Musk “slashes again”

With twists and turns, it seems that it is no longer enough to describe Musk’s privatization of Twitter’s acquisition of the century.

Speaking at the “All In” podcast summit on Monday, Musk questioned the veracity and accuracy of Twitter’s public documents and said that if the deal was going to go through, it would have to be done at a lower price.

Judging from the current market situation, Twitter’s share price has fallen to $36.85 per share, with a market value of $28.160 billion. Compared with the previously announced purchase price of $54.2 per share, it has fallen by 32.01%.

Second, Musk’s acquisition of Twitter also appears to be affecting Tesla. Just one day after Musk and Twitter reached a privatization deal, Tesla’s stock price plummeted more than 12% to close at $876.42, with a market value of $905.8 billion, evaporating more than $125 billion. According to relevant statistics, since Musk proposed to acquire Twitter, Tesla’s stock price has fallen 27.94%.

No matter how you look at it, it already seems to be an increasingly bad deal. However, according to the acquisition agreement signed by Musk, it is impossible for him to exit just because the stock has fallen.

Therefore, Musk aimed the “bargaining” reason at fake accounts. According to a report by the New York Post and Newsweek on the 17th, a new audit revealed that about 70.2% of Musk’s 93.3 million Twitter followers are “fake followers.”

Even so, as a “new king of Twitter” with more than 90 million followers, Musk’s constant remarks about this transaction can always influence Twitter’s stock price to rise and fall.

Whether it’s becoming Twitter’s largest shareholder or announcing a privatization of Twitter, the latter’s stock price will always skyrocket. However, Twitter’s stock price also fell after Musk showed his “no-buy” intention. And this also proves Musk’s identity as a big V and his own influence, control and initiative over the capital market.

As a result, after the brake, the market also believes that the probability that Musk will give up on the acquisition of Twitter has reached 60%. This inevitably makes people wonder what his true intentions are.

Recently, Twitter has praised WeChat, but it seems to have a strong dissatisfaction with “hate iron is not steel”.

According to reports, when answering whether to add a payment function to Twitter after the acquisition, Musk said, “If you are in China, basically you can live in WeChat, it can do everything, a bit like Twitter plus PayPal. Outside of China, there is no such thing. I think an app like this is very useful, it has no spam, you can post comments on WeChat, post videos, and most importantly, content creators get a revenue share” . He also emphasized that all people want is such a very useful and beloved product, either reinvent Twitter or create a new app from scratch.

However, compared to the payment function, Musk is obviously more “real” about fake accounts, and even directly “temporarily shelved” the acquisition of Twitter. The general opinion of the outside world about his move is that it was “expensive to buy”.

But apparently, Musk didn’t suddenly realize this serious problem recently.

In its financial report for the first quarter of this year, Twitter acknowledged the existence of many “fake or spam accounts” on its platform, as well as legitimate daily active users. But the proportion is less than 5% of the daily active users.

Musk also tweeted: “If we succeed in acquiring Twitter, we will either defeat the spam bots or die in our efforts!” According to a joint press release from Twitter and Musk previously disclosed by the SEC, he promised “Making Twitter better” by “fighting spam bots” and more.

The latest SEC filings show that Musk negotiated the Twitter deal over the weekend of April 23 and April 24 without any due diligence. Twitter also said in the filing: “Mr. Musk did not request a nondisclosure agreement or seek any non-public information about Twitter from Twitter.”

Since signing the agreement on April 25, however, Musk has been questioning the accuracy of Twitter’s public submissions that spam accounts make up less than 5 percent of its user base.

Musk also stated at the AllIn summit: “20% of fake/spam accounts, while 4 times what Twitter claims, the real number is probably ‘much higher'”. But he did not elaborate on how the 20 percent figure was derived.

In addition, Musk suggested that the SEC launch an investigation. He also called for a random sample of Twitter users to be tested to identify fakes.

In fact, according to the agreement, if Musk terminates the acquisition, Twitter will receive $1 billion in compensation from Musk. In addition, Musk will face a breach of contract lawsuit from Twitter, which could cost him billions of dollars.

The only reasonable explanation seems to be the stock price. Since Musk made a takeover offer on April 14, Twitter’s stock price has fallen from $45.08 per share, a cumulative fall of 18.26%, and the market value is $15.84 billion less than the total acquisition price.

The lesser of two evils, as a businessman, the pros and cons are clear at a glance.

Notably, analysts said that if Musk walked away from a bid, Twitter would have to evaluate it based on its fundamentals, a prospect that could lead to continued weakness in the stock price. Truist Securities estimates that Twitter shares will fall into the low $20s or $30s, based on pre-offer trading. CFRA sees a larger potential decline, with analyst Angelo Zino writing in a note: “If a deal doesn’t materialize at all, we see significant downside risk to the company given our independent valuation of the company at around $26.” .

It is not difficult to see that it is not Musk who is difficult to ride a tiger, but Twitter.

According to Fox News, Twitter CEO Parag Agrawal posted 13 tweets on the 16th, explaining in detail the spam on Twitter and its handling. He acknowledged that spam damages the experience of real users on Twitter, saying the company handles more than 500,000 spam accounts every day, and millions more accounts suspected of possibly being spam, but the method still faces difficulties. and challenges.

For this explanation, Musk just responded with a “poo” emoji to show his attitude.

In addition, Twitter’s deal with Musk doesn’t include a solicitation clause, which means Twitter must not attract bids from other potential buyers.

So the road before Twitter doesn’t seem to have many options: 1. The deal goes as agreed, which is probably the best-case scenario for shareholders; 2. Musk walks away from the deal, and Twitter’s board may sue to try Force Musk to complete the deal according to the agreement, but this will be a long and costly process; 3. Musk buys at a low price, which seems to be the most likely compromise.

“Recent comments from Musk suggest he is trying to negotiate a lower bid,” Jefferies equity analyst Brent Thill wrote in a report titled “Finding a scapegoat; a lower bid?” Wedbush Securities analyst Dan Ives was also skeptical of Musk’s actions in a note to clients, saying: “Our view is that Tesla stock has been under tremendous pressure since trading, changing stock market/risk over the last month. Circumstances and some other financing factors (equity financing) have led Musk to turn his attention to Twitter’s handling of bots, but this is not a new problem and may be more of a scapegoat for lowering Twitter’s stock price.”

It’s just that Twitter, which is in a passive situation, obviously doesn’t have much time and strategy to deal with it.

Musk disbanded the PR team in October 2020, and Tesla rarely does advertising and marketing.

But as a “net celebrity” with its own traffic attributes, Musk himself is actually Tesla’s super public relations department.

Since publicly disparaging Zuckerberg in 2018, Musk has quit Facebook and Instagram to focus on Twitter.

Today, Musk has become a heavy user of Twitter, and at most, he even posted dozens of tweets a day. With more than 90 million followers, he has also been ridiculed as the “new king of Twitter” after Trump.

Musk, who often “points the country” on Twitter, finally got into trouble because of his “open mouth” and excessive sharing of information about the company.

In August 2018, Musk tweeted that he had obtained enough funds to take Tesla private at $420 per share, saying that he had sufficient funds and called on shareholders and employees to support him. As a result, Musk was charged by the SEC, and he and Tesla each paid $20 million to settle, and also lost his chairmanship.

With the lessons learned, Musk finally learned to “darkness Chencang”.

Since January 31, Musk has purchased more than 620,000 Twitter shares. Since then, he has not been absent from trading on each trading day, and he bought 4.8 million shares on the most one day. However, at this time, the market is still calm and not at all obvious.

Until the SEC disclosed relevant documents, Musk had held 9.1% of Twitter’s shares, making it the largest shareholder of the latter.

Even before the public disclosure of his stake in Twitter, Musk had revealed to people that he was considering acquiring Twitter.

According to Sina Technology, on March 20 this year, Seth Dillon, CEO of the American right-wing satirical media Babylon Bee, was temporarily banned from Twitter for publicly mocking transgender people, and the mocking tweet was also deleted as “hate speech”. After learning of the incident, Musk personally called Dijon to understand the situation and revealed that he was considering acquiring Twitter.

This time point is also a full week earlier than Musk revealed to Twitter executives that he “may join Twitter’s board of directors, seek to take Twitter private, or start a Twitter competitor.”

Since then, Musk himself has continued to exercise restraint and suppressed his desire to share well.

Even after buying himself into Twitter’s largest shareholder step by step, Musk has not disclosed his true intentions to the outside world.

On April 5, Twitter announced that Musk would become a member of Twitter’s board of directors. Just when the world was expecting Musk to join the board, Musk suddenly changed his mind. On April 11, the Twitter CEO tweeted that Musk had declined to join the company’s board. Musk himself did not explain this, and he sent a “covering his mouth and laughing” tweet.

Musk, who has always been “elusive”, made such a decision is not surprising. Looking at it now, when he refused to join the Twitter board, he was actually making relevant preparations for the subsequent acquisition of Twitter.

Until the SEC issued relevant documents, on April 14, Musk conveyed his intention to acquire Twitter by forwarding this document.

In fact, after several rounds of confrontation, Musk’s true thoughts are still elusive.

Musk’s “challenge” on Twitter’s fake account this time, and the outside world even has a high probability that he will give up on acquiring Twitter.

However, according to Bloomberg, a 139-page document shows advisers on both sides are still trying to broker a deal. The filing shows how the deal was initiated and why Twitter decided to accept Musk’s $54.2 per share in cash. The document was formed after weeks of negotiations between the two parties, with Musk signing off before the final version of the document was submitted.

This seems to be Musk’s “darkness Chencang” again.

If the timeline is pulled back to April, Musk’s “art of negotiation” will be revealed once again. It only took 3 months to complete the hunt for Twitter.

On April 14, when Musk said he wanted to take Twitter private, “My offer is the best and final offer I can make. If it is not accepted, I will need to reconsider my position as a shareholder. .”

From the beginning of the story, Musk has a tough attitude that is completely non-negotiable.

Got caught off guard by a Twitter board, and apparently had no better strategy for coping.

Twitter’s board is considering steps to avoid a hostile takeover by Musk after Musk’s unpopular take-private offer, according to people familiar with the matter. One option currently under consideration is the adoption of a “Poison Pill”, or shareholder rights plan, formally known as a “dilutive takeover measure.” Another situation is that the offer is rejected on the grounds that the offer is too low.

So the day after the takeover offer was issued, Twitter announced that the entire board of directors had voted unanimously to launch a “poison pill” to prevent Musk’s hostile takeover.

Twitter made the plan to buy time, according to people familiar with the matter. The board met Thursday to review the takeover offer, hoping to analyze and negotiate any deal and still potentially accept it. According to Bloomberg, Twitter has hired JPMorgan Chase to advise it on blocking Musk’s takeover. Earlier, Twitter had hired Goldman Sachs as an advisor to Musk’s takeover proposal.

American mainstream media reported that when Twitter’s board of directors threw out the poison pill plan, it was still looking for a white knight to prevent Musk from buying the company. It was widely expected that Musk would only make an offer higher than $60 to prompt Twitter’s board to accept the offer.

Despite the swiftness of the Twitter board, Musk did not raise his offer to impress the other party.

“Buy it now” is one of the common acquisition strategies of Warren Buffett, which does not give the other party any room for bargaining. From this point of view, Musk obviously learned the essence of the stock.

Of course, from the perspective of the acquisition of Twitter, Twitter’s own bargaining power is relatively weak.

First of all, in the past few years, Twitter’s product development has been slow, user growth has stagnated, and it has suffered large losses for several consecutive years. These have dragged down Twitter’s stock price trend and made institutional investors very dissatisfied.

Secondly, Musk was already the largest shareholder of Twitter at that time, holding more than 9.1% of the shares.

Finally, Twitter does not have super voting rights, and the overall shareholding ratio of 11 board members is less than 2.5%, and even 2.25% of which is controlled by Musk’s friend former Twitter CEO Jack Dorsey. In other words, as long as Musk gets the approval of enough institutional investors, he can force the board to accept the offer.

As a result, Musk came up with a $46.5 billion financing arrangement, including $12.5 billion he obtained with Tesla’s equity mortgage, $13 billion in loans from financial institutions such as Morgan Stanley, and $21 billion raised by himself. , fully proved its acquisition strength.

Finally, the heartwarming Twitter big institutional investors gave Musk full recognition. Furthermore, under the pressure of investors, the poison pill plan of Twitter’s board of directors was stillborn, and even within the next ten days, there was a complete reversal of polarities.

Just when everyone thought the dust had settled and was only waiting for shareholder votes and regulatory approvals, Musk suddenly announced on May 14 that the acquisition of Twitter was on hold as it awaited details.

Just three days later, Musk said again that his acquisition of Twitter “cannot go forward” because of his problems with fake and spam accounts.

As a result, the transaction, which was originally scheduled to be completed before October 24, 2022, was finally plunged into huge uncertainty.

The U.S. Federal Trade Commission (FTC) is evaluating Musk’s $44 billion takeover bid for Twitter and will decide next month whether to conduct an in-depth investigation, according to people familiar with the matter.

Foreign media said the FTC declined to comment, and Musk has not yet responded.

This also means that this century of acquisitions is in full swing, and it is far from the end. We can only watch as we walk and wait and see.