Elon & Twitter

[bkp_duke]

Hmmm... hopefully Musk hired a better PI than the one he hired to investigate "pedo guy". haha.
Have they given any indication that they'd accept a lower offer? Isn't their reported methodology just taking a random sample of "active users" and trying to figure out if they're bots or not? Seems pretty sound to me. Does the methodology even matter as long as the accurately describe it?

Their methodology, as reported in their SEC filings, is a sampling of . . . wait for it . . . 100 accounts.

100 . . . out of hundreds of millions.


You can do proper stats with any kind of proper error bars with that. It's just garbage in . . . garbage out.


With their estimates based upon the above they say 5% of accounts are bots. 3rd party estimates based upon much higher counts put this much much higher at ~25%.

So yeah, he's got really good grounds for the board being forced to consider a lower offer.


Someone said the shareholder vote results should be out tomorrow, Thursday at the latest, regarding Twitter acting on his offer. If they approve to consider the offer, then negotiations can proceed further. The $54.20 number is not set in stone.

 

[ZenRockGarden]

Because they probably have been found out to have falsely "cooked the books" on the 5% bots number. Their reported methodology is suspect, and that in a court of law would probably be judged as fraudulent.

I've done a few corporate buy-outs of competitors. In every case my company was buying the CUSTOMER BASE, nothing else. If 25% of Twitter is bots, then 25% of isn't a real customer base. In two companies I bought it was noted that the customer base was substantially different than what we were told, in both cases we pro-rated our offer down to the % of real customers and it was accepted, without hesistation.

Twitter would probably agree to present to their shareholders a lower buy-out price to avoid the legal (and SEC) problems due to the above.

Twitter opens themselves up to many lawsuits, aside from Musk, for false reporting and accounting if their bot calculation is "materially incorrect".


EDIT - you can bet Twitter's board is:
1) quadruple-checking that bot calculation, and if it isn't based upon sound methodology then they:
2) are trying to find a way to craft an explanation of why accepting a lower buy out price is a good idea

If they reject Musk's revised lower offer and the deal falls through, this company will drop 60% when that happens. SNAP dropped > 40% today just on downward revised revenue, far less of an "offense" than what is suspected with Twitter and their bots calculation.

I don't think Twitter wants Elon, and they will play hard-ball, standing firm on his original offer, and making him walk away from the deal, then they claim (and get to litigate) the $1B bail-out fee that Elon would owe by walking.

The entire thing will have been a huge pointless distraction from getting Tesla (and Space X) stuff done.

 

[Daniel in SD]

Their methodology, as reported in their SEC filings, is a sampling of . . . wait for it . . . 100 accounts.

100 . . . out of hundreds of millions.


You can do proper stats with any kind of proper error bars with that. It's just garbage in . . . garbage out.


With their estimates based upon the above they say 5% of accounts are bots. 3rd party estimates based upon much higher counts put this much much higher at ~25%.

So yeah, he's got really good grounds for the board being forced to consider a lower offer.


Someone said the shareholder vote results should be out tomorrow, Thursday at the latest, regarding Twitter acting on his offer. If they approve to consider the offer, then negotiations can proceed further. The $54.20 number is not set in stone.

Their estimate is that 5% of daily active users are bots. There's a huge difference between that and the total number of accounts which are bots.
I agree that a sample of 100 is too small unless you're sampling every week or so. If you find 5 bots the 95% confidence interval is 1.6%-11.2% bots. Regardless, all that information was available beforehand.

Later on April 21, 2022, Mr. Musk publicly disclosed that he and Parent had obtained commitment letters for approximately $46.5 billion in financing to fund the proposed acquisition, including (1) a debt commitment letter providing for an aggregate of $13 billion in various secured and unsecured debt financing commitments; (2) a debt commitment letter providing for an aggregate of $12.5 billion in margin loan commitments (which commitments were subsequently reduced to $6.25 billion, as described below); and (3) an equity commitment letter providing for a $21 billion equity financing by Mr. Musk to Parent (which commitment was subsequently increased to $27.25 billion, as described below). The equity financing commitment did not include third party beneficiary rights permitting Twitter to enforce Mr. Musk’s equity financing commitment in connection with a potential transaction. Mr. Musk also disclosed that his acquisition proposal was no longer subject to the completion of financing and business due diligence. The debt commitment letters referenced drafts of agreements and documents providing for a tender offer for our common stock that had been shared with the lenders party to the debt commitment letters, but that had not been shared with Twitter.

The $54.20 number is in the shareholder letter. Obviously the shareholders are going to approve.

If the merger is completed, you will be entitled to receive $54.20 in cash

I wonder how many people at Twitter have stock options that are underwater at the current price but not at $54.20. Combine that with the fact that they don't seem super enthused about Elon taking over and it seems like they might chose to stick to the agreed upon price and sue if Elon doesn't perform. I'm no expert though!

 

[ZenRockGarden]

Their methodology, as reported in their SEC filings, is a sampling of . . . wait for it . . . 100 accounts.

100 . . . out of hundreds of millions.


You can do proper stats with any kind of proper error bars with that. It's just garbage in . . . garbage out.


With their estimates based upon the above they say 5% of accounts are bots. 3rd party estimates based upon much higher counts put this much much higher at ~25%.

So yeah, he's got really good grounds for the board being forced to consider a lower offer.


Someone said the shareholder vote results should be out tomorrow, Thursday at the latest, regarding Twitter acting on his offer. If they approve to consider the offer, then negotiations can proceed further. The $54.20 number is not set in stone.

Where have you found terms in the deal which say it's not at the agreed $54.20 price?

Honestly curious. My reading says it's that price, for full ownership, and if either side walks away they get $1B.

Elon can claim the valuation is wrong due to underlying bot numbers being off - but that's gonna be a matter for the courts, not the terms of the contract and some imaginary "we'll bargain further on price" clause.

 

[bkp_duke]

We know Twitter "doesn't want" Elon, but that is actually immaterial. They don't get to put an "emotional" say on it.

The Board of Directors MUST negotiate with Elon to obtain the best possible (and reasonable) price that they can for the company. IF they fail to do this, the shareholders have grounds to go after EACH member of the BoD for literally every penny these people have. So you can bet that BoD will do their damnest to get that full $54.20 out, unless they feel they have been caught cooking the books, and then they will get as much as they can reasonably get. Elon is going to use this last point to go after them for a discount, but don't be surprised if he is still willing to pay full price. Remember, he has publicly stated that he believes Twitter is run like crap, and that there is a TON of low-hanging fruit to improve the company and make it much much more profitable.

And, this isn't Elon's first rodeo when it comes to buying/selling companies. He's no novice at this.

 

[TSLA Siempre]

Where have you found terms in the deal which say it's not at the agreed $54.20 price?

Honestly curious. My reading says it's that price, for full ownership, and if either side walks away they get $1B.

Elon can claim the valuation is wrong due to underlying bot numbers being off - but that's gonna be a matter for the courts, not the terms of the contract and some imaginary "we'll bargain further on price" clause.

Elon can't simply change his mind and walk away for $1B. If he has financing, there is a "specific performance" clause that theoretically be enforced to force him to buy at $54.20.

 

[bkp_duke]

Their estimate is that 5% of daily active users are bots. There's a huge difference between that and the total number of accounts which are bots.
I agree that a sample of 100 is too small unless you're sampling every week or so. If you find 5 bots the 95% confidence interval is 1.6%-11.2% bots. Regardless, all that information was available beforehand.

Just looking at my company's twitter followers, that are active, WAY more than 5% are bots.

Sorry, but on this point, Elon certainly has the Twitter Board by the "short hairs".

 

[bkp_duke]

Elon can't simply change his mind and walk away for $1B. If he has financing, there is a "specific performance" clause that theoretically be enforced to force him to buy at $54.20.

I'm sure that's in there, but there would also be clauses to protect Elon regarding "what he is buying". If bots are excessive, you can bet your last dollar that there is verbiage in the agreement that protects Elon in that event (discount, or possibly cause to walk away, etc.).

I've known one of the Tesla's attorneys, they know what they are doing, and you can bet Elon's personal attorneys have gone over the agreement with a fine-toothed comb.

 

[Bet TSLA]

Where have you found terms in the deal which say it's not at the agreed $54.20 price?

Honestly curious. My reading says it's that price, for full ownership, and if either side walks away they get $1B.

Elon can claim the valuation is wrong due to underlying bot numbers being off - but that's gonna be a matter for the courts, not the terms of the contract and some imaginary "we'll bargain further on price" clause.

If indeed Elon can walk away for $1B for any reason (or simply because he can't get financing at $54.20), he has a fine bargaining position. He can simply say here's your $1B. Then he can buy up 51% of the shares at market price. The current market cap at $36/share is about $30B. When Elon walks away it will drop another 20% or so.

Since the Twitter board really doesn't want that to happen, they'll negotiate.

 

[evermore]

Their methodology, as reported in their SEC filings, is a sampling of . . . wait for it . . . 100 accounts.

100 . . . out of hundreds of millions.

I am unable to find this in their latest 10-Q. Is it in some other filing?

 

[TSLA Siempre]

We know Twitter "doesn't want" Elon, but that is actually immaterial. They don't get to put an "emotional" say on it.

The Board of Directors MUST negotiate with Elon to obtain the best possible (and reasonable) price that they can for the company.

Negotiations are over as far as Twitter's BOD is concerned. There is a contract for it to be purchased at $54.20. This is the leverage that Twitter has. Elon has the leverage of using his bully pulpit to rake the BOD and Twitter over the coals and the threat of lawsuit. Twitter has given all indications that they will use the leverage they have. Perhaps that can force Twitter back to the negotiating table, but so far indications are that the BOD isn't backing down. It isn't clear what Elon will decide to do IMO. I agree that he could still go through with the purchase at $54.20

 

[ohmman]

The Board of Directors MUST negotiate with Elon to obtain the best possible (and reasonable) price that they can for the company. IF they fail to do this, the shareholders have grounds to go after EACH member of the BoD for literally every penny these people have. So you can bet that BoD will do their damnest to get that full $54.20 out, unless they feel they have been caught cooking the books, and then they will get as much as they can reasonably get. Elon is going to use this last point to go after them for a discount, but don't be surprised if he is still willing to pay full price. Remember, he has publicly stated that he believes Twitter is run like crap, and that there is a TON of low-hanging fruit to improve the company and make it much much more profitable.

The number is $54.20. Elon is looking for wiggle room because market dynamics have changed, but he is in a really poor legal situation. Because if he tries to renegotiate, it's already been established that a deal with Elon isn't worth anything. HE is the one who can be sued if he tries to unreasonably exit the deal, and believe me, shareholders will line up in this economy to get their 46% premium (over today's close). Bottom line, his timing sucked, and he hasn't done himself any favors on the deal. If I were already in a contract to buy a property of any kind, I'd be spending my time talking about how great it was and how much greater it will be. That's how you work the public market.

I heard someone say this - if you were a great customer of a restaurant and decided to buy the restaurant, then you walked around badmouthing everything about the restaurant in an effort to get the restaurant for less than you agreed to pay, they should really just kick you out and never let you back in again. That analogy ought to resonate a little with anyone who's looking at this without any skin in the game.

 

[Daniel in SD]

Just looking at my company's twitter followers, that are active, WAY more than 5% are bots.

Sorry, but on this point, Elon certainly has the Twitter Board by the "short hairs".

How can you tell that they are active? Twitter claims 229 million monetizable daily active users but there are are 1.3 billion accounts.
I think I have 1 tweet and have never liked a tweet but I assume I would count as a monetizable daily active user and there would be no way for you to tell.

If indeed Elon can walk away for $1B for any reason (or simply because he can't get financing at $54.20), he has a fine bargaining position. He can simply say here's your $1B. Then he can buy up 51% of the shares at market price. The current market cap at $36/share is about $30B. When Elon walks away it will drop another 20% or so.

Since the Twitter board really doesn't want that to happen, they'll negotiate.

If he could do that he would have already done it. haha.
And he can't buy 51% of the shares because they implemented a "poison pill" to make that impossible.

 

[TSLA Siempre]

If indeed Elon can walk away for $1B for any reason (or simply because he can't get financing at $54.20), he has a fine bargaining position. He can simply say here's your $1B. Then he can buy up 51% of the shares at market price. The current market cap at $36/share is about $30B. When Elon walks away it will drop another 20% or so.

Since the Twitter board really doesn't want that to happen, they'll negotiate.

Elon can walk for $1B if the financing isn't there, but the financing IS there and already declared. He can't signal a wink-wink to Morgan Stanley and have them pull out. Would be problematic. The walk away for $1B for any reason isn't an option. If it was, then I agree he would have a fine bargaining position.

 

[ohmman]

monetizable

I don't know how many times I've pasted this in the thread, but everyone seems to just avoid it.

 

[_Redshift_]

Wow, posting NY Times Opinion pieces as some sort of evidence of anything factual is pretty bold. You Sir have some cojones.

Yeah, he should have posted the QAnon stuff you’all go apey for.

 

[ZenRockGarden]

Elon can walk for $1B if the financing isn't there, but the financing IS there and already declared. He can't signal a wink-wink to Morgan Stanley and have them pull out. Would be problematic. The walk away for $1B for any reason isn't an option. If it was, then I agree he would have a fine bargaining position.

I don't believe that's accurate. The contract has the price of $54.20 on it, and $1B if either side walks.

From Twitter's side, they can stand firm and get their $54.20, or they can keep the company and get a free $1B (after a court fight in all likelihood). Given they never wanted to be owned by Elon, I figure they play that angle.

Elon's choices are to pay the full $54.20 (which he doesn't want to do given current market conditions), or give up $1B. He can also try to bully them into a lower price, but I feel other than making a court case out of it to avoid the $1B, he's not going to get anywhere.

 

[bkp_duke]

The number is $54.20. Elon is looking for wiggle room because market dynamics have changed, but he is in a really poor legal situation. Because if he tries to renegotiate, it's already been established that a deal with Elon isn't worth anything. HE is the one who can be sued if he tries to unreasonably exit the deal, and believe me, shareholders will line up in this economy to get their 46% premium (over today's close). Bottom line, his timing sucked, and he hasn't done himself any favors on the deal. If I were already in a contract to buy a property of any kind, I'd be spending my time talking about how great it was and how much greater it will be. That's how you work the public market.

I heard someone say this - if you were a great customer of a restaurant and decided to buy the restaurant, then you walked around badmouthing everything about the restaurant in an effort to get the restaurant for less than you agreed to pay, they should really just kick you out and never let you back in again. That analogy ought to resonate a little with anyone who's looking at this without any skin in the game.

Poor analogy. In this case it's more like buying the building with plans to gut it. Elon isn't walking around saying how great Twitter is NOW. He's saying how great he can make it.

He's planning on shutting down the restaurant, gutting it down to the studs, firing the bulk of the employees, and bringing in his own team to rebuild everything.

 

[ohmman]

Poor analogy. In this case it's more like buying the building with plans to gut it. Elon isn't walking around saying how great Twitter is NOW. He's saying how great he can make it.

He's planning on shutting down the restaurant, gutting it down to the studs, firing the bulk of the employees, and bringing in his own team to rebuild everything.

LOL. Nice effort but that’s not a sound purchase. He’s smarter than that. You don’t buy something for that price to start over. You just start it.

 

[bkp_duke]

I don't believe that's accurate. The contract has the price of $54.20 on it, and $1B if either side walks.

From Twitter's side, they can stand firm and get their $54.20, or they can keep the company and get a free $1B (after a court fight in all likelihood). Given they never wanted to be owned by Elon, I figure they play that angle.

Elon's choices are to pay the full $54.20 (which he doesn't want to do given current market conditions), or give up $1B. He can also try to bully them into a lower price, but I feel other than making a court case out of it to avoid the $1B, he's not going to get anywhere.

Not true, there is a "due diligence" period.

Summed up pretty well in the last section of this article:

Elon Musk Thinks of Buying Twitter at a Lower Price - TheStreet

The billionaire has launched a public campaign designed to lower the price.

www.thestreet.com

"If a revised deal does get done by Musk and Twitter, it will likely will be at a lower price once negotiations take over and the diligence happens around Twitter DAU and algorithms hot button issues."


The reason Twitter stock is not at $54.20 is not because the market thinks Elon will walk away. It's because they think he will get a lower price due to the problems he's found already in the due diligence period (which IS after you sign a contract, for those that haven't been through this before - because it can take months).