Tesla investors can now relax and take ice cream. Yes, Elon Musk has hired a CEO to run Twitter. If not for  Tesla being asked to “recall” 1.1 million cars in China, the stock  would have seen a huge rally. (The  word “recall” is weak here  since most of its fixes are done over the air with no need to visit any dealership). Yes, Tesla will use over the air software updates to fix whatever the issues are with no need for any dealership visit. 

If Twitter succeeds in the everything app, many companies including PayPal, Booking , and Live Nation for tickets, could be disintermediated. But do not bank on that as these companies will not just wait to be flanked and destroyed.

This new CEO brings two key things: give Musk a cover to appear not to be running Twitter so that investors in SpaceX and Tesla will remain calm, AND as CEO, take the verbal and textual fires which Musk has been absorbing since he took the blue bird home. Left and Right, Musk will not allow this $44 billion special bird to fly out of his view! 

I predict that Musk will raise a huge sum of money on Twitter/X very soon because this company is coming back to NASDAQ within two years as a public company. It is a toy!

Yet, if you look at the big picture, Tesla will compound for Musk faster than whatever Twitter can deliver. Tesla is a category-king company in a huge market (all cars could become electric in decades) and if the goal is to add more digits in personal fortune, focusing on Tesla and SpaceX will serve Musk better.

But when you realize that rich people like toys with some buying football clubs, you cannot blame Musk for taking a bird home!

I am excited to welcome Linda Yaccarino as the new CEO of Twitter!

@LindaYacc will focus primarily on business operations, while I focus on product design & new technology.

Looking forward to working with Linda to transform this platform into X, the everything app. https://t.co/TiSJtTWuky

— Elon Musk (@elonmusk) May 12, 2023

It’s official: Twitter has a new CEO. Linda Yaccarino, head of global advertising and partnerships at NBCUniversal, will take over the top job from Elon Musk, who acquired Twitter in October for $44 billion. Musk confirmed Yaccarino’s hiring Friday, saying she will “focus primarily on business operations, while I focus on product design and new technology.” Musk said Thursday that he will transition to new roles as executive chair and chief technology officer. Yaccarino had been at NBCU for over a decade and was instrumental in launching the Peacock streaming service. Musk says Yaccarino will help “transform this platform into X, the everything app.” He recently merged Twitter into a firm called “X Corp.” and has said he wants to build an all-in-one app similar to China’s WeChat. (LinkedIn News)

GTBank (yes, GTCO) was peerless a few years ago when it delivered an industry-leading cost-to-income ratio (CIR) of sub-35%, a critical indicator of operational excellence in banking. But recently, the CIR has dropped; from 42.3% in 2021 to 48% in 2022. Yet, it still leads the profit margin element in Nigeria’s leading companies.

From this plot, it is interesting how Dangote Cement outperformed MTN (a telecom company) on profit margin. Airtel Africa did not even make the cut, implying that it was somewhere below 11% on profit margin! Very interesting indeed!

Comment on Feed

Comment 1: Thanks for sharing Prof. I would love to understand this economics. In Market Cap, Airtel is No.1, But in Profitability, they are not even in top 10. As an investor, one is tempted to ask, “should I invest in a company with a higher Market Cap or a Company with a higher profitability”? Seems like a no-brainer right, because with more profit comes more dividend. So I am curious, what is the mathematics behind Market Cap and Profit Margins?

My Response: You have largely 3 types of public market investors – income chaser (dividend loving who want the certainty of income coming in),  growth builder (they invest for shares to grow fast), and value picker (pick beaten down equities and hope they recover).  Airtel has delivered great valuation growth which favours the growth builder. Dividend paying companies like Dangote Cement will appeal to the income chaser. Investment thesis is not about “profit”; Amazon was loss-making but was improving valuation over years.

That is why bankers will ask you “what do you want to accomplish in this investment?” Answering that question will help one build a portfolio.  I recommend this Tekedia course -Tekedia Investment and Portfolio Management –  for everyone .

Comment 2: Cement, which ordinary should be classed as ‘staple’ or essential product enjoys unregulated price regime, while telecom services have price control always looking over their shoulders. This is why both Dangote and BUA can enjoy better margins than MTN.

For the banks, their own profit margins aren’t much about hardwork or innovation, rather the system favours them so much that by doing the barest minimum, they can still turn in significant profits; we rarely have commercial banks that are not recording profits.

Our market system is broken, just like the Nigerian State, so profits and advancements aren’t necessarily tied to ingenuity and excellent execution, rather a case of aligning with the right forces, and your small hustle will balloon in profits.

The wealth without enterprise (or subpar enterprise) maxim is always in play here.

Comment 3: Everything should not be about profitability. Do a Salary survey and staff welfarism in those companies with high profitability ratio to revenue, then you will understand that this profit is to the detriment of their staff.

My Response: Actually, in the CEO Report, these companies with the highest profit margins outperform. Profitable companies have funds to pay workers. They represent the best paid sectors in the public market – banking, oil/gas, telecoms. I am not sure if you have data to show otherwise. By far, these 10 companies are the best to work for all companies traded in the public exchange in Nigeria. So, unless you show data, your comment that profit is detrimental to staff is not there

In the Harvard Business Review,  I proclaimed, “The Best Global Leaders are Local Leaders” because if you look critically, every business is local! Stripe, a payment giant noted that more than 90% of all purchases still happen in person! https://hbr.org/2012/01/the-best-global-leaders-are-local . So, to unlock and capture opportunities in some markets, you need to win the meatspace (i.e. physical), even though you could deploy digital frameworks along the way. 

Amazon, the world’s leading ecommerce company, understands that construct and is doing everything possible to battle in the physical space for its grocery business: ‘Amazon has gone back to the future. CEO Andy Jassy has renewed a commitment to opening more food stores “given that most grocery shopping happens in physical venues.’ Yes, more stores will unlock the future!

In that post, our piece on logistics, connecting the latent opportunities which companies like Konga are pioneering in Nigeria, was featured by LinkedIn News. Read it here https://www.linkedin.com/news/story/can-amazon-bag-grocery-market-5274553/

Follow Ndubuisi Ekekwe for more feature-worthy perspectives.