Patterico's Pontifications

4/14/2022

Elon Musk Flexes His Muscle In Cash Bid For Twitter

Filed under: General — Dana @ 2:44 pm



[guest post by Dana]

Oh:

Twitter, Inc. (NYSE: TWTR) today confirmed it has received an unsolicited, non-binding proposal from Elon Musk to acquire all of the Company’s outstanding common stock for $54.20 per share in cash.

The Twitter Board of Directors will carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders.

CNN reports:

According to an SEC filing, Musk has offered to acquire all the shares in Twitter he does not own for $54.20 per share, valuing the company at $41.4 billion. That represents a 38% premium over the closing price on April 1, the last trading day before Musk disclosed that he had become Twitter’s biggest shareholder, and an 18% premium over its closing price Wednesday.

Musk said the cash offer was his “best and final offer,” according to the SEC filing, adding that if it’s not accepted he would have to reconsider his position as a shareholder.

And here is an excerpt from Musk’s letter to Twitter:

“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” he said in the letter to Twitter. “However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”

He concludes his letter with:

“Twitter has extraordinary potential. I will unlock it.”

From Dan Ives, tech analyst with Wedbush Securities:

Musk is putting the Twitter board’s backs against the wall. The premium is at a level that will be hard to see other bids occurring.

According to Bloomberg’s Billionaire Index, Elon Musk has a net worth of $259B. And from one billionaire to another, here’s how Mark Cuban responded to the news:

–Dana

54 Responses to “Elon Musk Flexes His Muscle In Cash Bid For Twitter”

  1. Hello.

    Dana (5395f9)

  2. Mark is right about that. I’m just following the money.

    felipe (484255)

  3. Pump and dump.

    nk (1d9030)

  4. The blue check panic is real. There are midterms to sway and just thinking about the possibility of not being able to control who is allowed to say what and who sees it has them freaking out. Mail-in ballots might not be enough.

    Bezos-owned Washington Post saying billionaires are dangerous.

    And this gem:

    So do you FINALLY all appreciate that buying a Tesla is enabling the destruction of free speech?”

    Obudman (a21e8e)

  5. He doesn’t have the cash. His net worth is juggled balls (and he’s really got those) up in the air. He’s so leveraged, Archimedes could use him for an aphorism.

    nk (1d9030)

  6. More to the point, there are other potential bidders but they all have antitrust problems. Musk has none. Starlink is as close as he comes and the integration opportunities there are minimal.

    None of the big guys (Facebook, Amazon, Google or Microsoft) can get near this, not can telecom conglomerates like Time-Warner or AT&T. This is the best offer shareholders are likely to see. That doesn’t mean it will happen — Yahoo! (who had, then turned off, their messaging services) managed to fight off a generous offer, and where the F are they now?

    The board will accept it or there will be a new board that will accept it.

    Kevin M (eeb9e9)

  7. Elon Musk Is No Longer Twitter’s Largest Shareholder
    …….
    Funds held by Vanguard Group recently upped their stake in the social-media platform, making the asset manager Twitter’s largest shareholder and bumping Mr. Musk out of the top spot.

    Vanguard disclosed on April 8 that it now owns 82.4 million shares of Twitter, or 10.3% of the company, according to the most recent publicly available filings with the U.S. Securities and Exchange Commission.

    The asset-manager increased its stake in the company at some point during the first quarter, according to the filings. Vanguard’s holdings are now worth $3.78 billion, based on Twitter stock’s closing price on Wednesday.
    …….
    Vanguard isn’t making a directional bet on Twitter. Instead, the majority of its assets are in index and other so-called passive funds. The firm often sides with management on voting issues and doesn’t advocate for changes like a hedge fund or activist investor might.
    …….
    Mr. Musk along with former Twitter Chief Executive Jack Dorsey, who is number seven on the list (of top ten Twitter shareholders), are the only individuals among the top 10 shareholders in the company.

    The rest of the spots are occupied by financial institutions.
    ##########

    Related:

    Billionaire Prince Alwaleed Rejects Elon Musk’s Twitter Bid
    ……..
    A 2015 regulatory filing showed that Alwaleed, along with his Kingdom Holding Company, owned a 5.2% stake in the social media platform. The Bloomberg Billionaires Index estimates the position is now about 4.4% of Twitter.
    ………

    More Related:

    Elon Musk delayed filing a form and made $156 million

    Elon Musk was 11 days late in publicly declaring he had amassed a large stake in Twitter. That omission may have earned him $156 million, according to a half-dozen legal and securities experts.

    That’s because of a 50-year-old law that requires that investors notify the Securities and Exchange Commission when they surpass a 5 percent stake in a company. Musk reached that benchmark March 14, according to the filings. But he made his public disclosure only Monday.

    In between, he continued to buy stock at the price of around $39 per share, bringing his total stake to 9.2 percent. After his disclosure, Twitter’s share price rose roughly 30 percent and is now above $50 per share.

    The late filing netted Musk $156 million, said David Kass, a finance professor at University of Maryland’s business school. “I really don’t know what’s going through his mind. Was he ignorant or knowledgeable that he was violating securities law?” he said. Whoever was handling the trades for Musk should have known, Kass said.
    ……..

    Even More Related:

    Twitter investors sue Elon Musk for failing to promptly disclose the size of his stake
    ……..
    Twitter’s stock popped 27% on Apr. 4 after it was disclosed that Musk had amassed his 9.2% stake, worth almost $3 billion.

    The class action case has been filed on behalf of investors who claim they lost out on potential gains they could have realized had Musk disclosed his shareholding earlier.

    “What seems crystal clear is that Elon Musk missed the applicable 10-day filing deadline under Sections 13(d) and 13(g) of the Securities Act of 1933 to report 5% ownership in a public company,” Alon Kapen, a corporate transaction lawyer with Farrell Fritz, said in a statement shared with CNBC.

    “That gave him an extra 10 days in which to buy additional shares (he increased his ownership during that time by an extra 4.1%) before the per share price spike that occurred when he finally announced his holdings on April 4,” Kapen added.
    ……….

    Rip Murdock (d2a2a8)

  8. He’s so leveraged, Archimedes could use him for an aphorism.

    He owns 170 billion in Tesla shares, plus SpaceX which becomes a trillion $ company any day he wants it to. He may be leveraged, but his net worth is well and truly enough. He’ll get the money, and he’ll take Twitter to the next level.

    Kevin M (eeb9e9)

  9. IF Musk filed late, what about Vanguard that filed MONTHS late?

    Kevin M (eeb9e9)

  10. Twitter’s board is weighing a plan to thwart Musk’s takeover attempt.
    ……….
    The board met on Thursday to discuss Mr. Musk’s offer to buy the company, according to one of the people, who wasn’t authorized to speak publicly. The directors are weighing whether to move ahead with the poison pill — formally called a shareholder rights plan — that would limit the ability of a single shareholder, like Mr. Musk, to acquire a critical mass of shares in the open market and force the company into a sale.

    The poison pill defense is a common tactic used by companies that want to fend off unwelcome takeover offers. It essentially lets the company flood the market with new shares or allow existing shareholders other than the potential acquirer to buy shares at a discount. This dilutes the bidder’s stake and makes buying shares more expensive.
    ……..
    …….Twitter’s investors on Thursday seemed underwhelmed with Mr. Musk’s bid, potentially over concerns as to how he would finance it. While shares of companies typically rise when there is takeover speculation, Twitter’s were down almost 2 percent on Thursday.
    ……..
    Twitter’s other top shareholders, according to FactSet, include the Vanguard Group, the company’s largest shareholder, with a 10.3 percent stake; Morgan Stanley Investment Management, with a 8 percent stake; and BlackRock Fund Advisors, with a 4.6 percent stake. Vanguard and Morgan Stanley Investment Management declined to comment on Mr. Musk’s bid. BlackRock did not immediately respond to requests for comment.
    ……..

    Rip Murdock (d2a2a8)

  11. The class action case has been filed on behalf of investors who claim they lost out on potential gains they could have realized had Musk disclosed his shareholding earlier.

    This is stupid. If Musk had said “Hey, I just bought a lot of TWTR” 5 days earlier, the stock would have popped 5 days earlier. Maybe Musk would have had to pay more on subsequent purchases, if any, but no way these guys were going to get anything extra.

    Kevin M (eeb9e9)

  12. what about Vanguard that filed MONTHS late?

    Vanguard previously owned 8.39% of Twitter, it just upped an existing stake. Per the article, the additional shares were acquired during the first quarter of 2022. What is the evidence that their reporting was “months” late?

    Rip Murdock (d2a2a8)

  13. In February 2008, Microsoft made an unsolicited bid to acquire Yahoo for $44.6 billion. Yahoo rejected the bid, claiming that it “substantially undervalues” the company and was not in the interest of its shareholders. Although Microsoft increased its bid to $47 billion, Yahoo insisted on another 10%+ increase to the offer and Microsoft cancelled the offer in May 2008.

    https://en.wikipedia.org/wiki/Yahoo!

    Over the next 10 years the company declined rapidly and was eventually parcelled off for about $5 billion. They sure showed that Bill Gates guy!

    Kevin M (eeb9e9)

  14. Rip, we’re in the 2nd quarter — where Musk was doing his buying. Vanguard bought earlier and reported later. You attack Musk and not Vanguard. Maybe not “months” but some greater time.

    I don’t get your hostility. Are you such an opponent of freer speech that you take the sides of the censorious gatekeepers? When you claim that a private company should have total control over the messaging on it’s (openly sold public accommodation) messaging service, censoring as it will, and someone comes along and say “Well, OK, hold my beer!” why do you suddenly change sides?

    Kevin M (eeb9e9)

  15. Mark Cuban is projecting. He really cannot conceive of someone putting his money in harm’s way to enhance freedom. He’s careful not to offend China.

    Kevin M (eeb9e9)

  16. I don’t get your hostility. Are you such an opponent of freer speech that you take the sides of the censorious gatekeepers? When you claim that a private company should have total control over the messaging on it’s (openly sold public accommodation) messaging service, censoring as it will, and someone comes along and say “Well, OK, hold my beer!” why do you suddenly change sides?

    Kevin M (eeb9e9) — 4/14/2022 @ 5:23 pm

    It’s not changing sides. There are a lot of people who never believed the entire “private company” line. Some of them post here.

    frosty (0dec90)

  17. I think that Elon Musk’s “free speech absolutism” is the same as Carl Icahn’s concern for McDonald’s sources of ham and bacon.

    nk (1d9030)

  18. I read that Elon Musk once described Twitter as a clown car crashing into a gold mine

    steveg (e81d76)

  19. It is funny to see all the media people harrumphing over how they are the only ones who should be trusted with free speech

    steveg (e81d76)

  20. He owns 170 billion in Tesla shares, plus SpaceX which becomes a trillion $ company any day he wants it to.

    His Falcon rockets are now being used by the DoD to launch satellites in to space. With that kind of connection, it would take something incredibly egregious for him to get knocked off his perch.

    Like Bezos, Zuckerberg, and Thiel, Musk is one of the tech world’s “made men.” To whatever extent he ups his stake in Twitter, it will be dependent on to what extent it will benefit the government, not any of the concerns being vocalized on the platform or in the mass media at the moment.

    Factory Working Orphan (2775f0)

  21. “I read that Elon Musk once described Twitter as a clown car crashing into a gold mine”

    You sure that wasn’t a description of Elon? Maybe replace “gold mine” with “emerald mine”.

    Davethulhu (da3c71)

  22. I think that Elon Musk’s “free speech absolutism” is the same as Carl Icahn’s concern for McDonald’s sources of ham and bacon.

    I just don’t see Musk as a corporate raider. He’s Asperger’s, not a sociopath. I think he’s just completely pissed off at how badly the “clown car” is managing the gold mine.

    Kevin M (eeb9e9)

  23. I am really amazed at the number of people who can read Musk’s mind, stating with authority fairly divergent views of what he really means vs what he says.

    This is a man who has done everything he said he’d so so far. Electronics payments? Check. Electric cars? Check. Rockets better than NASA? Check.

    But here with Twitter, he’s just in it for a scam and a quick buck? I think you confuse him with Donald Trump (who has done utterly nothing he said he’d do).

    Kevin M (eeb9e9)

  24. I don’t know Musk but Wall Street does. Twitter closed at 45.85.

    nk (1d9030)

  25. On your other point, what billionaire ever became a billionaire by ever thinking that he had enough money?

    nk (1d9030)

  26. Does Twitter make a profit? Has it ever made a profit? What is its plan to make a profit?

    Twitter, when it functions as a bulletin board, can be fascinating. When it becomes an aggregator of bias or poo throwing, it does the Devil’s work. I don’t see how moderation can be anything other than either random and unfair, or bot driven and therefore Orwellian.

    I think the problems with Twitter will remain no matter who owns it and I doubt there is any real way to control the outpouring of venom. It requires people to stop attention seeking and start looking away from car wrecks. But, if it stops being free, I guess maybe it will dwindle enough in importance that we can go obsess on and freak out about some other social media thingy.

    How this thing with Musk turns out will be entertaining. If they still make movies 20 years down the road, it will be a good one.

    Appalled (1a17de)

  27. I think this is good because it’s likely to be entertaining and the most likely bad outcome (complete destruction of Twitter) isn’t really a big deal.

    I use twitter. In 1-3 minute increments throughout the day. Usually when I’m waiting for something; pumping gas, in line at the grocery store, at the end of a dull meeting when I don’t want to start thinking about a new task. So I’m a user who values twitter a little bit.

    I also really like free speech and individual liberty. They’re subjects I care about and issues I’m interested in.

    If a bored and emotionally immature billionaire wants to buy twitter he’s free to do so. I have no problem with it and I don’t see anything anti-competitive about Musk owning it. (Google / FB would have legitimate anti-competitive concerns) From what I’ve heard him say I don’t expect he’s going to make it better. His thoughts on free speech and moderation don’t seem very insightful or even well thought out / coherent, but I could be wrong. If he makes it better that’s good. It will improve my experience with the site. If he makes it worse I’ll need to find something else do to do kill time in 2 minute increments.

    The people who seem really invested in this seem to be RW culture warriors who view this as a chance to ‘own the libs’, LW culture warriors who liked the status quo, and free speech specialists who are irritated at all the dumb arguments being made by the first two groups.

    All of them are free to raise 50B and put in a competing offer and they can run twitter how they please.

    Time123 (9f42ee)

  28. Musk is worth 276B
    If. He buys twitter for 43B that’s 16% of his net worth, which is doable, but a considerable investment for him.

    I’ll be interested to see if he follows through.

    Time123 (9f42ee)

  29. Musk isn’t a free speech absolutist. He just has his own definition of what kind of speech he wants on Twitter so he’s (probably /maybe) trying to buy it.

    If you want absolute free speech GAB is there for you.

    Time123 (9f42ee)

  30. On your other point, what billionaire ever became a billionaire by ever thinking that he had enough money?

    Some people do things to make money, other people make money by doing things. Still others make money to do things WITH. In order, that would be Ichan, Dorsey and Musk.

    Kevin M (eeb9e9)

  31. If you want absolute free speech GAB is there for you.

    No, GAB, Parler, etc, are just hothouses for particular speech. And even those are subject to the infrastructure gods taking a dislike.

    But I do agree that Musk will find that there is *some* speech that he’d not tolerate. Then again, there is speech that the US government will not tolerate and even criminalizes.

    I also think there are people who would go out of their way to find Musk’s limits.

    But, even saying that, the current Twitter rules are horribly restrictive for a service that purports to be open and free. It allows children (and bots) to be the gatekeepers of the leading platform of political speech, and those gatekeepers are terribly narrow-minded, uninformed and unreasonable.

    Kevin M (eeb9e9)

  32. I do agree with nk that the Street is looking at this with a jaundiced eye. Money has no politics, so I assume they are discounting Musk’s follow-through; he has no history as a corporate raider — this may just be a rich guy trying to buy a toy.

    One of the possible outcomes is that someone else, or several someone else’s, steps in with a proxy fight to reform Twitter’s management. I don’t really see this because the objections to Twitter’s management are political, not financial — its value is its power to influence public opinion, not the money = power thing that’s more usual. A $43 billion price tag limits the field to more than the usual (e.g. the Kochs don’t have enough).

    If Musk comes to realize that HE would have to censor some folks, too — someone would start posting mangled-baby pics — he may give the pursuit up as a bad job.

    Kevin M (eeb9e9)

  33. Kevin, GAB is what you get when you maximize free speech on the internet. A lot of RW types went there when FB & Twitter banned them for wild conspiracy theory and ethnic slurs. But if you want maximal free speech you’re probably going to get something like GAB.

    But it doesn’t sounds like you want maximal free speech. It sounds like you just want a wiser moderation policy on twitter. I also want a wiser moderation policy on twitter, so if you want, I’ll chip in 1$. If you can raise the other 43,999,999,999$ you can buy and I think we’ll both like what you do with the place.

    Time123 (9f42ee)

  34. @32

    Other plausible explanations for Musks actions;

    1. It’s a pump and dump scheme. Buy some, announce an offer at a premium to drive the price up, sell for a profit.
    2. Distraction from something Tesla or Space-X related
    3. He’s not entirely stable and this is the billionaire version of a middle aged accountant feeling small and buying a Corvette to make himself feel more important.

    Time123 (9f42ee)

  35. If Musk comes to realize that HE would have to censor some folks, too — someone would start posting mangled-baby pics — he may give the pursuit up as a bad job.

    He’s already said he’ll block spam and bots. Spam is speech, just speech the listener doesn’t want. He was able to rationalize it as not really being part of free speech. Which is dumb.

    Time123 (9f42ee)

  36. Musk is worth 276B
    If. He buys twitter for 43B that’s 16% of his net worth, which is doable, but a considerable investment for him.

    Most of his wealth is tied up in Tesla stock, so it is not very liquid.

    Rip Murdock (d2a2a8)

  37. @36 So increase it to 25% of his Net and it’s still a manageable deal.

    Time123 (9f42ee)

  38. Even Truth Social bans users, especially those that “disparage” the site or its owners, or “the excessive use of capital letters.”

    Rip Murdock (d2a2a8)

  39. Elon Musk Needs ‘Massive Loan’ or Big Tesla Stock Sale to Buy Twitter
    ………
    Elon Musk’s proposed all-cash offer to buy Twitter Inc. represents about one-sixth of his $250.6 billion fortune. Yet the vast majority of that wealth is tied to his stake in Tesla Inc., the electric carmaker he co-founded that has surged in value over the past two years and lifted him to the top of the Bloomberg Billionaires Index.

    The purchase isn’t straightforward, but Musk has several financing paths. One option is to sell his Tesla shares outright. Another is borrowing against them to stage a leveraged buyout, possibly with outside partners. Musk, 50, currently has about $3 billion in cash or other somewhat liquid assets after spending $2.6 billion buying a 9.1% stake in Twitter in recent months, according to Bloomberg calculations.

    For Musk to raise the additional $36 billion in cash needed to buy the rest of Twitter would require selling about 36.5 million Tesla shares, or more than a fifth of his stake. Such an exit could risk a slide in the company’s share price — not to mention potentially raise questions about the commitment, financial and otherwise, of its chief executive officer.

    His other option is to borrow against his positions in Tesla and space exploration company SpaceX.
    ………
    But even for the wealthiest person in the world, there are limits: The Bloomberg index estimates that he’s already borrowed about $20 billion against his shares, leaving about $35 billion remaining that he could theoretically take out against the two holdings.

    “Musk’s ‘best and final’ $43 billion non-binding offer has numerous conditions, including completion of financing, which we believe give it a low probability of success,” Robert Schiffman, a Bloomberg Intelligence senior credit analyst, wrote Thursday in a report.
    ………

    Rip Murdock (d2a2a8)

  40. I wish him well as the current system is little different from Soviet control of the media. Let’s try speech for a change.

    NJRob (a4744b)

  41. There are many options for speech in the United States, both in legacy media and online. It is hardly like the USSR.

    Rip Murdock (d2a2a8)

  42. NJRob, do you believe the comparisons you make are accurate or is it hyperbole for rhetorical effect?

    Time123 (9f42ee)

  43. Truth social was never about free speech. Gab legitimately is.

    Time123 (9f42ee)

  44. Elon Musk’s $43 billion bid for Twitter lacks ‘legal clout,’ experts say
    ……….
    Securities lawyers say the irregular offer to take Twitter private lacks enough formality to suggest it’s instead a deliberate tactic to elicit a rejection from Twitter’s shareholders, and in turn, create wiggle room for Musk to dispose of his now more valuable shares.

    “If I had to guess, I would say that he’s making an unfunded, highly speculative offer, that the board will reject, in order to give himself cover for selling off his stake, now that his board seat gambit has flamed out,” University of Kentucky law professor Alan Kluegel said about Musk’s latest chess move.
    ………
    Kluegel and others question Musk’s intent to buy Twitter, in part because his offer departs from the way that activist investors typically communicate takeover proposals. Normally, they said, an activist investor prepared to buy a company files a SEC Schedule TO, which extends the offer to shareholders.

    “If this was an actual, serious attempt at a hostile takeover, there is a formal procedure for making a tender offer, which includes things like a mandatory time period for investors to consider the offer and the board to respond,” Kluegel said.
    ……..
    ……..Formal takeover offers, Kluegel said, typically come with a term sheet that details the number of shares the activist intends to purchase, the share price, the investor’s funding source, reasons for the offer, and any contingencies. By law, the filings trigger a 20-day window when the offer must remain open.

    Another questionable component of Musk’s proposal, some of the lawyers said, is that Musk characterized it as “non-binding.” Bradley Wyatt, an attorney with Dickinson Wright who specializes in capital markets transactions, said Musk’s approach doesn’t have the hallmarks of an offer that aims to close the deal.
    ………
    John Livingstone, a research fellow for Case Western Reserve University School of Law, says there’s also a convincing argument that Musk’s offer is legally deficient in that it doesn’t specify duration or financing terms required by the Williams Act, a federal law that governs takeovers.

    “It can’t just be an offer into perpetuity to purchase at $54.20. There’s nothing in [Musk’s filing] that indicates when this offer expires,” Livingstone said.
    ………

    Rip Murdock (d2a2a8)

  45. John Adams was so obnoxious, you could see how Franklin and Jefferson would want him banned from Ye Olde Twitter. 😉

    DCSCA (f4c5e5)

  46. Time123,

    I believe they are accurate. When leftists and former conservatives claim that censorship is the only way to save democracy they are spouting the Soviet platform. They show their desire isn’t truth, but control.

    NJRob (1efb24)

  47. nk (1d9030) — 4/14/2022 @ 4:45 pm

    He doesn’t have the cash. His net worth is juggled balls (and he’s really got those) up in the air. He’s so leveraged, Archimedes could use him for an aphorism.

    He’s not contractually allowed to pledge more than 25% of his Tesla stock as collateral and some is already pledged. He’s have to borrow on some of the Twitter stock he was buying.

    I think Elon Musk is playing this byy ear, but he really does want t affect Twitter. His reversals are caused by the fact he needs to declare in advance what his intentions are.

    Sammy Finkelman (02a146)

  48. Elon Musk didn’t explain why he needed to take Twitter private to d what he wanted with it. He could control it with 51%

    Sammy Finkelman (02a146)

  49. NJRob, thank you for taking the time to reply.

    Time123 (9f42ee)

  50. Sammy,
    Musk could control Twitter for 51% but the SEC rules would control him.
    Taking it private would give Musk a tremendous amount of freedom.
    I despise Twitter and think it is a carbuncle on the hind quarters of our nation, but other than that, it’s OK

    steveg (e81d76)

  51. He doesn’t have the cash. His net worth is juggled balls (and he’s really got those) up in the air. He’s so leveraged, Archimedes could use him for an aphorism.

    There are plenty of wealthy people who would happily invest in any one of his ventures. He’s Midas. You can still have investors in a private company; just different rules.

    Kevin M (eeb9e9)

  52. John Adams was so obnoxious, you could see how Franklin and Jefferson would want him banned from Ye Olde Twitter

    Oh, I don’t know about Adams, but picture Andy Jackson on Twitter.

    Kevin M (eeb9e9)

  53. 44: More projecting by people of their own venality. Musk has never played this game, why should he start now? The people who should be worried are the stockholders, whose upside has now been greatly diminished by the poison-pill adopted by the Board.

    Kevin M (eeb9e9)

  54. Musk sold enough of his soon-to-expire options in Tesla last year to pay 11 billion in taxes.
    He’s got a big chunk of that purchase price sitting around.

    ingot9455 (75888e)


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