I strongly feel that the spammers thing is smoke and mirrors.
The deal at $54.20 was maybe OK for him a month ago (it was great for Twitter because nobody else was interested at that price). Since then, Twitter reported disappointing numbers for the past quarter, and the entire market took a nose dive, with tech hit especially hard.
TWTR stock price was in the mid-30s before Musk's offer. Without the offer, and with the disappointing numbers, and with the recent market development, one could reasonably assume that the stock would be below 30 today.
Musk should just pay the break fee of $1bn, and renegotiate for $42.69 or whatever meme number he fancies. Why pay $42bn total for something when you can get it for $30bn.
When Musk started selling his TSLA shares to buy Twitter, TSLA fell by like $200 or like 20%.
It was becoming obvious that to buy Twitter, TSLA value would have to decline severely. IIRC, Musk only got around to selling $8 Billion pretax before quitting.
Musk thought he could afford Twitter. He sells some TSLA and the market collapses, and he suddenly decides against it.
Everything else is smoke and mirrors. Musk doesn't have the cash for the deal anymore (maybe he never had the cash for the deal). I guess Musk is looking at the $1 Billion ejection clause now and trying to weasel around it.
But at this rate, it looks like Musk owes Twitter $1 billion cash for this broke deal.
The $1b is not a simple breakup fee. He can't just say, "I've changed my mind, here's $1b, the deal is off." It's not a $1b option to walk away.
The merger contract provides the option to pay $1b to walk away under only limited circumstances: either the acquisition is blocked by a government, or Musk fails to get financing for the deal. The latter can't really be easily faked: if he said 'sorry, I thought I had the money, but I checked my couch cushions and it turns out I don't,' and paid the $1b to walk away, Twitter would sue and this assertion that his financing broke down would be tested by the courts.
In fact, out of those limited allowances to pay the $1b and walk away, Musk is bound by the contract to 'specific performance'. That is, he's bound to actually do it. Pay the $54.20.
Yeah, I didn't realize this since I guess I've only paid attention to the surface-level facts.
But digging deeper, the "people in the know" are now pointing out that this $1 Billion escape clause is actually very restrictive and unlikely to be invoked. Musk might be forced into buying Twitter at the previously negotiated $54.20 price.
But there's also the question: will Twitter's board really go to court to force Musk to buy it at $54.20? There's also the question of politics here. Even if Twitter's board is in the legal-right to do so, forcing Musk to become the new owner is bad politics.
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There's also the possibility of the Twitter Board's incompetence. Maybe they don't realize the advantageous position they're in and give up before testing Musk in court?
> There's also the possibility of the Twitter Board's incompetence. Maybe they don't realize the advantageous position they're in and give up before testing Musk in court?
Yeah. Wealthy individuals advised by the best experts can't figure out what is good for them. Only if they would have someone in their orbit who knows how to read hacker news comments. </sarcasm>
You have a hilarious amount of confidence about the competency of America's oligarchs. Elon is a financial scammer, his money all comes from government subsidies.
Those companies don't have people worshipping them like they're a collective of geniuses. Musk's companies certainly aren't any worse than those companies - but they're no better either, and he's no Messiah.
Saying that on HN is just cruel: you know full well you have exactly the niche in your grip that simultaneously wants to exclaim.. the behavioural tendency of the child that he is, and bears the feeling 'no no, not here'...
> But there's also the question: will Twitter's board really go to court to force Musk to buy it at $54.20? There's also the question of politics here. Even if Twitter's board is in the legal-right to do so, forcing Musk to become the new owner is bad politics.
Is there some kind of politics more important for corporate decision making than claiming the $20bn or so you're entitled to by contract?
> Is there some kind of politics more important for corporate decision making than claiming the $20bn or so you're entitled to by contract?
Sure. It's the principle-agent problem. Twitter as a whole might make more money under scenario A, but the people who make that choice on Twitter's behalf might make more money under scenario B.
Of course, that's short term thinking if you're a C-level executive. Because scenario A gets you more money at your next job. But if you're thinking about retiring, it could work.
That is indeed the big question. The court case would go on for a long time, and in the meantime they'd be in this weird limbo and the business would suffer.
What we're really seeing here is: can a very rich person completely flout a contract, ignore legal obligations he signed, and abuse the legal system to the point that contracts are basically unenforceable against him? Sure, he has no case, and there is no real conventional legal way to wiggle out of this, but that's not really the question, is it?
As Matt Levine said in his column today, a merger arb told him that "if you're reading the contract, you've already lost."
In all likelihood, it seems the most probable outcome is a modest adjustment of purchase price to further "secure the deal" (whatever that means). But Musk is a bit crazy, so while that's the most likely outcome, it's hard to say it with much confidence.
One particularly tricky nuance of contract law is that their must be someone with legal standing who wants the contract to be enforced. If Musk doesn't think he can put the funds together without damaging businesses he cares about more than owning Twitter, then he can pretty much just invoke the $B walk away if he wants to. The Twitter CEO and board were pretty clear they did not think Musk's acquisition was in the best interests of the Company, but they were legally obligated to consider an accept a fair offer of acquisition because it would be in the best interests of the share holders.
Suddenly getting $1B without having to accept Musk as the new owner is beneficial to the share holders, and crucially tying up the company in a years long lawsuit to force Musk to acquire Twitter would be expensive, and until the contract is either completed or dissolved Twitter's fund raising options are greatly limited. Suing Musk for wanting out would not be a sound financial move and could even result in Twitter becoming insolvent. Their stock price could crash, their funds to continue the lawsuit exhausted, and most likely under those circumstances Musk would win and immediately turn around and buy Twitter for a far lower price.
With that said, the only real question here is what will Musk do under the circumstances? Funding the acquisition could cause his other businesses to suffer or even fail. SpaceX is particularly vulnerable, and it wouldn't take much to end the Borring Company if Musk's finances are in a dangerous position. If he just walks away he's out $1B, assuming they'll allow it. That can't be a super attractive option. Most likely he's going to exhaust every avenue in an attempt to raise the cash without putting his other businesses at risk. But there's a clock on that, and he could end up owing Twitter a shit load if he stalls for too long.
>One particularly tricky nuance of contract law is that their must be someone with legal standing who wants the contract to be enforced
> but they were legally obligated to consider an accept a fair offer of acquisition because it would be in the best interests of the share holders.
Musk buying the company at 30% over market value seems like it would absolutely be in the best interest of the shareholders as well
> Suing Musk for wanting out would not be a sound financial move and could even result in Twitter becoming insolvent
Why not? This seems like an easy case and a huge win for shareholders. I feel like shareholders could sue Twitter into insolvency if they didn't pursue Musk for massive reparations if he flouted the contract
> digging deeper, the "people in the know" are now pointing out that this $1 Billion escape clause is actually very restrictive and unlikely to be invoked. Musk might be forced into buying Twitter at the previously negotiated $54.20 price.
Matt Levine had a pretty different take, pointing out that if Elon Musk suddenly appears to be unwilling to buy Twitter, his financing might see that and - suddenly, but perfectly legitimately - evaporate, which would be a valid reason for Musk to walk away.
It really is true that lending someone a lot of money to make an investment they aren't interested in is a much worse financial move than lending the same money to the same person to make an investment they are interested in.
I mean, if that's true it just goes one step back. Then his action breaking the contract would be to express equivalence or hostility towards the transaction.
> Matt Levine had a pretty different take, pointing out that if Elon Musk suddenly appears to be unwilling to buy Twitter, his financing might see that and - suddenly, but perfectly legitimately - evaporate, which would be a valid reason for Musk to walk away.
That was awhile ago. Since then, the funding agreements have been made public, and Matt's most recent take is that the funding basically can't disappear unless Musk can kill the deal via another route.
> There's also the possibility of the Twitter Board's incompetence
This has been repeated at nauseaum .
Just because you don't know their names and aren't shitposting on social media they are not incompetent.
They managed to screw Musk over, they basically looked at macroeconomics, regrouped after the initial no and sold Twitter to Musk at the very top of a 13 year old bubble in the making.
If you look at Musk carrer each and every time he sold onto bigger fools. Compaq, Ebay and of course all the equity raises of his overvalued businesses.
Twitter board managed to screw him over and demonstrate that only idiots don't change their minds, all in one swoop.
They have the upper hand now.
If everything goes as it should this would be like Trump election loss. Meaning a defeat that makes it so that you don't hear from a guy for a long time. A severe wound and an existential threat to the ego.
Oddly however, the other counterfactual of Musk being incompetent did not come up. This is after all, a person that paid the SEC $40m and has to have a company lawyer review what he tweets about Tesla.
He has autonomy into buying the absolute top of the 13 year bubble. Locking the purchase price at t minus 4/6 months. In 4/6 months when the acquisition is completed the S&P could be at 3210 and he'd have paid 54.20/share.
Or even sub 3000 if inflation becomes deeply entrenched in the economy.
If it gives him a cover story to sell $TSLA shares when that company is valued more than the next ten automakers put together, he’s at least getting a bit diversification and is winning on that side while losing on the Twitter side.
> I really don’t understand this comment. You think the Twitter legal team are so dumb to not have negotiated an agreement in their own favour?
Oh, the agreement is absolutely in Twitter's favor if Musk pulls out of the deal.
But that doesn't mean *suing Musk* to complete the deal is actually their best move. As usual, the best move is probably some kind of plea-agreement (or starting to sue to get into the position of a plea-bargain), where the details are figured out.
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There's really no "political benefit" to forcing Elon Musk to become the new owner of Twitter. There's a lot of room for creativity here. Maybe Twitter manages to extract a $2 billion concession or $5 billion concession from Musk (rather than the limited $1 Billion in the deal, since that only applies to very restrictive terms)
Or maybe Twitter just bans Elon Musk from their platform for wanton trolling and collects the $1 Billion. Who knows?
Just because Twitter's Board is legally allowed to do X, doesn't mean that they will do X. They will use X to threaten Musk into doing Y (and Y is what they really want). I'm not sitting in Twitter's Board of Directors right now, I don't know what their "Plan Y" is. But I have reason to believe that X (ie: forcing Musk to buy Twitter at $54.20) isn't in their best interest.
How about the obvious fact that Twitter is not currently worth $54.20/share? It's probably worth half of that if it weren't for the offer, given this week's climate. Surely it's at least partly their responsibility to negotiate the best financial outcome for the shareholders.
> How about the obvious fact that Twitter is not currently worth $54.20/share?
Shame on Musk for writing $54.20 into the contract then.
Just because the value of something changed after you wrote the contract doesn't mean that you can break the contract unilaterally. Musk could have gotten around this with an all-stock deal (ex: I'll give the Twitter board 100,000 shares of TSLA or whatever), or other ways to write the contract without setting a particular dollar amount.
But Musk wrote $54.20 and signed it.
And the contract even says the Twitter Board can force Elon Musk to buy Twitter and finish the deal at $54.20. So they made it crystal clear to Musk (and his lawyers) that the $54.20 price points stays, no matter how Twitter's price changes over the next weeks.
But 54.20 ends in 420, which means weed. Musk loves to memelord.
I think offering a direct swap for his TSLA shares at 20:1 would have been a smart move. It would have cost him like 5% of TSLA, which is a lot but still would have left him with the same % that Bezos has of AMZN
And Tesla has recalled nearly half a million cars mfg between 2017-20[0]. That's a solid percentage of all the cars they've manufactured during that time. I shudder to ask what you think of its leadership.
One thing to consider is that if he can show that something potentially material like the fake account percentage was incorrect, then that may offer him an out.
Musk can claim that he relied on these numbers when making the offer. "Material misrepresentation" is the term he'd use and it just might work. There's an implied good faith in every contract, so irrespective of how "strict" the terms are, Twitter may have difficulty enforcing the agreement in this scenario.
That is, Twitter would have had to literally disclose that these numbers were unreliable, and have Musk agree under those terms in order to not have a fight on their hands.
Twitter would have to be run by people that don't want the $1B payout and for Elon to just fuck off. News flash, they current executives and even the founder do not want Musk to acquire Twitter. Everyone with the legal responsibility to sue Musk for taking that way out have no interest in doing so. The $1B walk away clause requires musk to pay because being in a position to be acquired negatively impacts their ability to raises funds. They're even under a hiring freeze, and the reason is probably due to a combination of uncertainty around the deal and partly because they can't due things like sell additional stock or bonds, and their ability to acquire new lines of credit are greatly reduced until the acquisition contract either completes or is dissolved.
Presumably a class action lawsuit of TSLA shareholders might force him to buy their shares at 54.20. Which, hilariously, might then get diluted by the poison pill.
This is incorrect. The contract says that they can indeed to legally force him to go through with the deal and price that he agreed to. If it turns out to be more than twice the current valuation of twitter, they should do this. But they probably won't
Keep in mind there's the very real possibility of twitter just negotiating for a $2 billion (random number between $1 billion and $44 billion) break up fee to use a different reason
Because if he didn't think the government would approve the deal, he shouldn't have made the offer in the first place. By making the offer he is creating a massive amount of distraction and uncertainty for the company-to-be-acquired, and if in the end the deal is voided because the government blocks it, then the company-to-be-acquired need to be compensated for all the wasted time and effort that went into a failed deal.
This is very common in large acquisitions and mergers. Remember, Must didn't have to include the $1B walk-away fee. But if he didn't, then the board may have been much less likely to accept the offer.
The lawyers came up with the terms and contingencies. Once signed, you're expected to hold up your end of the deal. I'm sure the lawyers have experience with court-cases / whatnot and have the precise court-cases which led to this style of agreement... but that doesn't matter anymore.
Musk agreed to it, so it must be upheld in that manner.
ATT had to pay T-Mobile when their deal fell through due to the government. Look at this way Twitter just made a whole bunch of business decisions based somewhat/mostly on Musk's takeover. If he pulls out, Twitter will be hurt financially. Or suppose it was a hostile takeover by a competitor - they could fein a takeover - hurt their competitor - then walk away.
I don't think he did. Section 8.3 deals with the termination fee and it doesn't list 8.1(b)(i) as a reason it gets paid. 8.1(b)(i) is the government blocking.
mediaman’s comment (and the article they linked) says that the government blocking the deal is one of the limited circumstances in which Musk wouldn’t have to pay.
I may have been unclear. He wouldn't have to buy Twitter if the government prevented it, but he would be required to pay $1b. Outside of those circumstances, he is contractually forced to buy Twitter.
The government issue and the money issue are basically the two scenarios in which Musk would be unable (not just unwilling) to complete the transaction. So that's where he has to pay the fee. Otherwise, he can't change his mind.
No, I think you were clear, and I wasn't. :) I understood that it was more "he won't be on the hook to buy Twitter if the government prevented it but there's still a kill fee," but bungled describing it.
(I know "kill fee" isn't the right term, but that's what we'd call the equivalent in publishing!)
To further compound the problem, a significant chunk of Musk’s financing for the deal relies on leveraging (some of) his TSLA for a $12b or so loan. The loan mechanics require TSLA to maintain $740 or higher. When the deal was announced, it was $1,026. It has closed below $740 for the past two days currently at $728.
IIRC, Musk makes Twitter a 100% cash offer. Twitter accepts, but writes the deal such that if either side pulls out of the deal, then a $1 billion penalty will be applied.
Musk goes to the banks and secures a $20 billion-ish loan, putting TSLA as collateral.
Musk starts to sell TSLA for the other $20 billion of cash. Stock tanks as a result, only ~$8 billion sold on public filing documents.
Musk runs around looking for another $12 billion for the last week or so.
And now we have today where it looks like he is failing his side of the deal. If Musk lost the $20 billion-ish from the banks due to TSLA being too low, it makes sense for him to give up.
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All that is going on right now is Musk trying to blame Twitter for the failed deal, so that he avoids the $1 billion penalty written into the contract.
I am curious if his inability to raise money for the acquisition is a strong signal of the sliding value of social media. Facebook and Twitter seem to be on a streak of trying to pivot, Reddit is in private equity. Musk is fairly well-connected, so if he's unable to get other rich people to invest, their speculative value (at the height of their value) may be vanishing.
Had you posted under any other topic relating to Musk before today, you would have had replies here claiming "Musk is highly intelligent and helped create at least 3, multi-billion dollar companies, with 2 more in the pipeline (neuralink and boring). How dare you question his genius".
Since there aren't, I'm using this comment as a reminder against confirmation bias.
He is all of those things. But he's also full of shit.
Those two thing can be true at the same time.
I follow many VC Twitter accounts and it seems to me, even the 'nice' ones are giant turds when it comes to any kind of social or communitarian understanding of the world.
But they understand startups very well.
It's common among successful people, I think, to be really great in their core competency, to have fairly astute understanding of other things and yet be completely glib at the same time, and lack the self awareness to recognize it, supported by the fact that 'nobody challenges them' on anything.
TSLA has a problem with its stock. It's way overpriced for the size of the company. For Tesla, the company, to grow into its stock price, it has to make more cars than Toyota, GM, Ford, Volkswagen, and the rest of the top 12 car companies put together. Toyota alone makes 5x as many cars as Tesla.
Which means TSLA is a meme stock. And the bottom is falling out of meme stocks.
> For Tesla, the company, to grow into its stock price, it has to make more cars than Toyota, GM, Ford, Volkswagen, and the rest of the top 12 car companies put together.
You’re right that Tesla is valued on future performance but this part is just factually wrong. They will need ultimately to make more profits than those companies combined, but the number of cars is not that important. Apple has a ~25% share of the phone market but makes most of the profit.
> They will need ultimately to make more profits than those companies combined, but the number of cars is not that important
That climbs pretty linearly with car sales. There's only so much margin you can make with a vehicle in any market. Apple manages to have higher profit at lower sales because selling a phone for $1000 that cost $200 is possible since millions of people can afford $1000.
Selling a $100k car that cost $20k is a much bigger margin than maybe Toyota has, but there are very few people who can afford $100k cars. Eventually you need volume. Apple itself has huge volume, they are outsold by around 20-30% against Samsung, not by 5000%.
Yes, automakers can push the "more car per car" thing. Luxury cars don't really cost that much more to make than low-end cars, and the profit margins are much better. But the market for high-price cars is limited, and there are too many companies in it already. The volume is in the low-priced cars.
These sorts of discussions start to seem nitpicky when you're talking about the sheer magnitude by which they're overvalued. Whether they have to make more _profits_ or _cars_ than every other car company combined doesn't really matter because it's so ridiculous.
Can you say "margin call". His tune has changed - he realizes he cannot do it with Tesla stock. Bringing in other investors now. They will want a return on their investment other than "freedom of speech" if you believe the BS he used for a reason in the first place. There are some things even the riches man on the planet cannot have.
And that is outdated information, as we clearly see that Musk is now thinking of pulling out of the deal entirely.
When Elon Musk's networth is almost entirely tied up in TSLA shares, when the price of those shares declines by 20%+, it changes plans. Banks are less likely to take Elon Musk's collateral (almost certainly TSLA shares), Musk himself loses a chunk of networth and loses an ability to raise dollars, etc. etc.
Yesterday when he started running into trouble with the margin loan, the headline was that he was in talks to secure different financing. That doesn’t make my info outdated.
If you can get several tens of millions of dollars, liquid, on fairly short notice, there's almost nothing you can't buy on a whim. You may as well have infinite money. It doesn't matter that you can't liquidate another 90-99% of your net worth easily. You borrow $60m for that second yacht, then pay it off as soon as the tax situation looks favorable for realizing some gains. No big deal. Live like (er, better than) a king, pay taxes like a pauper. It's the American way.
Larger sums are only really useful for making big-splash investments. Like this. As far as personal spending goes, it's no obstacle, so it doesn't matter that they can't easily turn their entire net worth into a literal billions-of-dollars balance in a checking account.
Right, big-splash, chest-thumping investments are about the only thing that might be a problem. Not ordinary purchases. But that's not so much buying something, in the ordinary sense, as shifting investment strategy.
At least one reason it matters is the gigantic numbers poison public discussion of wealth. People commonly claim things like Musk can single-handedly end world hunger because he has enough net worth to buy everyone food for the next 20 years. That isn't true if there is no way for him to liquidate enough of that worth without destroying the worth in the process. What these people actually can do is give away equity shares to the poor, but you can't buy food with equity shares. Or, in Bezos case, since he owns Whole Foods, I guess he can just give away food.
Didn't he end up not helping at all after previously committing billions to it?
I feel like he's not obligated to do anything, but ignoring his commitment makes him a worse person, and there are probably amounts greater than zero which do not encounter the issue you describe
It seems to me like they did, they came up with a plan and everything.
Are we sure Elon isn't just claiming that he forever wants more detail, like a sealioning troll, because in actuality he wants the money for himself more, and never actually intended to make the donations he committed to? Occam's razor would suggest that is actually the case.
I mean, if we was serious about it, after he received the plan, did he ask for more detail on any of the items he didn't understand?
it's actually just a plan, not a 'so-called "plan"', whatever that means
>It doesn’t say how they’ll spend the money aside from allocations
the way the money will be spent, is by allocating money to the items that it will be spent on, which are detailed in the plan.
that seems good enough to start for me, but where did Elon ask for more info than that? I asked this in the previous post, but very conspicuously got no answer.
surely he didn't just _forget_ about _billions of dollars he committed to donate to charity?_
That's true but wealth at that level is essentially relative anyway.
There's little you can do as a billionaire that you couldn't do as a hundred-millionaire when it comes to simply buying things for liquid cash. You can buy all the houses, boats, private islands, etc. that you want.
The only meaningful difference in wealth at that scale is buying fundamentally scarce things: specific real estate and private islands, favors from politicians, private time with other powerful people. For all of those, you are competing with other wealthy people to win them, so it's relative wealth that matters.
I agree with your point in general, but I think you'd need to scale the two example numbers each up by an order of magnitude. A hundred-millionaire is definitely rich, but can't buy all the houses, boats, private islands, etc. that they want. A single property or a yacht can easily cost well into the tens of millions. Plus if you're living in a $10M+ home, your annual expenses are presumably significant, so you'd want to keep a fair amount to live off of.
It's probably ridiculous to most to think of hundred-millionaires being financially constrained, but I do think there's a material difference in the buying power of $100M and $1B without getting into unique goods.
> Most if not all of these people can't liquidate even close to their "net worth"
I think that's broadly true, though some of the older ones might be able to. Bill Gates, for example, has diversified his wealth out of Microsoft (and he doesn't control the company these days, anyway). I don't think the market would punish Berk or AutoNation, for example, nearly as hard as they've punished Tesla for Elon cutting his ownership stake.
It's not punishment. Stock price * shares != actual value of the company. As more shares go onto market, demand naturally decreases as supply satiates existing demand, thus causing the price to decrease. I'm sure this is covered in some basic economics course that I never took.
And yet we treat the market cap as the actual value of the company. Also, sometimes the actual value can be more—for instance if a buyer comes along who wants all of your company, to take it private.
It would be interesting if there were some way to calculate something like the "cash net worth" of individuals. Work out what they could actually reasonably expect to get if they liquidated all their assets. Obviously it would be a pretty rough estimate, but you'd definitely see some reshuffling of the richest people lists.
Call it what you will, I don't think it's just the economics of putting more shares on the market. When the CEO dumps ownership, he is signaling a lack of confidence.
What did Bill Gates signal when he diverted his Microsoft stock into the Bill Gates Foundation back when he was forced to step down as CEO after the antitrust lawsuit?
Not all sales are equal. Here you have a guy who essentially arrived at the end of the road and brought Microsoft where only Standard Oil arrived before.
Both had extinguished all their natural competitiors and had to be essentially stopped by the US Federal Govt.
Stark contrast with the CEO of a luxury automaker who inflated a financial bubble to enrich himself who is now selling to buy a social media platform.
The evidence against this is that tsla stock has gone up since musk said the deal was "on hold". This may be because the market expects him to not have to increase supply by selling more shares, but he's already trying to arrange outside funding to limit what he has to sell.
It could be that confidence in musk and his brand is having more of an impact on share price than supply and demand. He's behaving erratically and is clearly distracted from running tesla by this twitter fiasco. I'm not sure what weighs more on the minds of institutional investors.
Which is why it's not at all unexpected that the Twitter board after some hand-wringing jumped on the deal because even at a "loss" someone who offers to turn your illiquid assets into cash without tanking the value of those assets is literally the dream exit.
Except the Twitter board had almost no shares between them (Jack being the only exception). I recall reading that none of them even tweet, but that's neither here nor there.
Drug dealers are just middlemen though. Would you really trust the chemist that has never tried their own goods and has an overall disdain for drug usage.
Kind of stretching the analogy, but you hopefully get my point.
I don't see mention of the number of Twitter users and investigation on fake accounts. I guess that falls under the misrepresentation of accounting section. It looks like a fairly standard acquisition/merger contract.
The mention of the 1 Billion penalty is however pretty easy to find.
It seems like he only needed to put up $4bn of his own money. The rest of the financing was leveraged with loans. And some investors would also keep their shares (like the Saudis)
I think the parent was suggesting, without being so blunt, that TSLA is undervalued and grabbing some of those shares while they're cheap is his strategy.
And, of course, the counterstrategy is to wait until next Wednesday, when the price of TSLA moves upward, then sell and catch the falling knife when other institutional buyers ease off the stock price.
To be clear, I hold no shares of TSLA because you can get hurt trying to catch falling knives.
Well if his only goal was to get Trump back on the platform, perhaps it's better he loses 1bn and fail instead of 42b and Trump back on? - and even if he loses the billion, Trump might still get back on.
Every step of the way some armchair comes up and concludes that Elon is broke and this deal won't go through.
Why wouldn't he put up more Tesla as collateral? How do you know he can't get more financing? How much BTC, Doge and eth does he have? No one knows how rich this man is, people need to stop acting like they do.
> Why wouldn't he put up more Tesla as collateral?
Because he didn't. If Elon Musk had easy access to Tesla-as-collateral, he would have put more of it up as collateral.
> How do you know he can't get more financing?
Because he's cutting himself out of the deal. That suggests he has run out of options to get money.
Besides, surprise +50 BPS from the Fed just made it incredibly more difficult to get financing from the banks, and -20% to TSLA's stock price in the past couple of weeks compounds upon this fact, and makes it more difficult to use TSLA-shares as collateral.
> How much BTC, Doge and eth does he have?
Whatever amount he has, it is worth about 25% less than two weeks ago.
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EDIT: I mean, maybe Musk has the money and is just trolling all of us? Which sounds on-brand for him frankly. I don't know why he'd want to do that, but he's not exactly a "stable" figure.
> Musk should just pay the break fee of $1bn, and renegotiate for $42.69 or whatever meme number he fancies. Why pay $42bn total for something when you can get it for $30bn.
That's not really how the break fee works. There's a specific performance clause that allows Twitter to force Musk to go through with the deal as long as he has the money (which, shockingly, seems to have come through). They'd only give up on that and take the break fee if the deal was truly over and they were prepared to say no to a lower offer.
I admittedly haven't checked the full agreement, but if that is the case, then the angle over the less than 5% spammers/bots makes even more sense, if that number was indeed part of the agreement.
1) That number was not part of the agreement
2) What is part of the agreement is that Musk waived his right to due diligence
3) That number is part of Twitter’s usual investor disclosure, but with a caveat that it may be wrong; besides, Musk may only break the deal if any incorrect disclosure constitutes a “Material Adverse Event” which in Delaware law means he must prove it affects the value of the company by at least 40%, which this obviously does not
> We currently estimate that false or spam accounts represent less than 5% of our MAUs. However, this estimate is based on an internal review of a sample of accounts and we apply significant judgment in making this determination.
Here's the actual quote from Twitter's IPO. 0% chance Musk is convincing a judge this statement is "materially off" given the amount of disclaimers attached.
Similar statements in more recent fillings have all come with similar disclaimers to the best of my knowledge.
Yep, agreed. It doesn't seem like he has much of a shot. The only way it seems possible is if they knew it was materially off, there are internal docs with analysis showing something like 10%, and they just lied and put some language around it to give them wiggle room.
You should definitely read Matt Levine's coverage of the fiasco.
Quote from his newsletter:
> That contract does not allow Musk to walk away if it turns out that “spam/fake accounts” represent more than 5% of Twitter users. We discussed this last month, when Twitter admitted in a securities filing that it had (slightly) overestimated its daily active users for years. The merger agreement contains a provision that allows Musk to walk away if Twitter’s securities filings are wrong — and this 5% number is in its securities filings — but only if the inaccuracy would have a “Material Adverse Effect” on the company. (See Sections 4.6(a) and 7.2(b).) That is an incredibly high standard: Delaware courts have almost never found an MAE. An MAE has to be something that would “substantially threaten the overall earnings potential of the target in a durationally-significant manner,” the courts have said; there is a rule of thumb that an MAE requires a 40% decrease in long-term profitability. If it turned out that 6% or 20% or 50% of Twitter accounts are bots, that will be embarrassing and might even reduce Twitter’s future advertising revenue, but will it be an MAE?
There isn't a way for him to exit the deal – Twitter can compel him to go through with it based on the contract. The main question remains though: Will Twitter go through the arduous and potentially ruinous process of forcing him to honour his obligations? Is this a negotiating tactic on his behalf (Is he trying to get a better deal)? If he does want out, will Twitter compromise and take a settlement (they could ask for way more than oft-discussed $1B exit fee)?
This is Musk being Musk, and personally I hope if he does try to back out or renegotiate, he gets punished severely.
Matt's understanding of M&A is... a little shallow. An MAE or MAC is about something changing between the time of the deal being signed and actually closing.
There doesn't need to be an MAE or MAC for a deal to fall through if a representation the target makes is false. In this specific case Musk can walk if any of the reps & warranties are false (or any of the covenants are breached).
I looked it up and the news seems to be reporting what you said, but it is not true. Section 9.9 of the agreement is contingent on a bunch of conditions being met, after which the deal is forced through if it is also funded. For some reason the media misreported it out of context. The break fee is paid by either Twitter or Elon, depending on who cancels the deal.
Yes, it is public though I don't have a link. To the best of my knowledge, Twitter is accountable to the SEC if they materially misrepresented any numbers about their business. I don't think the deal has any specific language about that.
I am not a lawyer, let alone a securities lawyer, but from what I have seen over the years, I suspect that if he just backed out but did not renegotiate, or did not do so with a plausibly-acceptable offer, he would likely be sued by Twitter stockholders claiming his actions had done harm to Twitter's valuation - a claim which can at least be made even though the market is falling broadly. If that puts pressure on him to renegotiate, that pressure would seem to strengthen the Twitter board's hand in seeking a considerable premium over whatever the then-current valuation of Twitter will be.
It is not clear to me that the personal cost to Musk would be less than what he initially expected it to be, measured in units of Tesla stock, though I agree it could be less than if he completes the current deal.
As for the spammers thing, Musk waived an extensive due-diligence investigation, and now he is complaining about issues that should have been covered by that investigation.
>Musk should just pay the break fee of $1bn, and renegotiate for $42.69 or whatever meme number he fancies. Why pay $42bn total for something when you can get it for $30bn.
Perhaps because the board and shareholders will be far more inclined to reject an offer from Musk after he feigned buying it one time and backed out?
> Perhaps because the board and shareholders will be far more inclined to reject an offer from Musk after he feigned buying it one time and backed out?
He didn't feign anything. On the contrary, he's proved that he was dead serious about it.
All he'd be doing would be renegotiating the price, which is something that any reasonable person would do when the circumstances change so drastically (assuming, of course, that a renegotiation would be possible).
Don't think for a second that Twitter would walk away from Musks's offer if someone were to offer $60 a share.
No, that's not legal. Trying to back out of this deal because market fluctuations caused the company to be worth less than he wanted would be very, very much against his contract.
He can only back out is Twitter's securities filings are so wrong that profit projections are more than 40% off (MAE standard) or he was unable to secure financing. Spambots being a bit higher than projected is not enough to break the contract, especially given that Musk waived due diligence and that the Twitter filings have always said that the bot number is an estimate. Elon Musk's lawyers are probably more than a bit panicked right now.
Doubt it. They have a client who makes things difficult, but that's nothing compared to the stress of being in a job where a wrong decision costs lives.
I think you underestimate the human ability to feel stress. I recently heard about a video game developer/director having a stroke due to stress from extended crunch. A video game! No lives at stake there. Heck, you should have seen how stressed I was in grad school ... I was nearly suicidal on occasion. But absolutely nothing substantial hinged on the work I was doing.
Feels like you'd have to offer substantially more premium, or more breakup fee, or (probably) both, if you've intentionally broken your last deal and then you turn around and propose another.
Now that's premium starting from a lower base, but...
Also, it does feel a little "manipulation"-y to tank the price on news of you yourself trashing your deal, then taking advantage of that to make the same deal but cheaper?
Of course any analysis is assuming Elon actually means it and didn't just tweet this as a joke or on a whim.
> Also, it does feel a little "manipulation"-y to tank the price on news of you yourself trashing your deal, then taking advantage of that to make the same deal but cheaper?
Elon Musk's past behavior has shown him to be extremely comfortable with this tactic.
> Musk should just pay the break fee of $1bn, and renegotiate for $42.69 or whatever meme number he fancies. Why pay $42bn total for something when you can get it for $30bn.
I just assumed this is his plan here? He manipulates the market with his shenanigans and trash talking, lowers the price of Twitter by a massive amount, then buys it for a bargain.
He breaks, says his independent investigation says 5-30% of Twitter is bots. Price tanks even further than natural market would dictate. Buy at a much lower price.
And yet you've probably never seen my tweets, because I'm generally not replying to celebs' tweets. Bots (owners) are trying harder than most people to maximise their visibility before getting banned, so it's expected that you would notice a higher proportion than they actually represent. That's not to say I have any reason to think the bot share isn't higher, just I don't think it's possible for any single person to judge anywhere near accurately considering the huge scale of Twitter and that therefore any one of us users is only seeing a tiny, tiny fraction of the accounts/tweets being posted.
Maybe consider where you're looking is more likely to attract bot replies? It's like an NFT discord you're more likely to see spam for eventual rugs because they're hunting people already proven to be likely to invest in stupid NFTs. Step off celebrity twitter and there's a lot less bot activity because it's less profitable to spam there.
I'm dying to know how they're defining "bots" for this purpose and whether it's specifically defined in the agreement. I suspect a (perhaps feigned) argument over the scope of the definition will be the deal's undoing.
Twitter would pocket a billion dollars - ~5x its net cash flow for last year - why on earth would it sell for _less_ when it can invest that cash in just about anything? He'd be buying the company years of runway to build... whatever it wants - at that point I'd invest in twitter as soon as Musk's check cleared.
This isn't a renegotiation, this is him paying points on his mortgage for a lower rate - but where the points paid go towards the previous owners either way.
Better lawyers isn't a fool proof trump card you can use to just get out of anything. This isn't like Trump stiffing contractors on a job site where he has all the money and the contractors are (relatively speaking) penniless.
Does it stipulate that the billion has to be in cash? What if he trades rides to the ISS for the board members? If it doesn't have to be in cash, then it could cost Musk less than the number of the contract.??
Not sure if you're serious, but no, he can't pull crap like that and neither can anyone else who signs a contract specifying a penalty in dollars. Rides to the ISS aren't dollars.
Of course I'm not serious. If the board accepted payout equivalents for themselves and not the remaining stock holders, they would not be upholding their fiduciary duties. Oh, and then you know, accepting of bribes and what not.
It's more likely Musk never intended to go through with it but got caught up in his own bravado. Now reality is coming in hard. He was going to lose a lot on this deal.
You always need to pay much more on payouts than the current stock price.
There is no chance he could buy it for $30bn.
Unless history and future predictions suggests that there is no chance for stock to grow in foreseeable future.
I mena, he’s obviously rich as hell, but the imaginary la la land of his reported net work isn’t real. When it comes to actually forking over real money he can’t afford to buy twitter
> As a result of these developments, we believe that if Elon Musk’s bid for Twitter disappeared tomorrow, Twitter’s equity would fall by 50% from current levels. Consequently, we see a significant risk that the deal gets repriced lower.
The board and execs consented to a takeover by an ideological adversary...the company culture is smashed and will never return
If he walks, the stock craters and employees know the board is no longer invested in the future...if the deal goes through, employees will have to March to Elon's beat or be fired. Either way...bye Twitter
This sounds like some kind of ancient samurai lore wrapped in traditions of sacrifice and nobility.....instead of a business deal happening in the United States of America.
"Consented to takeover by an ideological adversary" -- why, because Trump is banned? Is Musk going to try to bluff Facebook with an offer too?
What if the deal fails? How will Musk ever live down the dishonor?
He specifically said this is his final offer and he does not want to do back and forth to negotiate the deal. Then why would he do it now? It would look like he is not keeping his word/promise by not respecting his "final offer". He should just admit that he paid too much for the deal and just pay up and move on.
The deal at $54.20 was maybe OK for him a month ago (it was great for Twitter because nobody else was interested at that price). Since then, Twitter reported disappointing numbers for the past quarter, and the entire market took a nose dive, with tech hit especially hard.
TWTR stock price was in the mid-30s before Musk's offer. Without the offer, and with the disappointing numbers, and with the recent market development, one could reasonably assume that the stock would be below 30 today.
Musk should just pay the break fee of $1bn, and renegotiate for $42.69 or whatever meme number he fancies. Why pay $42bn total for something when you can get it for $30bn.