Musk Puts Twitter Deal on Hold

https://www.france24.com/en/business/20220513-twitter-deal-t…
Elon Musk put his $44 billion deal for Twitter “temporarily on hold” on Friday while he awaits data on the proportion of its fake accounts, sending the shares in the social media platform plunging.

In a tweet, the Tesla billionaire linked to a Reuters story from May 2 citing a financial filing from Twitter that estimated false or spam accounts made up fewer than 5% of the company’s “monetizable daily active users” in the first quarter.

“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than 5% of users,” Musk wrote on Twitter. It wasn’t clear whether the issue could scuttle the deal. Musk later tweeted that he’s “still committed to acquisition.”

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https://www.marketwatch.com/articles/musk-twitter-deal-risk-…

His declaration raises the question of what the risk is for investors that the deal won’t go through. It’s called the arbitrage spread, or arb spread, which is the difference between the share price and the acquisition offer—and it’s usually expressed as a percentage.

In the case of Twitter ticker: TWTR), for example, the $13 difference between the stock price and Musk’s price divided by the stock price implies the market believes there is a roughly 60% probability the deal falls apart.

The better question might be what’s the price Musk will renegotiate at. Twitter stock might trade as low as $28 if there is no deal, based on what the Nasdaq has done of late. Investors can plug in the number for a new takeout price to get their own odds.

So the Musk announcement is to obtain a better price?

tjscott0 asks,

So the Musk announcement is to obtain a better price?

Absolutely!

He pays the $1 Billion break up fee for nixing the deal at $44 Billion. Comes back at $30 Billion, and saves $13 Billion.

Genius.

intercst

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I saw a meme on FB a week or so ago, words to the effect “Musk cancels Twitter deal as it fails to make him interesting”.

Life imitates satire.

Hasn’t Musk used Twitter to leverage pump and dump schemes before?

Steve

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Hasn’t Musk used Twitter to leverage pump and dump schemes before?

No. Musk has repeatedly been accused of doing so by morons who seem to have no idea what pump and dump means. Perhaps there’s some kind of agenda there?

Meanwhile, Musk continues to absolutely destroy the competition in space and auto by creating better solutions to real problems.

-IGU-
(another 53 Starlink satellites put into orbit today, and the same scheduled for tomorrow)

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No. Musk has repeatedly been accused of doing so by morons who seem to have no idea what pump and dump means. Perhaps there’s some kind of agenda there?

Yeah, I’m thinking the agenda is “reality”. Musk himself said (and I quote) “ I might pump, but I don’t dump’:” His third largest holding is Bitcoin, after Tesla and SpaceX. Oh wait, but then he sold 10% of his Bitcoin “to prove that it wouldn’t move the market”. Meanwhile his groupies, I mean acolytes ran out and bought Bitcoin at a price higher than he did, pushing up the value of his holdings.

Hi there, I’m Goofyhoofy. I’m playing the part of the moron in this drama.

My guess is that he is now out to destroy the Twitter deal. There is no way that a mere 5% of the Twitterverse is fake accounts (his sudden stalking horse), and he knows it. Two things going on: the market is tanking, which means he can re-enter at a lower price, even after paying a breakup fee, as Intercst notes. Moreover, he is pledging his Tesla stock for a fat part of the acquisition price (so he doesn’t actually have to sell it), but those pledges are generally made in real dollars because the lenders don’t want to accept the volatility risk. With Tesla shares also tanking, he faces a ‘silent’ margin call and would have to pledge even greater numbers for an asset which is currently devaluing.

So he kills the deal, hoping for a mulligan and an even fatter pitch, acquisition wise. I would surmise that it is extremely difficult to persuade him of anything he doesn’t already believe, but I wonder if the ‘everyone will pay to use Twitter’ theory has gotten some pushback from any insiders he does bother to listen to.?

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Yeah, I’m thinking the agenda is “reality”. Musk himself said (and I quote) “ I might pump, but I don’t dump’:” His third largest holding is Bitcoin, after Tesla and SpaceX. Oh wait, but then he sold 10% of his Bitcoin “to prove that it wouldn’t move the market”. Meanwhile his groupies, I mean acolytes ran out and bought Bitcoin at a price higher than he did, pushing up the value of his holdings.

Hi there, I’m Goofyhoofy. I’m playing the part of the moron in this drama.

You certainly are playing the part. You assert that Musk owns lots of Bitcoin. What makes you think Musk owns any Bitcoin at all? Or that he’s ever sold any? I think he owns a little, but I don’t know.

Tesla bought a bunch of Bitcoin. As Musk said at the time (Feb. 2021; see https://twitter.com/elonmusk/status/1362598034866118658?s=20… ):
“Tesla’s action is not directly reflective of my opinion. Having some Bitcoin, which is simply a less dumb form of liquidity than cash, is adventurous enough for an S&P500 company.”

Followed by:
"To be clear, I am not an investor, I am an engineer. I don’t even own any publicly traded stock besides Tesla.

However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.

Bitcoin is almost as bs as fiat money. The key word is “almost”."

A couple of months later, Tesla sold 10% of its Bitcoin as a liquidity test. It passed the test nicely and they haven’t sold any since. A couple of times (including now) its value, as measured in USD, has fallen below what they bought it at. All this is duly reported in SEC filings by the company. Regardless, Tesla has lots of cash on its balance sheet. The Bitcoin is just a small part of that (about 5-10%). They no doubt have more in various fiat currencies, given that they’re doing business all over the world.

So yes, when an asset is never “dumped”, there can’t be any “pump and dump” going on. It is, in truth, moronic to suggest that there is. And Musk, so far as I know, has never owned much Bitcoin; I think he has more Doge; but in any case it’s just a small amount.

The entire assertion is made up, with no relation to reality at all.

-IGU-

Hmm. I hadn’t even looked at the rest of this nonsense you posted.

My guess is that he is now out to destroy the Twitter deal.

Okay. At least you say it’s a guess. Of course Musk actually said that he’s “Still committed to acquisition” but I guess you think he’s lying.

There is no way that a mere 5% of the Twitterverse is fake accounts (his sudden stalking horse), and he knows it.

I think that’s true, but we aren’t talking the “Twitterverse”, we’re talking about this assertion: “Twitter Inc. estimated in a filing on Monday that false or spam accounts represented fewer than 5% of its monetizable daily active users during the first quarter.” I don’t have any feel for what a “monetizable daily active user” looks like. It’s quite possible that the typical bot doesn’t show up in that list – bots don’t read posts, don’t make posts until activated, and probably are usually set to post only occasionally. But I don’t know. Do you?

Two things going on: the market is tanking, which means he can re-enter at a lower price, even after paying a breakup fee, as Intercst notes. Moreover, he is pledging his Tesla stock for a fat part of the acquisition price (so he doesn’t actually have to sell it), but those pledges are generally made in real dollars because the lenders don’t want to accept the volatility risk. With Tesla shares also tanking, he faces a ‘silent’ margin call and would have to pledge even greater numbers for an asset which is currently devaluing.

Actually, he’s reduced the amount of Tesla stock he has pledged (see subsequent SEC filings), by about half, and is actively pursuing other investors so that he need pledge no stock at all. So much for the rest of your theorizing. Oh wait, there’s more.

So he kills the deal, hoping for a mulligan and an even fatter pitch, acquisition wise.

I can imagine that he would like to renegotiate some aspects of the deal, especially if he’s finding that potential co-investors are saying something like “Sure, I’m in for $1B at a $10 lower offer price.” It’s possible.

I would surmise that it is extremely difficult to persuade him of anything he doesn’t already believe, but I wonder if the ‘everyone will pay to use Twitter’ theory has gotten some pushback from any insiders he does bother to listen to.?

You would be completely wrong about that. Musk is easy to convince he’s wrong. Just show him that reality says otherwise. Examples are how he reversed course on excessive automation during the Model 3 ramp; how he scrapped the approach of building the Starship out of carbon fiber and going to steel instead; and him ditching radar as part of the autonomous sensor suite on all new Teslas. These decisions take an almost unimaginable ability to say “What an idiot I’ve been. We have to start over.” Most people, even the best of us, succumb to the sunk cost fallacy (and ego) rather than do the right thing. This is one of Musk’s superpowers.

As to everyone paying to use Twitter, he never suggested that. You are making the usual error of reading what people say about what Musk says rather than reading what he actually says.

-IGU-

However, when fiat currency has negative real interest, only a fool wouldn’t look elsewhere.

Bitcoin is almost as bs as fiat money. The key word is “almost”."

I’m not so sure. If that were true, then Tesla should be happy to accept Bitcoin in exchange for a Tesla, right? Yet they don’t. In fact, almost no companies accept Bitcoin for anything. Is there a reason for that?

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