Why 2023 Could Be a Terrible Year for Zuckerberg and Meta

December 28, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 28th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

A hiring freeze, a collapsing share price and billion-dollar fines from regulators. Despite a brutal 2022, almost everything points to 2023 being Zuckerberg’s biggest challenge yet.

He can be quite stiff, Mark Zuckerberg. But suddenly a different person appears. One who laughs. Even at jokes made at his own expense.

“It’s hard to imagine anything more important,” says Mark Zuckerberg.

It is November 2021, and Facebook’s founder and CEO has just been asked by YouTuber Sara Dietschy to rate various memes about the company’s impending name change to Meta. Meta has recently held a major presentation in which Zuckerberg himself laid out a vision for the next ten years. In the weeks that followed, he went on a PR tour to talk about it — including the meme review.

Since then, Meta’s share price has fallen to around $120 — a steep decline from those lighthearted days. The tech world has gone through a severe correction.

And yet there is much to suggest that Meta faces even bigger challenges ahead. In fact, 2023 may come to be Zuckerberg’s “annus horribilis” — a terrible year, as the late Queen Elizabeth II once described it.

The first concern is that Meta’s business model is under attack.

After a decade of enormous growth, 2022 brought a revenue decline for the first time in the company’s history — two quarters in a row. That is a bad indicator for the year ahead. There are primarily three things weighing on Meta’s ad-based revenues.

The general economic climate tends to hit the ad market hard. Rapidly rising interest rates, inflation and a looming recession in several key markets have prompted advertisers to pull back.

The second factor is TikTok. The platform — which is Chinese-owned and has attracted concern from officials including FBI Director Christopher Wray, who called it “extremely worrying” — has nonetheless failed to alarm users. TikTok’s ad revenue reportedly grew 142 percent year over year.

Third, Meta lost the ability to precisely track its advertising on Apple iPhones. This seemingly small change to Apple’s operating system could cost Meta around 103 billion kronor in lost revenue, according to Zuckerberg himself. Apple claims the change protects user privacy — though it also conveniently coincided with the expansion of Apple’s own advertising business. Unusually good timing for Tim Cook. Very bad timing for Mark Zuckerberg.

The second major cloud over Meta is that tech regulation is starting to bite. In 2023, the EU’s Digital Markets Act (DMA) comes into force, with the Digital Services Act (DSA) following the year after. Lawmakers have taken their time — to put it mildly — in addressing these issues. But when things finally start to move, they tend to move hard. The DMA is almost tailor-made to squeeze the largest tech companies, and Meta is firmly on that list.

A separate EU proposal would strip Meta of the ability to require users to see personalised advertising. That would further reduce the precision of Meta’s ads on both Facebook and Instagram, with likely severe consequences for revenue. The proposal will almost certainly be challenged in court.

Even without new laws, it can get expensive. Under GDPR, Meta has already been fined a total of 9.5 billion kronor since last year.

One advantage Meta has on the regulatory front is its sheer scale. The FTC, led by Lina Khan — who has become well known and feared in tech circles — recently sued Microsoft to block its acquisition of Activision Blizzard, a deal worth 710 billion kronor. But Khan’s FTC doesn’t only target the largest deals: they also sued Meta in an attempt to block the acquisition of Within, a relatively small VR developer.

That blocked acquisition is a serious warning sign. It signals that Meta’s previous strategy of buying its way to new innovation is unlikely to work in 2023. Instagram, WhatsApp and Oculus were all companies Zuckerberg purchased — for enormous sums. If that route is now closed off, he has to build the next generation of products himself.

Which explains why Zuckerberg is committing $100 billion to the metaverse. He doesn’t really have another option.

But the question remains: does he genuinely see something others don’t — or are there simply no people around him willing to disagree?

His former operational partner, COO Sheryl Sandberg, left Meta in autumn 2021. She was widely described as the adult in the room during Facebook’s most chaotic years of growth. Zuckerberg also controls Meta outright through a special class of shares that gives him effective veto over the company’s direction. In practice, he cannot be fired.

In that situation, it is easy to end up surrounded by yes-people. Why challenge the vision of the all-powerful CEO? It is easier to keep your head down and hope he is right — even if not everyone believes he is. There is an element of unchecked authority here that is hard to ignore. And that is rarely a good starting point for innovation.

Do you remember Facebook Slingshot, Lasso and Rooms? No, you probably don’t. They were three in a long line of failed internal projects that never amounted to anything. That is the trend Zuckerberg must now break.

Not everything is bleak, however. Two things do work in Meta’s favour.

First, the stock is now genuinely cheap by tech standards — the whole company is valued at little more than 2.5 times revenue. Google and Apple trade at roughly twice that. That could attract new investors and contribute to upward momentum.

Second: inertia. In the third quarter, Meta had almost three billion monthly active users — roughly a third of the world’s population. It is easy to keep using Messenger, Instagram and WhatsApp once you’ve started. They may not feel quite as fresh as they once did, but will people actually leave? Meta’s numbers suggest most won’t. That gives the company a solid base from which to build new revenue streams.

In the end, Mark Zuckerberg himself — as the company’s largest shareholder — has billions of personal reasons to keep trying. Whether he succeeds remains to be seen. But 2023 could be a very long year for him.

Fortnite Fined Billions for Deceiving Children — Swedish Parents Can Claim

December 20, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 20th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

The makers of Fortnite are facing billion-dollar fines for deceiving children. But the true scale of the problem is far larger — and the white lies are many.

Did your children accidentally buy a llama or a battle pass in Fortnite? If so, you may be owed a refund from the American consumer watchdog, the FTC.

The Federal Trade Commission has come down hard, issuing the largest fine in its history: 5.4 billion kronor.

According to the FTC, Epic Games — the company behind Fortnite — unlawfully collected data on children under 13 and operated a digital storefront designed in ways that led to unintended purchases.

Epic Games said it agreed to the settlement because it wants to be a “leader in consumer protection.”

The billion-kronor fine sounds impressive. But the money is almost certainly a drop in the ocean compared to what it would cost if all the games and internet services that exploit children actually had to pay for it.

The situation for children and young people online is, frankly, not good. And every party bears a share of the blame.

The laws are often old and hard to comply with. Companies behave as though children simply do not exist on the internet. And parents have no real idea what their children are actually doing.

Why isn’t this being fixed?

The first reason is that almost nothing online is designed with children in mind. Services like YouTube, Google and Instagram all have adults as their primary audience. But there are no watertight identity checks. A twelve-year-old can simply claim to be thirteen — and that one year is the line between being a child and an adult in the strict legal sense.

These questions are governed in the US by a law called COPPA — the Children’s Online Privacy Protection Act. In Europe, the equivalent is GDPR-K, part of the broader data protection package that came into force in 2018.

COPPA has age working against it. It was written long before the first iPhone existed, and therefore long before Snapchat, TikTok or Fortnite. The law has been updated over the years, but companies still need to hire expensive consultants just to be confident they are getting it right.

The third challenge is one shared by games and internet services alike: the human factor.

If there is one universal truth about parents and children, it is that adults overestimate their children’s abilities, and children want to do what their older siblings do. Anyone who works on children’s products — digital or physical — will confirm this.

In the digital world, it means that younger siblings get access to TikTok or Fortnite earlier than older ones did, simply because it becomes harder and harder to justify saying no. Parents can also be spectacularly unaware of what their children are doing online — even when it costs money.

Well-resourced groups like the Electronic Frontier Foundation have pushed back against new legislation, arguing that the risk of excessive content censorship is too great.

What is clear is that even with new laws, bringing order to this space will be difficult.

And so Epic Games will now pay 5.4 billion kronor.

“No game developer creates a game with the intention of ending up here,” the company wrote in a statement about the settlement. That is an optimistic view of the gaming industry.

The problem is rather the opposite: very few game developers create games with the intention of not ending up here.

Ignoring the fact that children and young people are online solves nothing. And as Epic Games has now discovered, it can also turn out to be very expensive.

After Tesla’s Stock Fall, Shareholder Patience May Finally Run Out

December 15, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 15th, 2022.

Tesla is the EV market leader, but faces tough competition ahead. The bigger storm cloud, though, is coming from inside: the CEO is selling shares and pouring his energy into Twitter.

Have you heard of Marc Tarpenning and Martin Eberhard?

The most devoted enthusiasts will know the names, but for most people, they are two figures who disappeared without leaving a visible mark on the world. They are, in fact, the founders of Tesla. Eberhard also served as CEO during the company’s first four years.

But the name associated with the company is Elon Musk — the man who always seems to be at the centre of things.

As a colourful — and controversial — figure, it is hard to separate him from the companies he becomes involved with. That Tesla has benefited from this fascination is obvious. But now the other side of that coin is starting to show.

This week, Musk sold 22 million Tesla shares for $3.6 billion, roughly 37 billion kronor. He remains the largest shareholder, but the timing of the sale raises questions. Tesla’s stock has fallen around 55 percent since the start of the year and is now at its lowest point since autumn 2020. When a company’s CEO — an insider — sells shares, it is always noteworthy. And it invites scrutiny.

Part of the explanation comes down to Twitter. Following Musk’s $44 billion acquisition of the platform earlier this year, he made two large share sales. The first was in April, for around $8.5 billion, and then again in August for $3.95 billion. Both were necessary to finance the deal — a deal he spent months trying to walk away from.

On both occasions, Musk stated he did not intend to sell further Tesla shares. This week’s transaction was therefore not something other shareholders were expecting. That an acquisition of this scale requires cash is something most people can understand. What is harder to see is how Tesla’s shareholders benefit from any of this.

Beyond the share sales, there is a growing concern about where Musk’s time and attention actually go.

KoGuan Leo, the third-largest individual Tesla shareholder, put it plainly: “Elon has abandoned Tesla and Tesla has no functioning CEO. Tesla needs and deserves a full-time CEO.”

More shareholder voices are now being raised. They see a company that needs complete focus to navigate an increasingly competitive electric vehicle market, where Chinese rivals are gaining ground fast. Having a CEO spread across so many other companies is a liability. Twitter and Tesla have nothing in common beyond their owner — but the associations bleed across regardless.

The question this raises is what Tesla’s board should do. Musk is certainly a major shareholder, but not the only one. The board’s primary responsibility — in any company — is to represent all shareholders and ensure the right person is in charge. That is a difficult task under ordinary circumstances. It is particularly difficult when the CEO’s brother, Kimbal Musk, is one of the board members.

Removing Musk is not going to happen any time soon. But even prominent CEOs get pushed out from time to time. One need only look at Twitter itself, where Jack Dorsey stepped down just over a year ago. He was then running both Twitter and the payments company Block (formerly Square). The loudest voices calling for his departure were activist fund Elliott Management, who believed the company needed new leadership and faster product development. Back then, the argument was simple: you cannot have a CEO with two jobs.

Elon Musk has considerably more than two. On the other hand, he also appears to work extraordinarily hard, and has an army of loyal allies around him. Neither Tesla, SpaceX nor Neuralink need him present every day for the companies to continue developing.

The success Musk has delivered has earned him enormous goodwill. That goes a long way. But after a share price fall of more than half, there is a real risk that patience eventually runs out — even for Elon Musk.

ChatGPT Is the Biggest Buzz in Tech Right Now — Could It Be the Next Google?

December 6, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 6th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

A research organisation is behind the biggest thing the tech world has talked about in years: ChatGPT. The new AI software is taking the internet by storm. Could this be the foundation of the next Google?

Ask and you shall receive, as the saying goes. That has rarely been more literally true than with ChatGPT. In just one week, the new AI software has gained over a million users.

Part of the innovation lies in the interface: you can chat directly with the software, asking questions in natural language. The responses also feel more human than the correct-but-mechanical answers we are used to from search engines. It feels like talking to someone who is genuinely trying to help — and who can refine their answers based on your feedback.

Ask it directly what to make for a Swedish Christmas dinner and it responds in an instant, with a confident, reasonable list. The impression is striking.

But the most interesting thing about this phenomenon is not the novelty of the user experience. It is what the underlying technology could form the basis of — and what comes next.

For a company like Google, which built a world-leading position by being the best at finding things on the internet, services like ChatGPT represent a new and unusual challenge. Google has been essentially uncontested in search for a long time. But as so often with new technology, the challenge is coming from the side — in this case from a partly non-profit research organisation, OpenAI — rather than from a direct competitor.

The challenge for Google is not the technology itself. Google employs thousands of people working on machine learning. The issue is scale and the company’s revenue model.

Google handles around 8.5 billion searches every day. Getting a service with a million users to run quickly and reliably is a challenge. Getting Google to work for everyone on Earth is a fundamentally different and vastly harder problem.

But the deeper issue is financial. Google generated nearly 6 trillion kronor in revenue over the past twelve months. The vast majority came from ads linked to search results. Changing how search results — and the accompanying ads — are presented therefore carries enormous risk. The smallest change could result in billions in lost revenue.

Precision is what Google charges for. That dependence points toward incremental changes rather than radical redesigns. The question is not whether Google could technically overhaul its search engine. The question is whether anyone inside Google can justify that kind of risk. Large companies, as Google has now become, tend to favour the safe over the bold in moments like this.

Some healthy scepticism about ChatGPT is also warranted. Stack Overflow — a question-and-answer site for software developers — has temporarily banned answers generated by ChatGPT. The responses are simply wrong too often. And what makes it worse is that the wrong answers tend to look plausible and well-sourced. That undermines the entire point of the site: being able to find a correct answer quickly.

It is early days. But the direction is clear: AI-powered conversational interfaces are coming for search. Whether it is OpenAI, Google, or someone else that ends up defining what that looks like is still very much an open question.

Suddenly Musk Gets It: Apple’s App Tax Is Calling the Shots

November 29, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 29th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Now that Elon Musk has woken up to Apple’s “tax,” Spotify gains a loud new ally. But Musk is playing a high-stakes game — and his newly acquired Twitter cannot afford to lose it.

Twitter’s new owner Elon Musk is a busy man. On top of owning Twitter, he is also a major shareholder and CEO of Tesla, SpaceX, Neuralink and the Boring Company. There are surely more companies and titles to add to the list.

Perhaps it is because he is so busy that he is only now discovering things that have been going on in the tech world for years.

Musk tweeted this week: “Did you know Apple puts a secret 30% tax on everything you buy through their App Store?”

Eh, yes? Everyone in the tech world knows this by now. It is exactly what the court case between Apple and Epic Games was about. It is the same issue Spotify brought to the EU with a formal complaint. It is the ongoing regulatory battle that has occupied regulators across Europe, the US and South Korea for years.

When Musk discovers something, it does at least tend to get noticed. And there is no harm in having an influential voice draw public attention to this issue. The 30 percent cut Apple takes from in-app purchases is genuinely significant.

But complaining loudly is ultimately just noise. For players like Spotify and Epic Games, having vocal support on these issues is no doubt welcome — but it is unlikely to change the outcome of ongoing legal processes.

Musk will probably also come to realise why relatively few developers actually pick a fight with Apple: it can be very expensive to have them as an enemy. If Apple decides that something in Twitter warrants closer scrutiny, the tech giant will scrutinise it. That process can be appealed — but only to another part of Apple. In practice, business-critical features can be kept off the market based on little more than Apple’s discretion.

For Twitter, this could be catastrophic. The platform is entirely dependent on users on Apple’s operating system, and uses the App Store as its most important distribution channel. If the app were removed — as Musk himself says Apple has threatened — it would be enormously difficult for Twitter to function as a business.

In the end, Musk is in a position where he needs Apple far more than Apple needs him. Picking this fight loudly and publicly may feel satisfying, but the leverage runs firmly in one direction.

After the FTX Collapse: Tokenomics Could Change Everything — If We Want It To

November 26, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 26th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

After billion-dollar crashes and fraud across the crypto world, many are wondering whether the market is simply over. But what is called “tokenomics” has the potential to reshape large parts of society. The more interesting question is: do we even want that?

In the autumn of 2021, a piece of American history came up for sale at the prestigious auction house Sotheby’s. One of the thirteen surviving copies of the US Constitution was on the block. The slightly yellowed pages are considered a national treasure.

So far, perfectly normal.

Then the crypto world got involved.

A so-called DAO was formed — a decentralised autonomous organisation — with one single purpose: to buy the Constitution. Think of a DAO as the crypto world’s equivalent of a homeowners’ association. There are rules to follow, but no single person is in charge. Decisions happen through voting. Tokens give you a vote.

The DAO raised the equivalent of over 400 million kronor in just a few days. Tens of thousands of people participated from around the world, each buying in with crypto. It was a remarkable demonstration of what this technology can enable.

In the end, a private bidder outbid the DAO, and the document went elsewhere. But the experiment stuck.

Equity trading happens on exchanges with rules, customs and laws. That creates reasonably fair conditions. Trading in unlisted shares carries higher risk — which is why we have the term “venture capital.” Cryptocurrencies carry even higher risk, and far fewer rules. Fraud and pump-and-dump schemes are part of everyday life, even among established players.

There are differences between projects. Many enthusiasts would argue that Bitcoin is fundamentally different — technically and philosophically — from everything else. That may be true, but many speculators are not there for the philosophy. They are trying to make money.

Looking at price versus value in crypto, it is no exaggeration to say that prices have been high relative to the underlying value, which has often been low. But the function — the underlying promise of what this technology could enable — is worth examining independently of price.

That is where the real rescue of crypto’s reputation may eventually come from.

One area where it could have genuine impact is traditional finance. These initiatives are known as “DeFi” — decentralised finance. The idea is to trade financial products without centralised intermediaries like banks or central banks. Transactions can be faster and cheaper, at least in theory.

The underlying technology — blockchains — makes this possible. As a developer, you can build your own financial company on the Ethereum blockchain without needing external approval. Trying to do the equivalent inside Nordea or Swedbank would be nearly impossible, requiring both their goodwill and their permission.

DeFi removes the middlemen from financial transactions. Instead of trusting institutions, you trust the technology. Predefined smart contracts execute the transactions — no one interferes.

Another area is NFTs — non-fungible tokens. The NFT market has also crashed after intense speculation. Sales volumes fell 99 percent between May and September this year. But the underlying function remains, and it is a genuinely novel way to regulate ownership in a digital world that has historically been driven by copying. It also works for representing ownership of physical things. In the US, the first physical house has already been sold as an NFT.

There are interesting tendencies on the horizon, despite all the crashes. When, or perhaps if, these markets can regain consumer trust, tokenomics could become building blocks for a new kind of internet.

But perhaps the most interesting question is also the simplest: do we actually want it? When more and more things are represented as tokens, more things become tradeable commodities. Life starts to resemble a trading floor — one that can also get hacked. Tokenomics makes it possible to own a fraction of nearly anything. That is a significant statement about where the world might be heading.

Streaming’s New Normal: How Netflix Is Going Full Seinfeld

November 22, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 22nd, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Hoping for a new Squid Game this winter? You might be disappointed. Everything points to Netflix’s content becoming more like Seinfeld than big prestige dramas. The reason: a new business model.

“We basically sold nuclear weapons to a third-world country, and now they’re using them against us.”

It sounds like a declaration of war — for good reason. But the slightly dramatic statement came before the war in Ukraine, and carries less geopolitical weight than it implies. We’re talking about streaming. Nothing more serious than that.

The quote comes from Bob Iger, the then-former CEO of Disney. He was talking about how the entertainment giant licensed its content to Netflix for years. It was good money in the short term, but it also meant Disney+ took a long time to launch.

When those contracts expired, Netflix went from being a customer to being a competitor.

Last weekend, Bob Iger reclaimed the CEO role after his successor Bob Chapek was fired after just over two years. The internal power dynamics at Disney are a story in themselves — but what matters for this analysis is what it means for the streaming market.

Until now, Netflix has been able to focus solely on its subscribers. Now it has added a new target audience: advertisers.

For anyone who has worked in commercial television, this is nothing revolutionary. It’s how the industry has always worked. For Netflix, it is not trivial.

Suddenly, the streaming giant needs to ask itself what advertisers think about its content. And the answer to that question has major consequences for what content gets made.

Netflix ads haven’t arrived in Sweden yet, but the effects are already becoming visible — through the shows they commission and acquire.

Julia Alexander at the newsletter Puck calls this the “Seinfeld strategy.” What works well right now is comedy — preferably light, something you can watch actively or have on in the background. Timeless themes where familiarity is part of the charm. Seinfeld and The Office are the clearest examples.

Netflix’s own comedy Blockbuster — set inside the video rental chain they helped kill — fits the mould exactly.

The ad-supported tier points in one clear direction: safer, more mainstream content. Nothing that alienates advertisers, nothing too challenging or niche.

The hope is that you’ll sit there with half an eye on the TV while scrolling on your phone. A few ads roll by in the background. Bingo.

That, in essence, is Netflix’s new business model.

FTX Files for Bankruptcy — The Crypto Giant Was Run Like a Youth Hostel

November 14, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 14th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

Billions disappeared when crypto company FTX collapsed. The question being asked now is how investors could have placed so much money in a company run with so little professional rigour.

Ten people living together in a luxury penthouse on the Bahamas, worth around 415 million kronor. Most of them in a romantic relationship with each other — something its founder openly discussed on social media.

What sounds like the premise for another bad reality TV show was in fact the operating base of FTX, one of the world’s largest crypto exchanges, which has now filed for bankruptcy. The final accounting is still not complete, but debts from the collapse appear to run between 10 and 50 billion dollars.

Many are now asking how this could have happened. Among them, presumably, are a large group of Canadian teachers whose pension fund invested heavily in FTX.

How did it happen?

Looking more closely at Sam Bankman-Fried — known widely as SBF — you don’t find obvious answers. A 30-year-old with dishevelled hair, who wore rumpled shorts to meet world leaders, and who cultivated an image somewhere between eccentric genius and accidental billionaire.

In 2019 he founded FTX and Alameda Research and moved to Hong Kong. Two years later he relocated to the Bahamas. Timing, as they say, is everything.

Bankman-Fried became known as one of the strongest supporters of the cryptocurrency Solana, which was also popular with other investors who believed crypto could be the foundation of “a new kind of internet.”

Clearly, that did not come to pass in the way they imagined.

But the perceived excitement around that vision led several investors to set aside ordinary principles around risk management. Investors poured over 2.2 billion dollars into FTX. For a time, the investment looked like genius. Bankman-Fried appeared on conference stages alongside Tony Blair, and his family sponsored investigative journalism.

Then it all collapsed, very fast.

In the space of a few dramatic days, FTX went from global star to the crypto world’s most notorious cautionary tale. The details of how unprofessionally the company was actually run continue to emerge, and they are alarming.

That the crypto market is volatile is no surprise. That fraud and incompetence exist in any industry is also not surprising. What is striking in the FTX case is that the chase for the next big thing seems to have led investors to make enormous concessions on the most basic principles of due diligence.

Polestar Solves Its Immediate Cash Crisis — But an Enormous Challenge Remains

November 11, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 11th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

While Tesla’s CEO is busy elsewhere, the other EV companies are scrambling to find their footing. Polestar has solved its immediate cash crisis — but an enormous challenge still lies ahead.

17 billion kronor.

That is what Polestar’s main shareholders — Volvo Cars and PSD Investment (owned by Volvo’s chairman, who represents Geely) — have committed to lending the struggling electric vehicle company. And now that Polestar has released its latest quarterly figures, it is clear why those billions are needed. The money is still flowing out fast.

The new quarterly numbers show revenue doubled year-on-year — from 213 to 435 million dollars. That is a positive sign. But the losses are still significant: the company lost 196 million dollars, roughly two billion kronor, in the third quarter alone.

That is a meaningful improvement compared with the same period last year, but the path to profitability is still far off.

That more capital would be needed was therefore no surprise. And tapping the stock market in current conditions was not a realistic option.

A loan from existing shareholders was therefore one of the few reasonably viable alternatives left.

But Polestar is far from alone among EV companies facing this pressure. Consider just a few of the share price performances this year:

Xpeng: down 86 percent. Rivian: down 68 percent. Fisker: down 52 percent. The list goes on. With that kind of share price performance, the stock market becomes a liability rather than an asset as a source of capital.

In times like these, having well-capitalised shareholders matters enormously. Polestar appears to have them — but the expectation is that those owners are growing increasingly impatient.

Further down the list sits the EV company the world watches most closely: Tesla. Its share price is down 52 percent since the start of the year.

A few weeks ago, Tesla’s CEO Elon Musk was forced to sell around 4 billion dollars worth of Tesla stock — around 43 billion kronor — presumably to help fund his Twitter acquisition. The debt structure behind that deal may well become a significant financial problem down the line. With Pfizer, Carlsberg and Audi all pausing their advertising on Twitter, the pressure on the platform is only growing.

The market leader’s CEO therefore has his attention firmly elsewhere. He is a multi-billionaire — but one who has now bet enormously on a very different kind of company. Does Tesla miss his undivided focus?

The answer is probably yes.

Tesla’s lead in the market was not built on Musk’s undivided attention alone. But the main challenge for the EV industry right now is intensifying competition — and that is exactly where leadership presence matters.

Volkswagen’s various ID models now share the roads with Audi’s e-tron, the Renault Zoe and Kia’s EV6. Polestar’s parent company Volvo Cars just launched its first fully electric SUV, the EX90 — competing in the same segment as Polestar itself.

The bottom line is clear. With a tougher financing environment, Polestar’s ability to keep pace with the competition has become harder to take for granted.

The Strategic Move That Brought Down One of the World’s Largest Crypto Exchanges

November 9, 2022
by Björn Jeffery
SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on November 9th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.

A strategic masterstroke brought down one of the world’s largest trading platforms in less than 48 hours. In doing so, it may have changed the direction of the entire crypto market.

Thousands of visitors had gathered at the Token 2049 conference in London to discuss the latest in crypto. It would be hard to imagine a worse day for an event of this kind. It was the equivalent of running an “Investment Banking Executive” conference the day Lehman Brothers collapsed.

That is where the crypto market finds itself right now. FTX, the world’s second-largest exchange for cryptocurrencies, has imploded.

It is a strategic move that will be written about for a long time.

It all begins with an article in trade publication Coindesk, which obtained the balance sheet of Alameda Research — a trading firm controlled by FTX founder Sam Bankman-Fried. The balance sheet revealed that Alameda was heavily exposed to FTT, FTX’s own native token.

The problem is that FTT is not heavily traded, and therefore has low liquidity. That means a large seller can crash the price on its own.

That is where Changpeng Zhao steps in. He had previously invested in FTX, but having now seen the balance sheet, he announced on Twitter that Binance would be liquidating all of its FTT holdings.

Zhao knows the market cannot absorb this. There are no buyers. The price drops 20 percent immediately. Users start withdrawing their funds en masse.

FTX asks Binance to step in and rescue it. Binance initially agrees — then backs out when it sees how deep the hole truly is.

It is simple, elegant, and brilliant. Zhao himself claims it was not planned — but it is hard to believe a person of his experience didn’t understand what his announcement would set in motion.

Less than three months ago, Sam Bankman-Fried appeared on the cover of Fortune magazine, celebrated as a crypto billionaire and philanthropist. The fallout from this crash, however, will have effects far beyond him personally.

Trust in crypto trading was already fragile. Seeing one of the largest exchanges go under — seemingly overnight — will not help. Coinbase, the largest US-listed crypto exchange, has tried to put a distance between itself and the chaos.

FTX was also a company with enormous venture capital exposure. Sequoia — one of the world’s most prominent investors — has already written down its entire stake. Other major funds followed. Valuations that looked impressive are now worth nothing.

Crypto enthusiasts have long promised to reshape finance, to build a new system that is fairer, faster and more transparent. What this week has shown is that the industry still has a very long way to go before it can credibly make that case.