Say what you will about Elon Musk, but that guy’s really attached to the weed number. I mean, in his failed bid to take Tesla private — failed at least partly because he did not have “funding secured” — Musk offered $420 a share. And now, here he is bidding for Twitter at $54.20, which values Twitter at $43 billion. After all, Musk said “this is not a way to make money” for him in an interview with Chris Anderson. “I don’t care about the economics at all,” he said. The man likes what he likes.
And right now, this prolific shot-putter likes Twitter. Not enough to talk about the business things he’s going to do to improve it, mind you — but enough to be the very first meme activist investor. A hostile takeover! God, I feel alive.
““YOU DO WONDER IF HE’S THOUGHT THIS THROUGH.”
“You do wonder if he’s thought this through,” says Stephen Diamond, an associate professor of law at Santa Clara University.
For those of you who are not terminally poisoned by an obsession with corporate finance, a hostile takeover is when someone offers a bunch of money to buy a company without the cooperation of the company’s management. Usually, when someone wants to buy a company and take it private, they consult with the company’s management and come up with a price and try to make people happy. You know, a whole courtship ritual.
A hostile takeover is more, well, hostile — and also more unusual. Management is bypassed. “If you’re serious about this sort of thing, you line up financing in advance,” says Diamond, who notes that Musk hasn’t done that. Morgan Stanley is advising Musk, and I imagine they’ve talked to him about this, though whether Musk was listening is anyone’s guess. Musk confirmed in his TED Talk that he could pay for the whole thing but doesn’t want to. (Musk also says, “The intent is to retain as many shareholders as is allowed by the law.”)
Perhaps you remember last week, when Musk disclosed his ownership of 9 percent of Twitter, turning Twitter into a meme stock and sending its shares up 27 percent. Then, he was going to be a board member — though that hinged on an agreement for him not to own more than 15 percent of shares. At some point this weekend, he changed his mind about the board position, and now he’s doing what is, even for him, a truly remarkable corporate troll.
“MUSK ALSO SAID HE TWEETS FROM THE TOILET
On April 13th, Musk, who is Twitter’s second-largest shareholder, sent Twitter a little letter with the $54.20 per share offer. That number is a 54 percent premium over the share price before Musk started buying stock and a 38 percent premium over the share price on April Fools’ Day, which was, as fate would have it, the last trading day before Musk announced his Twitter ownership.
In the SEC filing for the bid, Musk indicates his primary interest is “free speech.” “I think it’s very important for there to be an inclusive arena for free speech,” he said in today’s TED Talk. “Twitter has become kind of the de facto town square. So it’s just really important that people have both the reality and the perception that they’re able to speak freely within the bounds of the law. ” Musk also said he tweets from the toilet.
Musk has always taken an expansive view of the First Amendment, and I’m not entirely sure that he’s aware it only applies to government censorship of speech, but I’m also not sure he cares. In his SEC filing, he writes, “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.”
Okay, so why the takeover? Well, “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 writes. What these transformations might be is anyone’s guess — Musk has been suggesting an edit button, complaining about “top” Twitter accounts that don’t post enough and suggesting a special authentication tier for Twitter Blue in between visits to Berlin fetish clubs. Product suggestions are all well and good, but I don’t really see how that connects directly to the bottom line.
““THIS IS NOT A THREAT.”
This letter is like a three-tweet thread, tops, but Musk has a long history of preferring private companies because, as his biographer Ashlee Vance writes, “Musk prefers to operate in secrecy.” Going public with Tesla, a financial necessity at the time, “represented something of a Faustian bargain,” Vance writes in his 2015 book, which Musk has rated “mostly correct.” And “hey, I want to take Twitter private because I’m a control freak” probably doesn’t feel right for a takeover offer?
Anyway, in the filing, Musk says he doesn’t want to play footsie with Twitter. He’s making this offer, and if the deal doesn’t work, “I would need to reconsider my position as a shareholder,” he writes in a “voice script” attached to the filing. “This is not a threat, it’s simply not a good investment without the changes that need to be made.”
Musk also says this is his final offer, though Columbia University’s John Coffee, a corporate governance expert, notes Musk’s hands aren’t tied. (Coffee thinks Musk could get cash very easily to finance a bid.) It’s possible this is just another way to pressure the Twitter board to do what he wants, Coffee says. Musk said in his TED Talk that he has a Plan B but that he’ll discuss it another time.
The filing includes a script for talking to shareholders to try to convince them to sell. It’s a pretty simple script, although I have no idea if the non-Musk-fan shareholders will find it convincing. That’s what’s happening now, by the way: Musk is trying to convince shareholders to sell him their chunk of the company. Twitter shareholder and Saudi Prince Al Waleed bin Talal Al Saud has already rejected the offer and tweeted to say rejection. Messy!
Credit: The Verge