7 ms·

I don't think your argument holds water. If the shareholders are rational and believe the true value is greater than current price, why aren't people buying un

by cwkoss 5y ago

I don't think your argument holds water. If the shareholders are rational and believe the true value is greater than current price, why aren't people buying until it asymptotically approaches that price? Optimism and hopes for future gains aren't priced in because they are fantasy and not yet material.

sgjohnson 5y ago
> why aren't people buying until it asymptotically approaches that price? Because the market can stay irrational longer than you can stay solvent.
- Breza 5y ago
  Well put!
mupuff1234 5y ago
With that rational you're also implying that it's never worth holding a stock since there's only potential downside. Which clearly isn't how things work.
WinstonSmith84 5y ago
Indeed https://twitter.com/Alwaleed_Talal/status/1514615956986757127 https://twitter.com/Alwaleed_Talal/status/151461595698675712... One can easily imagine how useful it's for such a country like Saudi Arabia to control the #1 worldwide media platform without being too exposed on the frontline (i.e. as a large, but not too much, shareholder).
georgeecollins 5y ago
All shareholders may believe the true value is greater than the current price but still not buy or sell at the true value price because they don't know when the company will sell for the true value. You see this when a company makes a bid for another company but the deal hasn't gone through yet. It sometimes trades for a little more or a little less, and that's when a deal has been accepted. When it's a little less, that's because there is some legal risk that the deal won't go through. When it is a little more that is because someone thinks the deal will get held up and renegotiated (like another bidder might show up). So it is possible and common for a stock to be lower then what people expect it to be worth. A really good example of this is when you have a powerful CEO or a person with more voting rights who might hold up a deal for their personal ambition. Think about Shari Redstone at Viacom. Most people think the company is worth more but difficult to sell because she wants to run it awhile to show she can. Twitter is worth a lot but difficult to sell for all the reasons this deal is showing. Supposedly Disney thought about buying it but realized it would be very controversial. When it takes a long time for the right buyer to show up investors trade the stock at a discount. It happens all the time in media stocks. (Full disclosure: I have Twitter stock)
trothamel 5y ago
The current shareholders, who vote on this, think that the current value is higher than what is being offered to them to sell. Those are the ones that Elon has to convince with his higher offer.
- loceng 5y ago
  Well, along with if they don't sell to him it feels like he will become create a Twitter competitor with up a budget of up to $42 billion to spend - which based on his past successes he will efficiently spend.
  - stevespang 5y ago
  - chillwaves 5y ago
    OK then let's see him do it. Maybe he will have innovations like the 141 character tweet.
  - whateveracct 5y ago
    Hn the government isn't going to subsidize his Twitter competitor like they did his other ventures tho
  - chx 5y ago
    Past successes? - Tesla loses money on every car. They make money from regulatory credit trading. - SpaceX's Starlink satellites are involved in about 1,600 close encounters between two spacecraft every week, ~50 % of all such - Hyperloop is impossible - The Boring Company tunnels are deathtraps
    - procombo 5y ago
      Sorry you're so glum. Buy a Tesla. It'll put a smile on your face. -Space access is leading the world. Satellites bring freedom, access, and peace. -Cars are the safest, fastest, and smartest you can drive. -Tunnels solve waaaay more problems than they create. Hyperloop isn't so much an 'active' project, see tunnels. -Robots are extension of AI work for self driving. -Brain project will help those with physical disabilities, and learning. -Solar roof and battery at home is wicked cool and useful. I'm leaving stuff out. Don't know if they take a loss on their cars, but if so that's very common for hardware manufacturers. I'm not an Elon apologist by any stretch, but you have objectively bad takes here. I can only imagine you just don't like his personality. Are his companies not leading in Space access? Clean energy? Transportation? Maximizing life? Fun. The guy is a workhorse He innovates at every turn. He hires the best, and expects the best. He has done a marvelous job incentivizing great engineering, science, and research. Their goals are lofty. He thinks long-term. His teams are largely motivated for the right reasons, and he helps make many of his employees very wealthy. His intentions are good. He's an environmentalist. He loves Earth. He loves people. He's positive and optimistic for the future. He can be abstract, artistic, and goofy. From our perspective, he's rarely wrong, and when he is, he owns it. Is he perfect? Hell no. But he accepts responsibility. He engages with the public, and his fans.... and his haters. One thing is for sure so far, people who bet on him win. We'd be so lucky to have Elon lead a communication/social platform.
daveed 5y ago
Risk management? I believe a lot of my long positions are worth more than their current price, doesn't mean I'm going to spend all my money buying them up to that price. If I lock in a 20% gain today that's nice, but I might believe with high confidence that it'll rise 50% in the next year. Then Elon's bid doesn't move me that much.
- cwkoss 5y ago
  If they believed this, they wouldn't be selling at the current spot, sellers would all be putting their asks ~46% above spot (discounting time value of money), and the market would move. That risk and upside is already priced in if you believe in market efficiency.
  - dhzhzjsbevs 5y ago
    Asks above 5% or so current price usually get rejected by brokers.
  - daveed 5y ago
    I don't believe in market efficiency. The market is large and has plenty of participants with different strategies. There are people selling at the going price, and there are people who are not. The trading price is a good reference price, but it's not the "right price" for everyone.
    - pyuser583 5y ago
      But isn’t that the point of a market? Some people have goods they don’t want, other people want those goods. So they buy and sell. Every time a stock trades, there’s a single price. And that price is the price one person is willing to sell at, and another is willing to buy at. That’s how markets work.
    - cwkoss 5y ago
      OK... I don't anyone would find your squishy confidence it's worth 50% more than current value any more credible than shorters who think it's worth 50% less. Both seem like fringe opinions without much foundation.
lilyball 5y ago
Risk tolerance, a need for a diversified portfolio, a lack of infinite money to spend buying stock, etc?
- hajile 5y ago
  These guys are literally betting that it'll go up 100% to that mythical $77. If they actually believed HALF this amount was going to happen, they'd be buying until it reached $50-60. Instead, we see Goldman Sachs saying that $30 is their sell price. A dollar in the hand is worth a LOT of imaginary gambling dollars. This can only be described as political/ideological or a huge gamble that Musk would come back with an even bigger offer rather than walk away. Neither of these seem to be in the best interest of shareholders.
  - Breza 5y ago
    I don't think investors are totally rational, but here's a simplified example. If you think there's a 90% chance that a stock price will triple and a 10% chance that it will drop to zero, you could resist a takeover bid and still not want to put all of your money into it.
    - hajile 5y ago
      If you're gambling with your stock, under what circumstances would you not take a massive 20% ROI and turn it over into a new stock? In my opinion, the real reason behind the board's decision is ideological. If Someone with their ideology made the same offer, I'd bet big that they'd be announcing their acceptance and talking about the bright future for the company. Screwing your shareholders over for ideology would not sit well with a jury. I'd love for them to go to discovery over this and see what the board REALLY said.
NorwegianDude 5y ago
People usually want to earn money, so it's a good idea to buy low and sell high. You don't want to buy close to the price you think it will reach. Not only because of the risk of it being wrong, but also because other options exists that is believed to make more money compared to the risk. It would be stupid to buy a stock even if there was a 100 % guarantee for a stock to increase 2 % in 1 year as there are other basically risk free options available.
danamit 5y ago
His point is, that at least half of the share holders are not happy selling for that price. Selling is a personal decision, and if at least half are not happy to be forced to sell, I don't see it being a good idea. Even if the optimal price that's some supernatural being will suggest is lower than current price, it is still the decision of the share holders. Optimism and hopes are worth a price, you are in ycombinator.com, a major buyer of optimism and hopes.

by cwkoss 5y ago

sgjohnson 5y ago

> why aren't people buying until it asymptotically approaches that price? Because the market can stay irrational longer than you can stay solvent.

Breza 5y ago
Well put!

mupuff1234 5y ago

With that rational you're also implying that it's never worth holding a stock since there's only potential downside. Which clearly isn't how things work.

WinstonSmith84 5y ago

Indeed https://twitter.com/Alwaleed_Talal/status/1514615956986757127 https://twitter.com/Alwaleed_Talal/status/151461595698675712... One can easily imagine how useful it's for such a country like Saudi Arabia to control the #1 worldwide media platform without being too exposed on the frontline (i.e. as a large, but not too much, shareholder).

georgeecollins 5y ago

All shareholders may believe the true value is greater than the current price but still not buy or sell at the true value price because they don't know when the company will sell for the true value. You see this when a company makes a bid for another company but the deal hasn't gone through yet. It sometimes trades for a little more or a little less, and that's when a deal has been accepted. When it's a little less, that's because there is some legal risk that the deal won't go through. When it is a little more that is because someone thinks the deal will get held up and renegotiated (like another bidder might show up). So it is possible and common for a stock to be lower then what people expect it to be worth. A really good example of this is when you have a powerful CEO or a person with more voting rights who might hold up a deal for their personal ambition. Think about Shari Redstone at Viacom. Most people think the company is worth more but difficult to sell because she wants to run it awhile to show she can. Twitter is worth a lot but difficult to sell for all the reasons this deal is showing. Supposedly Disney thought about buying it but realized it would be very controversial. When it takes a long time for the right buyer to show up investors trade the stock at a discount. It happens all the time in media stocks. (Full disclosure: I have Twitter stock)

trothamel 5y ago

The current shareholders, who vote on this, think that the current value is higher than what is being offered to them to sell. Those are the ones that Elon has to convince with his higher offer.

loceng 5y ago
Well, along with if they don't sell to him it feels like he will become create a Twitter competitor with up a budget of up to $42 billion to spend - which based on his past successes he will efficiently spend.
- stevespang 5y ago
- chillwaves 5y ago
  OK then let's see him do it. Maybe he will have innovations like the 141 character tweet.
- whateveracct 5y ago
  Hn the government isn't going to subsidize his Twitter competitor like they did his other ventures tho
- chx 5y ago
  Past successes? - Tesla loses money on every car. They make money from regulatory credit trading. - SpaceX's Starlink satellites are involved in about 1,600 close encounters between two spacecraft every week, ~50 % of all such - Hyperloop is impossible - The Boring Company tunnels are deathtraps
  - procombo 5y ago
    Sorry you're so glum. Buy a Tesla. It'll put a smile on your face. -Space access is leading the world. Satellites bring freedom, access, and peace. -Cars are the safest, fastest, and smartest you can drive. -Tunnels solve waaaay more problems than they create. Hyperloop isn't so much an 'active' project, see tunnels. -Robots are extension of AI work for self driving. -Brain project will help those with physical disabilities, and learning. -Solar roof and battery at home is wicked cool and useful. I'm leaving stuff out. Don't know if they take a loss on their cars, but if so that's very common for hardware manufacturers. I'm not an Elon apologist by any stretch, but you have objectively bad takes here. I can only imagine you just don't like his personality. Are his companies not leading in Space access? Clean energy? Transportation? Maximizing life? Fun. The guy is a workhorse He innovates at every turn. He hires the best, and expects the best. He has done a marvelous job incentivizing great engineering, science, and research. Their goals are lofty. He thinks long-term. His teams are largely motivated for the right reasons, and he helps make many of his employees very wealthy. His intentions are good. He's an environmentalist. He loves Earth. He loves people. He's positive and optimistic for the future. He can be abstract, artistic, and goofy. From our perspective, he's rarely wrong, and when he is, he owns it. Is he perfect? Hell no. But he accepts responsibility. He engages with the public, and his fans.... and his haters. One thing is for sure so far, people who bet on him win. We'd be so lucky to have Elon lead a communication/social platform.

daveed 5y ago

Risk management? I believe a lot of my long positions are worth more than their current price, doesn't mean I'm going to spend all my money buying them up to that price. If I lock in a 20% gain today that's nice, but I might believe with high confidence that it'll rise 50% in the next year. Then Elon's bid doesn't move me that much.

cwkoss 5y ago
If they believed this, they wouldn't be selling at the current spot, sellers would all be putting their asks ~46% above spot (discounting time value of money), and the market would move. That risk and upside is already priced in if you believe in market efficiency.
- dhzhzjsbevs 5y ago
  Asks above 5% or so current price usually get rejected by brokers.
- daveed 5y ago
  I don't believe in market efficiency. The market is large and has plenty of participants with different strategies. There are people selling at the going price, and there are people who are not. The trading price is a good reference price, but it's not the "right price" for everyone.
  - pyuser583 5y ago
    But isn’t that the point of a market? Some people have goods they don’t want, other people want those goods. So they buy and sell. Every time a stock trades, there’s a single price. And that price is the price one person is willing to sell at, and another is willing to buy at. That’s how markets work.
  - cwkoss 5y ago
    OK... I don't anyone would find your squishy confidence it's worth 50% more than current value any more credible than shorters who think it's worth 50% less. Both seem like fringe opinions without much foundation.

lilyball 5y ago

Risk tolerance, a need for a diversified portfolio, a lack of infinite money to spend buying stock, etc?

hajile 5y ago
These guys are literally betting that it'll go up 100% to that mythical $77. If they actually believed HALF this amount was going to happen, they'd be buying until it reached $50-60. Instead, we see Goldman Sachs saying that $30 is their sell price. A dollar in the hand is worth a LOT of imaginary gambling dollars. This can only be described as political/ideological or a huge gamble that Musk would come back with an even bigger offer rather than walk away. Neither of these seem to be in the best interest of shareholders.
- Breza 5y ago
  I don't think investors are totally rational, but here's a simplified example. If you think there's a 90% chance that a stock price will triple and a 10% chance that it will drop to zero, you could resist a takeover bid and still not want to put all of your money into it.
  - hajile 5y ago
    If you're gambling with your stock, under what circumstances would you not take a massive 20% ROI and turn it over into a new stock? In my opinion, the real reason behind the board's decision is ideological. If Someone with their ideology made the same offer, I'd bet big that they'd be announcing their acceptance and talking about the bright future for the company. Screwing your shareholders over for ideology would not sit well with a jury. I'd love for them to go to discovery over this and see what the board REALLY said.

NorwegianDude 5y ago

People usually want to earn money, so it's a good idea to buy low and sell high. You don't want to buy close to the price you think it will reach. Not only because of the risk of it being wrong, but also because other options exists that is believed to make more money compared to the risk. It would be stupid to buy a stock even if there was a 100 % guarantee for a stock to increase 2 % in 1 year as there are other basically risk free options available.

danamit 5y ago

His point is, that at least half of the share holders are not happy selling for that price. Selling is a personal decision, and if at least half are not happy to be forced to sell, I don't see it being a good idea. Even if the optimal price that's some supernatural being will suggest is lower than current price, it is still the decision of the share holders. Optimism and hopes are worth a price, you are in ycombinator.com, a major buyer of optimism and hopes.