden, Arps, Slate, Meagher & Flom. The retrenchment comes as China is pushing to expand its domestic law industry: About 30 Chinese firms announced last year that they would set up 40 new offices on the mainland, according to Law.com International. China has grown more suspicious of U.S. operations in the country, having broadened the scope of an anti-espionage law last year. Concerns for the safety of American businesses grew when several consulting firms — including the Mintz Group, Bain & Company and Capvision Partners — were the targets of raids or official security visits by the national authorities. And for many advisory firms still in China, a dwindling volume of deals made it hard to justify the increased safety risks and rising cybersecurity costs. Geopolitical tensions are unlikely to abate any time soon. The Biden administration yesterday announced broader restrictions on advanced technology that can be sent to China, a move that Beijing officials condemned. And President-elect Donald Trump has promised a hard-line approach to China and threatened tariffs as high as 100 percent on the country. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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