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 shitposter 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,” 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.
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 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 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 about said rejection. Messy!
Though I’m not sure with what money he plans to buy Twitter — I guess he could sell another chunk of Tesla shares or try to get financing through a bank. Even then, I’m not sure the offer is good enough for most shareholders since a year ago, the stock was worth $70.
Looking at the share price of Twitter, I don’t think the market believes in Musk’s offer either. Usually, when a company gets a takeover offer, the shares trade around the price of that offer. Twitter is currently trading well below the offer, at $45.99 as of this writing.
That’s weird. Offers like this put the company in play, opening the door to other offers. I can imagine a scenario where a company such as Salesforce, which considered a Twitter acquisition in 2016, outbids Musk and walks off with Twitter. Disney also once considered Twitter but walked away because “the nastiness is extraordinary,” Bob Iger said. (I hear Chamath Palihapitiya also floated a proposal around then.) Rumor is that then-CEO Jack Dorsey advocated for Twitter to go private with these bids.
And here’s where things get a little curious because, in addition to famously being a Bitcoin maxi and CEO of a whole other company, Block, Dorsey is pals with Musk and considers him the ideal Twitter user. I wonder if Dorsey is involved behind the scenes — after all, he did seem to be shoved out by Elliott Management, another major Twitter shareholder, in favor of Parag Agrawal, the current Twitter CEO.
There’s one other complicating factor. Sitting on the board of Twitter is a man named Egon Durban, who’s the co-CEO of Silver Lake, an investing firm you may remember from such hits as “buying what’s left of Facebook’s attempt at a cryptocurrency” and “working with Elon Musk to take Tesla private in 2018.” It’s hard for me to say off the cuff what this means for Musk’s bid… but it does seem like a lot of these guys get beers together.
If someone else bids for Twitter, that’s probably fine for Musk, who makes a bunch of money — even though he’s said his intent is not to make money, and he doesn’t care about the economics at all. But with the share price trading that far below Musk’s offer, it suggests the market doesn’t think there’s going to be a bidding war for Twitter. (If shareholders thought that were a possibility, the share price would trade above Musk’s bid.)
Twitter — for all it is beloved by internet-addled billionaires, journalists with brain worms, and the cryptocurrency community at large — is an also-ran social network. It’s culturally very visible since 24-hour TV news channels can lazily use tweets to make television, but it’s not widely used and is currently being just absolutely killed by both TikTok and the company formerly known as Facebook.
If this really is Elon’s bid to save free speech, you have to wonder why he’s not looking at some other, bigger options. On the other hand, this is a truly groundbreaking troll — and maybe all that’s all it’s meant to be. I expect Jack Dorsey is laughing his head off.
With reporting by Alex Heath and Andrew Hawkins.