Good morning. Andrew here. Should taxpayers rescue Spirit Airlines? That is the question being discussed in the White House. We’ve bailed out industries before, including the bank and auto sectors after the 2008 financial crisis and airlines during the Covid pandemic. But remember that the government blocked Spirit’s proposed sale to JetBlue during the Biden administration. Now, we may pick up the tab for a rescue. Please tell me what you think. (Was this newsletter forwarded to you? Sign up here.)
The costs of Musk’s vision for TeslaTesla shareholders initially breathed a sigh of relief when Elon Musk’s electric carmaker reported better-than-expected earnings and positive free cash flow. But company executives later told Wall Street that Musk has bigger, expensive ambitions. It’s a reminder that, whether at Tesla or at SpaceX, investing in a Musk-owned company means contending with moonshots that may take years and billions to finance. Tesla’s $25 billion surprise: That’s how much the company expects to lay out in capital expenditures this year, to finance its work on artificial intelligence, humanoid robots and more. It’s expected to drag Tesla’s free cash flow into negative territory, Vaibhav Taneja, the company’s C.F.O., told analysts yesterday. “We believe this is the right strategy to position the company for the next era,” Taneja said. Remember that Tesla isn’t just about electric cars anymore. Indeed, while automotive revenue was up 16 percent year over year, vehicle sales were down sharply from a few years ago. Musk has increasingly emphasized Tesla’s work on A.I., especially when it comes to technologies like autonomous vehicles (to power a fleet of so-called robotaxis) and its Optimus humanoid robots. That requires serious investments, including for TeraFab, a multibillion-dollar manufacturing base to create cutting-edge chips to power self-driving cars, Optimus robots and more. It’s a joint project among Tesla, SpaceX and Intel. That focus is testing the core businesses of Tesla. Rivals in China and elsewhere are rolling out newer, and in some cases cheaper, vehicles. Even smaller Tesla businesses, such as batteries for solar power installations, are facing increased competition. It’s a similar story at SpaceX. Earlier this week, SpaceX said it had the right to buy Cursor, a popular A.I. coding start-up, for $60 billion to bolster its xAI division. (SpaceX might also team up with Mistral, a fast-growing European A.I. model lab, Business Insider reports.) Wall Street thinks Tesla will be fine for now. Given rising gas prices because of the war in the Middle East, “my guess is we are going to see more investors taking a look at Tesla once again,” Melissa Otto, the head of Visible Alpha research at S&P Global, told The Times. But Tesla shares are down more than 3 percent in premarket trading this morning amid A.I. industry worries about the costs of bets on the technology. Musk is betting that investors will continue to be patient — but Wall Street will want to see results soon.
Kalshi penalizes three political candidates for trading on their own races. The predictions market’s enforcement sanctions, including against a Republican running in Texas and a Democrat in Minnesota, come amid growing concern about insider trading on the betting platforms. Separately, French officials are investigating suspicious temperature readings taken at Charles de Gaulle International Airport, amid heavy betting on the weather on Polymarket. A crypto mogul sues the Trump family’s crypto start-up. Justin Sun, an early investor in World Liberty Financial’s digital coins, accused the firm of barring him from selling his tokens and pressuring him into buying more while threatening to report him to law enforcement. The lawsuit marks a major rift between Sun, who was investigated by the S.E.C. during the Biden administration, and the Trumps as World Liberty Financial’s coins slump in value. Lululemon hires a Nike executive to lead its turnaround efforts. Heidi O’Neill, who spent more than 25 years at Nike, will become C.E.O. in September as the athleisure company faces declining sales and repeated clashes with its billionaire founder, Chip Wilson. Shares in Lululemon were down nearly 5 percent in premarket trading today. The costs of backsliding peace prospectsThe stock rally is on pause this morning as war jitters consume global markets. Oil prices are spiking again as the Strait of Hormuz, a vital conduit for Middle Eastern energy exports, remains largely blockaded. And there’s little sign that stalled U.S.-Iran peace talks will soon resume after Iran said it had seized two cargo ships, though the White House said the purported moves didn’t violate a cease-fire agreement. The latest:
All eyes are on the strait. A prolonged closure of the waterway would put the global economy at risk. “We are facing the biggest energy security threat in history,” Fatih Birol, the head of the International Energy Agency, told CNBC today, adding that the war has led to the loss of 13 million barrels of oil per day. Birol added that the fighting had led to “major disruptions in vital commodities.” These have helped drive up the prices of goods like fertilizer. (Even if the fighting stopped immediately, it would take six months to remove the mines from the waterway, the Pentagon told Congress, according to The Washington Post.) The war is hitting companies: 21 firms have withdrawn or cut financial guidance this earnings season, while 32 have suggested they may raise prices, according to Reuters. Watch these two dates:
The case for, and against, saving SpiritThe Trump administration’s interventions in private enterprises have raised questions over how much the U.S. is embracing industrial policy. Its latest potential intervention, a proposal to save Spirit Airlines, raises a more frequent question for U.S. economic policy, Lauren Hirsch writes: Who should be bailed out, and when? Spirit needs help. The low-cost airline filed for bankruptcy protection in August, the second time in two years, citing a heavy debt load and competitive pressure among the reasons. It has also wrestled with rising costs, a failed attempt to sell itself to JetBlue and engine defects that grounded many of its planes for long stretches. Its efforts to exit Chapter 11 have been complicated by higher oil prices driven by the war in the Middle East. Some of its creditors said recently that they had “serious questions” about the plan. What the potential bailout looks like: The government would lend Spirit up to $500 million, a loan that would be a more senior claim on assets to other creditors, like the investment firm Citadel. The government would also include warrants giving it the right to buy as much as 90 percent of the airline’s stock. The goal is for Spirit to raise enough money to establish a sustainable business plan. Skeptics wonder if that will be enough. “Can we do anything to save Spirit and make it viable?” Transportation Secretary Sean Duffy said in a CBS News interview this week. “Or would we be putting good money into a company that inevitably is going to be liquidated?” Some Republican lawmakers are worried, too. “This is an absolutely TERRIBLE idea,” Ted Cruz, a Republican senator for Texas and the chairman of a committee that oversees the airline industry, wrote on social media. There are policy reasons to save Spirit. Its low fares help drive down fares across the industry, a dynamic that a federal judge cited in blocking the airline’s sale to JetBlue. And political ones. The Trump administration may be wary of others blaming the loss of thousands of Spirit jobs in part on the military campaign against Iran. “Donald Trump’s war with Iran caused the sky-high fuel prices that finally did Spirit Airlines in,” Senator Elizabeth Warren, Democrat of Massachusetts, wrote of the potential bailout on social media.
Shareholder proposals get squeezedProxy filings traditionally offer a preview of the strategy debates and policy fights that big companies like Citi might have with shareholders at their annual meetings. But it appears that Citi’s C.E.O., Jane Fraser, won’t be facing any fireworks at the bank’s virtual-only shareholder gathering in May. For the first time in at least 25 years, Citi’s proxy didn’t include a single shareholder proposal, Michelle Leder, the founder of Footnoted, which digs through filings to the S.E.C., reports for DealBook. (The S.E.C.’s EDGAR database goes back only to 2001.) This was the first time in the company’s modern history that there were no shareholder proposals to vote on, a spokeswoman for Citi confirmed. She pointed to a disclosure in the proxy that noted that while three shareholder proposals had been submitted, “each agreed to withdraw their proposal.” It’s not clear from the filing which groups submitted the proposals, or what issues they focused on. The absence of shareholder recommendations for Citi is part of a bigger trend. In November, the S.E.C. announced a significant change to the way it interprets its rules, making it easier for companies to keep shareholder proposals out of their proxies. Companies no longer require prior approval from the S.E.C. to exclude proposals, and they have wide latitude in determining a reasonable basis to do so. Companies, including Apple, Bank of America and Lockheed Martin, have fewer shareholder proposals to vote on this year. Apple, for example, included four in its 2025 proxy. This year, just one — calling for a report on the company’s dependence on Chinese manufacturing — was put up for a vote when Apple held its annual meeting on Feb. 24. It failed by a wide margin. The trend is not absolute. Several companies have received more proposals this year under the new rules. Shareholders at Meta, which filed its proxy last Thursday, will be voting on 10 proposals at its meeting on May 27, compared with nine in 2025. Meta typically attracts more shareholder proposals than most big companies. But given Mark Zuckerberg’s majority control of the stock, it’s essentially impossible for any shareholder proposal to pass without management’s support. At the company’s 2025 annual meeting, none of the nine proposals came close to passing. We hope you’ve enjoyed this newsletter, which is made possible through subscriber support. Subscribe to The New York Times.
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