The week of April 11: a character makes an offer for Twitter.
The week of April 11: a character makes an offer for Twitter.
Please note that, owing to the observance of Good Friday and Easter, this will be an abbreviated version of the Capital Letter.
B ut it will be longer than 280 characters . . .
LOL. You know who has tweeted that, in his own words, he has “made an offer,” and linked to the filing that he has made with the SEC. The “offer” is nonbinding. It takes the form of a letter to Twitter’s chairman in which Musk states he would like to buy all the company’s outstanding stock. The board can reject Musk’s approach. But if it does, and he so chooses, Musk can go fully hostile and make a direct offer to Twitter’s shareholders.
So far, Twitter’s board has come up with a generic response:
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.
Nothing can be read into those words either way (that’s the idea), but reports that the board is none too pleased by Musk’s move (there has even been talk that it is mulling a poison pill) are, if I had to guess, credible.
Musk’s proposal is to take full control of the company at a price of $54.20 per share (“4.20,” hmmm . . .), a 54 percent premium over Twitter’s closing price on January 28, 2022, the trading day before Musk began buying stock in the company, and a 38 percent premium over Twitter’s closing price on April 1, 2022, the trading day before Musk’s position was announced. A year ago, Twitter was trading at around $70, not far above the level ($69) it reached in January . . . 2014. The stock bottomed just above $14.40 in May 2016. When buying shares, timing is everything. On any broad view, however, it is hard to see Twitter, despite its political and cultural clout, as either a financial (it’s not exactly a money spinner) or stock-market success, other, I suppose, than in terms of its valuation (some $34 billion: Musk’s offer values the company at $43 billion).
Musk has written to Twitter’s chairman explaining that he believes in the “company’s potential to be the platform for free speech around the globe,” adding that he believes that “free speech is a societal imperative for a functioning democracy.” Radical talk these days. Those forever grumbling about billionaire “greed” should be pleased. They are always calling on the country’s entrepreneurs to, in the sanctimonious phrase, give something back (as if the services performed by the businesses they have created do not). But here we have one of these monsters putting his dollars to work in the name of free speech. I, for, one look forward to the applause that is sure to come from Bernie Sanders and Joe Biden — although, given, Musk’s, uh, history with Elizabeth Warren, cheers from that source may take a while.
It’s significant that Musk mentions free speech first, before adding that Twitter will “neither thrive” (a reference that could also encompass its underwhelming financial performance) nor “serve this societal imperative [as a platform for free speech] in its current form.” It’s no secret that Musk does not think that, where free speech is concerned, the company is doing what it should. The reference to company’s “current form” could be an allusion to the way Twitter is currently run, or to its status as a public company or, indeed, to both. In Musk’s view, “Twitter has extraordinary potential.” He promises to “unlock it,” a reference that, again, could refer to its social function and its ability to make money. All that said, judging from comments Musk made today, he is not doing this for the cash.
Musk wants to take the company private, something that will give him a free hand to run it as he sees fit. Given the growing strength of highly politicized investment institutions in our public markets, I don’t blame him. I note, for example, that BlackRock reportedly owns about 4.5 percent of the company. “Reporting” to Larry Fink, BlackRock’s chairman and CEO, a corporatist chieftain if ever there was one, is not really Musk’s style.
Meanwhile, Reuters reports:
Saudi Arabian investor Prince Alwaleed bin Talal said on Thursday that as one of the major shareholders in Twitter he rejected a takeover bid by billionaire entrepreneur Elon Musk.
Musk describes the proposed bid as his “best and final offer” (he is not the last potential bidder for a company to have said that, however) and adds, what are implicitly, a couple of threats, first of which is that “shareholders will love” the “high price” he has offered. The implication is that shareholders will not love the board if it turns the proposal down: There is no guarantee — far from it — that Musk will make that direct offer to shareholders if the board rejects his proposal. The second threat is that if “the deal does not go through,” he would need to “reconsider [his] position as a shareholder.” That might please the board and Prince Alwaleed bin Talal, but shareholders dreaming of $54.20 might not be quite so thrilled.
Meanwhile, it’s worth noting that Twitter closed down on the day, at $45.02, well below Musk’s offer price and below yesterday’s close of $45.86. The market, so far, is clearly not expecting the deal to go through (even at its $48.36 peak, at the opening, the share was priced well below the proposed offer price). It is, however, unlikely (in my view) that, at this stage, investors are worrying about the possibility that, in the event his proposal is turned down, Musk then dumps the stock.
It’s way too early for that.
Meanwhile, Musk is now running a Twitter poll on whether the decision to accept his offer should be “up to” shareholders, not the board. The vote itself — about half a million votes so far, around 85 percent in favor of giving the decision to shareholders — is, of course, irrelevant. But is this another part of an opening salvo in what may ultimately evolve into a direct approach to shareholders, or is it merely the application of a little pressure?
To be continued . . .
The Capital Matters week that was . . .
Our latest Capital Record features David Bahnsen talking to Rene Aninao of Corbu LLC, a macro-intelligence firm with special expertise in geopolitics, national security, and foreign policy. They unpack the specifics of the Russia–Ukraine effect on commodities, bond yields, equity markets, economic growth, and of course, the rules-based order.
And we ran our usual wide-ranging collection of articles, with, this week, pieces on taxes, automation, Putin’s Price Hike™, employee rights, lockdown failures, climate policy, and the Fed.
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