Photo by Ravi Sharma on Unsplash

“Our special this evening is Twitter, Mr. Musk. And that is offered at market price.”

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In what will make for a great corporate strategy case study one day — if not a movie — as everyone now knows, Elon Musk has put in a bid for Twitter. What’s ironic and hilarious (based on your perspective) is that he’s waging this takeover war on… Twitter. This is almost the equivalent of trying to buy JPMorgan and hiring JPMorgan to advise you on the transaction. Twitter’s core value proposition, as Musk has pointed out, is a de-facto town square where news, opinions, scientific debate, etc. is discussed by people with all kinds of different backgrounds and from all kinds of different walks of life — it is the global melting pot of speech. We can now add Mergers and Acquisitions to that list of discussions as keyboard warriors across the globe have come to Musk’s defense and are now more knowledgeable about poison pills, golden parachutes, white knights, etc. than a lot of newly minted MBA’s. That’s the beauty of Twitter that Musk is trying to preserve — as he’s stated numerous times, this is not about the economics for him — this is a passion project to keep the dream of free speech alive.

“This is not a way to sort of make money… it’s just that I think my strong, intuitive sense is that having a public platform that is maximally trusted and broadly inclusive, is extremely important to the future of civilization,” Musk said at TED2022. “But yeah, I don’t care about the economics at all.”

What’s curious to me is that despite the healthy premium being offered (~54% premium over the day before Musk started accumulating shares in the Company), the share price has not moved a lot since he originally declared his 9.1% stake (before he announced the bid to take the Company private). This represents a possible 20% gain that potential investors are letting pass by — without even taking into account the fact there could be other bidders for the company (see the White Knight strategy the board is likely working on). You’re also seeing a lot more positive action on the April/May/June puts than you are on the calls (which are seeing some negative pressure) further enforcing the fact that sophisticated investors aren’t buying the possibility of this happening. This also brings up a really interesting discussion on fiduciary responsibility as the Twitter board is putting themselves in the spotlight. Collectively, the board owns ~0.12% of the Company (save for Jack Dorsey who sides with Musk and is leaving the board) — with reportedly one Board Member never even having Tweeted before. Things like this happen all of the time — but not with this type of publicity. If the board finds a reason to reject the offer, how will the public respond?

Especially when they find out they likely own Twitter shares in their 401K (Vanguard, Blackrock, Morgan Stanley, & State Street — all asset managers — round out the top 5 shareholders with Musk)!

As someone who has spent their entire career in finance, it’s fascinating to see this play out on such a public stage. Musk’s main goal here may be to preserve the freedom of speech (it is a crazy world when you have the Kingdom of Saudi Arabia Tweeting about the deal economics and the ex-President of the US banned from the platform) — but he’s also shining a light on the world of finance, public markets, private equity, shareholder rights, etc. Given how much these subjects effect every one of us, it’s certainly healthy for people to learn more about them.

I’m excited to see how this plays out — in an age where media companies are owned by billionaires with their own political agenda (Bezos & The Washington Post, Bloomberg and well Bloomberg, the media company Donald Trump threatens to start, etc.) — it seems that Twitter is one of the last arenas for people to have a voice. At face value, Musk really seems to be interested in preserving this — because while the economics of the deal don’t make a whole lot of sense (see the Goldman research opinions) — it’s hard to put a price on free speech.

Who knows, Musk may be getting the deal of the century for $54.20 a share.

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