Musk Wins His $1 Trillion Pay Package & October Layoffs Hit 22-Yr High

0:00Stocks? ETFs? Or what about mutual funds? Choosing your investments is easier with Fidelity. Our step-by-step experience can help you pick out the right investments for you. Plus, with recurring investments, you can decide how much and how often to invest. Lastly, there's 24-7 help if and when you need it. To find your next investment, head to fidelity.com slash trading. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSC SIPC.

0:32Good morning, Brew Daily Show. I'm Neil Freiman. And I'm Toby Howell. Today, Elon Musk officially begins his trillion-dollar quest. Then, we just had the worst October for layoffs in over two decades. It's Friday, November 7th. Let's ride.

0:51Good morning and happy Friday. You got to hear about this museum tour over in Dusseldorf, Germany. At the city's Kunstpalast Museum, they run a tour twice a month where a guide, Joseph Langelink, constantly berates you for being dumb and not knowing about art. According to The Guardian, the 70-minute tour costs 7 euros and is described in marketing materials as grumpy and highly unpleasant. It's also ridiculously popular. Every single grumpy tour has been sold out since May, and they're booked solid through the end of the year. The concept was invented by performance artist Carl Brandy, who was convinced people enjoy the emotional rollercoaster of hanging out with an aggressively rude person.

1:29Playing the role of Langolink, he says, I never insult visitors directly based on their personality or their appearance, but I insult them as a group. My contempt is directed at an inferred ignorance that may not even exist, but I try to make them feel as ignorant as possible. Toby, I think this is genius and other museums are going to copy it. There's so many little nuances as to why this works specifically in the museum. It's not a comedy club, so there's no separation between the audience and the person doing the insulting, so it feels more intimate. plus it's not a place where you normally get insulted or laugh in general.

2:01Museums are not those types of institutions. Also, there's this undercurrent that museums hold all the power. They're putting the art out. They're putting whatever out for you to see. There is a little bit of that perceived ignorance. I walk into museums and you look at something like, I don't really know what's going on there. So I think all of those layers just make it a really fun and diverse experience with so many different angles as to why you're saying, why do I like this guy yelling at me? So booking my trip over to Dusseldorf right now because it seems like a good time. I don't think you'll have to because I think a lot of museums are going to start to copy it because they're trying to get people in their doors and they're saying, oh, wow, this grumpy tour is sold out from May through December.

2:39I should probably get on that. And now a word from our sponsor, U.S. Bank. If your laptop is starting to slow down and freeze up, it's probably time for an upgrade. But instead of breaking the bank and paying out of pocket, you can pay later with the U.S. Bank Split card. Introducing the U.S. Bank Split World MasterCard, a new type of card that lets you pay later on every purchase. With a split card, all purchases are automatically divided into three payments and placed into a payment plan to be paid back over three months, so you don't have to worry about going off budget. And if you're looking for additional flexibility, any purchase over$100 can be extended to 6 or 12 months with equal monthly payments for a low monthly fee.

3:16No matter what you're paying for, pay later on every purchase with the U.S. Bank Split Card. Learn more at usbank.com slash splitcard. That's usbank.com slash splitcard. In the most highly anticipated shareholder vote in, well, ever, Tesla investors approved CEO Elon Musk's historic pay package with over 70 % voting in favor. If Musk hits aggressive targets over the next 10 years, he will gain potentially$1 trillion in stock, making him the world's first trillionaire and then some. We've never seen anything like this pay package in corporate America before, and we may not again until Elon clones himself.

3:54What we're about to embark upon is not merely a new chapter of the future of Tesla, but a whole new book, Musk said. I guess what I'm saying is, hang on to your Tesla stock. So why did Tesla offer it to him? Well, a little backstory is in order. Last year, a Delaware judge blocked Musk's existing pay package at Tesla, worth up to 56 billion, finding the board was under too much of his influence when it approved the deal. Outraged over that decision, Tesla chefed up a new one worth a lot more and presented it to shareholders for their approval. And they did. Not that the outcome was ever in doubt.

4:26It was as inevitable as an Alcaraz Center Grand Slam final. Musk ratcheted up the stakes in recent months, saying that if he didn't receive this pay package, he would ditch the company to build AI products elsewhere. To most investors, the prospect of Musk leaving Tesla would be unfathomable. They are one in the same. The majority of Tesla's$1.5 trillion valuation is tied not to its car business, but to Musk's vision of a Tesla 2.0 that sells millions of Optimus humanoid robots a year and operates a globe-splaining feat of self-driving taxis. They're betting$1 trillion is enough to keep his eye on the prize.

4:58This has just been the trillion-dollar saga because this was a follow two months of very aggressive campaigning by Tesla, which is not something you normally see when it comes to a shareholder vote. I mean, Tesla ran ads for this. Tesla doesn't even run ads for their own car. So it just shows you how much they thought that this was an existential vote and needed to go the way that they wanted it to. Tesla chair Robin Denholm said that the board isn't actually concerned with how Musk is splitting his time. She said other CEOs might like to play golf. Elon doesn't play golf. He likes to create companies.

5:32So basically they're saying we're making peace with Elon having his attention very fractured, but we still need him. And then you have the psychologists get involved here because what is the difference between a$56 billion pay package versus a trillion-dollar pay package? And to them, they say it doesn't actually make much of a difference. Once you reach a certain level of wealth, any incremental gains beyond that is something that doesn't necessarily change your daily life. What, is he going to buy more coffee? Is he going to make his coffee at home? No, it doesn't change anything about his life.

6:02And also, some MIT Nobel laureates have looked into this idea of diminishing returns when it comes to financially incentivizing leaders of companies. A study of the 10 most valuable NASDAQ firms from 2017 to 2022 found no link between CO pay and stronger stock performance. And then another study of 429 companies showed that firms where COs were underpaid relative to peers actually delivered higher shareholder returns. So it is interesting that maybe this entire concept of motivating Elon Musk doesn't have much basis in research. So why did Musk want this so badly? Why did he want this pay package?

6:39And if he didn't get it, he was going to leave. I think the answer lies not in wealth, even though that may play a small part. It lies more in control, influence, and power. He wants what Mark Zuckerberg has. Mark Zuckerberg has 61.1 % of the vote of Meta because of that dual class voting structure. Elon Musk currently owns 13 % of Tesla, and this pay package would bump him up to 25 % should he hit these targets. He said on a podcast recently, if we build this robot army, which he wants to do at Tesla, do I have at least a strong influence over that robot army? I don't feel comfortable building that robot army if I don't have at least a strong influence.

7:20I think you can read what's going on in Elon's mind right there. It's not about the money. It's about power and control. Like we've seen him go into D.C. earlier this year. It's about exerting his influence on the highest echelons of society. And then let's dive into the actual tranches of this pay package. Is he going to reach them? In terms of the product milestones, he needs to deliver 20 million EVs. Right now, he delivered 8.5 million, so more than double. He needs full self-driving subscriptions to reach 10 million. He needs robo-taxis to reach a million in operation. and he needs to deliver a million Optimus robots.

7:54Those, hypothetically, you could see how he could get to. It's the financial goals and the EBITDA targets that have people saying, he's probably not gonna reach the upper echelons of these tranches because tranche one is they need to reach an annual EBITDA target of$50 billion. Last year, Tesla posted$16 billion in earnings, so it's not necessarily something that's too close by. And if he wants to reach the full payout threshold, he needs to get Tesla to$400 billion dollars in EBITDA. Right now, the most profitable company in the world is Apple. They brought in $145 billion, so orders of magnitudes larger than anything we see at Tesla, but also in corporate America at writ large.

8:35Moving on, as fall took full effect in October, trees were shedding leaves and businesses were shedding jobs. October layoffs were historic in all the wrong ways. U.S. companies announced 153 ,000 layoffs in the month, nearly triple last year's total, marking the worst October since 2003, and the highest single month total in Q4 since 2008, according to data from Challenger Gray in Christmas. If you look at the cumulative damage, there's been over a million job cuts so far in 2025, the most outside of the pandemic since 2009. Many firms are course correcting after the pandemic era of overhiring, especially in sectors like logistics or e-com where demand has normalized.

9:16Warehouses were the biggest job cutters last month with 48 ,000 layoffs, followed by 33 ,000 in tech. Amazon, UPS, Paramount, and Target were some of the big corporate names that announced layoffs last month. There's also AI, which is either a structural issue facing workers as it remakes the workforce, or a convenient cover execs are using to positively frame their downsizing. What makes this past October especially jarring is that companies typically avoid announcing layoffs in Q4, wary of bad optics around the holidays. So this surge, despite the reputational risk, shows just how intense these corporate cost-cutting efforts have become.

9:52Neil, with the federal government being shut down, we haven't had an official jobs report since August. So investors have turned to these private readings in the meantime. And these readings are scary right now. Yeah. So for months, we've been in what economists have called a low hire, low fire environment. The job market was essentially frozen over. No one was bringing new employees on board. But at the same time, you had pretty good job security because there weren't a lot of layoffs either. That is all changing as we go into the fall. They're calling it low, higher, more fire. And the question really is for economists, the Federal Reserve, people like us, anyone who cares about the economy is why is this happening?

10:31Is there a through line through this all? Is it individual belt tightening from companies based on unique circumstances, the names that you mentioned, UPS, Amazon? Or is it, you know, a broader theme that there are serious cracks forming in the job market? I'm just going to run down a little bit why these companies are saying that they're getting rid of employees for Amazon, which did the biggest layoffs in its history. Andy Jassy, the CEO, said he was responding to a culture issue inside the company that had a lot more layers that led to slower decision making. So he's blaming bureaucracy, which a lot of companies have blamed.

11:06You go to UPS, it shed 34 ,000 employees over the past year. it's saying it has a lot of automation gains and productivity gains, and that's why it just doesn't need as many employees. And then others are blaming tariffs. The children's clothing brand, Carter's, is cutting 15 % of its workforce, and it said explicitly that it is because of higher costs of tariffs. So if you're trying to chalk this up to an AI chat GPT wipeout, the data and evidence doesn't exactly show that. It seems to be for a myriad of reasons. And actually one of the highest cited, actually the highest cited reason that people lost their jobs in this Challenger Gray and Christmas report was Trump administration's doge cuts impacting people.

11:47So again, we haven't had public payroll data for a while because the government shut down. ADP data can only give us private payroll, so we haven't been able to see that. But this Challenger Gray and Christmas report polled people. And remember, the government cut a ton of jobs this year, so maybe that is reflecting in the October numbers as well. We were supposed to get the jobs report this morning. So that's two that we've missed. This one would be for October. You get it the first Friday of the next month. So it would have come out in two hours. So we are in a fog, just like a lot more important people like Jerome Powell.

12:18Moving on, ESPN's bet on betting didn't pay off. Yesterday, the worldwide leader in sports and Penn Entertainment announced they are cutting short their supposed decade-long agreement after less than two years together. The move comes after ESPN Bet failed to make a dent in an industry dominated by the duopoly of FanDuel and DraftKings, languishing in seventh place with less than 3 % market share. For ESPN, it's not the end of the world as just hours after things ended with Penn, it announced a new partnership with DraftKings, though it's more limited in scope. For Penn, though, it's another embarrassing failure.

12:53Breaking off this deal represents its second failure at trying to make the media sports betting model work. The first attempt being a$551 million deal for Barstool Sports, which ended up as an$850 million write-off. As a dust from this latest fallout settles, investors are not pleased. One prominent Penn investor, HG Vora Capital, wrote earlier this year that Penn has executed a string of transactions that, in our view, stand among the worst in the industry's history in reference to both the ESPN and Barstool deals. Neil, on the surface, these kind of tie-ups make sense. ESPN and Barstool have large audiences of sports fans that you could hypothetically turn into gambling customers.

13:32But in reality, the marriage has never quite drove enough customer acquisitions to justify the financial outlays. I want to talk about Penn first, because this was a series of historically awful business moves. So Penn is a regional casino operator. They own properties like Boomtown Casino Biloxi, America Star Casino, Hotel Vicksburg, Hollywood Casino, and Bangor, Maine and Cactus Pete's Resorts Casino. in Nevada. So that has been their business model for a long time. Now they're looking at these gambling apps becoming so popular and they're saying, oh, we want in on the action. We want to build our business in this way.

14:07So they go to Barstool and they say, hey, you have a huge audience. You make amazing content for the types of people that we want to bring onto this platform. Let's create an app together. That did not work out. Then they go to ESPN. They say, oh, you have an even bigger audience than Barstool did. Why don't we work together to make an app together? That did not work out as well. So it's been a huge egg in the face for the CEO and executive leadership at Penn that has been facing a lot of activist investor pressure to grow. They said that they wanted a 20 % market share in the sports gambling space, and they never achieved above 4 % through the past five years.

14:41So a series of historic missteps. In a way, I think ESPN is a little relieved here because there was always a lot of trepidation of tying the media arm of ESPN to the gambling arm of ESPN bet because these reporters, are supposed to be objectively reporting on the very thing that they want people gambling on. And the thing that came to a head, that optics came to a head when we were talking about the Terry Rozier and Chauncey Billups gambling scandal that just broke a few weeks ago. And literally as ESPN was talking about it on their core programming, an ad for ESPN Bet came up on the bottom that they quickly took off screen, just showing how this was always just a little bit of an unhappy marriage.

15:20So now the ESPN Bet is going away. It's going to be rebranded as Score under Penn's umbrella. ESPN is going to keep ESPN Bet as a content brand, but no longer an actual sportsbook. And DraftKings is just going to kind of dodge and weave throughout all of ESPN's properties. People are a little bit more open to seeing DraftKings' name pop up because it's just been a name in the industry for a while. Apparently, they're actually getting more money from DraftKings than they ever were getting for Penn. So I think it's one of these things where ESPN said, fine, this did not work, and actually we're better off for it because it just doesn't lead to that uncomfortable optics that the other arrangement did.

15:57So bottom line here, I think, if we survey the sports gambling landscape, it's that no one has been able to challenge FanDuel and DraftKings so far. Together, they own roughly two-thirds of the U.S. market. Penn tried a couple of times, and they absolutely failed. But they are playing defense against one particular upcomer, and that is prediction markets. DraftKings just bought a prediction market startup, Railbird, to kind of get into this industry because that is what scares them at night. Prediction markets like Calci and Polymarket, not anything that Penn is doing. All right, we're gonna take a quick break and come back with our stock and dog of the week.

16:32You know that saying, more money, more problems, Toby? Of course. Why do you think my life is so chaotic? Sure. Well, with startups, it's more like more money, more security. Big enterprise deals usually come with even bigger security and compliance requirements. Yeah, the right kind of security posture doesn't just protect you. it can actually make or break a deal. Thankfully, Vanta's AI and automation makes it easy for you to get big deal ready in days. They automate your compliance and continuously monitor your programs so future deals never get blocked. Plus, Vanta scales with your company so you'll always have the support you need no matter what growth phase you're in.

17:09Morning Brew daily listeners can get $1 ,000 off at Vanta.com slash Morning Brew. That's Vanta.com slash Morning Brew. Welcome to Stock of the Week, Dog of the Week, the segment where Toby and I pick one stock whose phone got fully charged overnight and another that's sweating it out at 3%. I won the pre-show game of Simon Says, so I get to go first. And my Stock of the Week is Snapchat. And the reason why isn't very perplexing. Snap shares gained nearly 10 % yesterday after the social media company announced a deal with AI startup Perplexity. Perplexity is going to pay Snap$400 million in cash and equity for prominent real estate in the app, something investors see as boosting user growth and engagement on Snapchat.

17:51What does that look like? Here's Snap CEO and Meta head of product, Evan Spiegel. Starting in early 2026, Perplexity will appear in our chat interface for Snapchatters around the world. Through this integration, Perplexity's AI-powered answer engine will let Snapchatters ask questions and get clear conversational answers drawn from verifiable sources all within Snapchat. I should note here that perplexity is being sued by news organizations like the New York Post and Dow Jones for copyright infringement, and it's also being sued by Reddit for alleged illegal scraping of content for commercial gain.

18:22Nonetheless, Snap thinks its users will enjoy gabbing with the chatbot on its platform, plus it adds a new revenue stream to support an ad business that's never really been competitive against the giants in the industry. Still, Snap is chugging along, putting up 15-8 in the social media G League. It increased its sales 10 % year over year and grown its daily global user base to 477 million people. Yeah, previously, Snap worked with OpenAI and Google for this MyAI chatbot that it was trying to integrate into its platform. But those are companies that have relationships with larger companies. I mean, OpenAI and Microsoft are pretty tied up.

18:59Google is Google itself. So it was looking around at kind of the AI speed dating landscape and going, hmm, who's the only uncoupled person here? Who's the only major independent AI vendor that we could work with? Perplexity's name came up. Perplexity is the name you see thrown around a lot, too. Apple was rumored to buy them for a while because to ramp up its AI effort. So I think when you're looking for someone who is independent and who could give you the capabilities, Perplexity is the logical name that you land on. And I think it makes sense. I mean, for Snapchat, they can stay in the AI race.

19:32They don't need to develop it in-house with much fewer resources than any of these other social media companies. For perplexity, you get access to a 400 million person user base. I mean, Snapchat, for all its faults, still is a very large social media company in general. So it's a great place to real world test your models out. So I think overall, this is just a marriage that makes a lot of sense on the surface. We'll see how it actually, like most marriages, how does it actually play out in reality when they have to actually get down to the nitty gritty of it. But good wins for both companies, it seems, on the surface.

20:05My dogs of the week are members of what I am christening the 20 % Club, Duolingo, Celsius, and Elf Beauty, companies that literally have no connection other than the fact that they declined in value. The 20 % Club is more like a sticky frat basement, actually, a.k.a. not a place you want to find yourself. But the first entrance that made it past the bouncer is the Duolingo, which fell 25 % yesterday after the company shifted their focus to user growth instead of focusing some more on near-term profitability that investors wanted to see. Duolingo's revenues still grew 41 % during the quarter, but some soft guidance was all investors could see, granted to get access to the 20 % club, Neil, with room to spare.

20:44Yeah, it's been quite a rollercoaster year for Duolingo. They started out the year at around$325 a share. They went up to$544 in May, but even before yesterday when they joined the 20 % club with that huge plummet, the shares were trading down 20 % for the year. They had a big PR crisis a few months ago when they said they were going to really lean into AI, which kind of blew up in their face. But things seem to have smoothed over. And now, as the CEO said, there are experiments that put monetization and user growth at odds. And part of my job has been arbitrating between these two. It looks like he's prioritizing user growth, long-term vision over monetization at the moment.

21:22Investors don't really like that because they want to see some cash flow, and that's why you saw the stock plummet. Next in line at the club is the energy-driven company Celsius, which fell 26 % yesterday on fears that a distribution change would interrupt sales of the hot new brand recently acquired Alani Nu. Despite third quarter revenue rising 173%, the fact that it's going to take a few quarters to fully roll out Alani Nu made investors pause and almost sent them to the 30 % club, Neil. Similar, you said there was nothing that these companies had in common, but I see shades of what happened with Duolingo with Celsius by they're doing some short-term turbulence in order for long-term games.

22:00So Pepsi does own 11 % of Celsius now. And one of the big parts of that investment is allowing Celsius and whoever Celsius buys, like Alani knew, to use their distribution network. And Pepsi has obviously one of the best distribution networks for any beverage company. So that's what's going on here. Overall, though, the energy drink market seems to be booming. Monster beverage reported earnings after the bell yesterday. They're a competitor with Celsius. And the CEO said, overall, the global energy drink category remains healthy with robust growth. Coffee prices are skyrocketing. People are getting their caffeine fixed from places other than soda and now coffee because it's getting so expensive.

22:36So overall, it looks like this industry is expanding at a rapid clip. But again, investors don't like when you see some short-term uncertainty, which is why Celsius stock plummeted yesterday. Finally, in line at the club is Elf Beauty, which actually fell 34 % yesterday after the company warned of tariff-related headwinds and voiced worries about the health of the American consumer. In a presentation, the company showed how every 10 % tariff increased its cost of goods sold by$17 million, which is not something investors jive with. This company is not doing well right now, Neil. It's not, but it has an ace in the hole because it recently acquired Haley Bieber's cosmetics and skincare line, Rode.

23:14And it's going to forecast that this company, or Rode specifically, this brand will bring in$200 million in sales this fiscal year. The CEO is chalking this up to uncertainty around guidance because for the past two earnings calls, they weren't able to issue guidance because they would have no idea what the tariff hit would be. Now, the first time they're issuing guidance and investors are like, well, that's a little lower than we thought. But it's been a bit of a black hole for most of the year now for Elf Beauty. So I guess if we had to tie all of these companies together, which I know it's kind of hard, is that they are taking some short term hits, are overall optimistic in the long term.