5 ms·

Goldman told TWTR Elon’s $54.20 offer was too low but has a sell target at $30

66 points by htk 5y ago

eoghann 5y ago
In the commodities world it's expected that Goldman's physical position is the opposite of what would be expected from their analysis. It's also worth pointing out that it's perfectly reasonable for a forecast to be very different to a current price due to price being a function of time and different risks and time horizons involved.
newhaus1994 5y ago
Zerohedge really shouldn’t be tolerated here at this point in time, to be honest.
brycelarkin 5y ago
Equity Research and the Investment Banking Division are completely different groups with procedures in place to make sure they never interact with each other.
- quantified 5y ago
  Right.
- formercoder 5y ago
  Not never. They speak regularly, with an attorney on the line, following approved topics and protocols.
  - version_five 5y ago
    They speak with an attorney on the line so the conversation is privileged and cant be subpoenaed.
    - jcranmer 5y ago
      ... that doesn't give the conversation attorney-client privilege, and I think it just tends to make the judge angry when you try to claim in court that it does--it's not an effective technique in practice.
    - formercoder 5y ago
      It's a phone conversation on an unrecorded line so the presence of the attorney isn't really relevant in that sense.
  - JumpCrisscross 5y ago
    To synchronise schedules and blacklists. Not to discuss valuations.
- fakethenews2022 5y ago
  Nope. Look at the dot-com bubble and bust when in a single firm equity research pumped and investment banking got people to buy. I asked a banker this exact question back then. All I got was flowery language of great walls and reputational damage. We all know what happened. The bubble popped. The two sides don't need to talk. The equity research is public. Incentives are such that both sides want to pump.
  - Kranar 5y ago
    The dot-com bubble predates FINRA Rule 2241 which was adopted in 2015. [1] https://www.finra.org/rules-guidance/rulebooks/finra-rules/2241 https://www.finra.org/rules-guidance/rulebooks/finra-rules/2...
- Dylan16807 5y ago
  It's still very awkward for them to have such different valuations.
  - Kranar 5y ago
    It's awkward only in the sense that the valuations are absolutely worthless. You can back test the 1 year target estimates of almost any company to see for yourself that they are junk, in fact this topic has been studied almost to death if you do a search on Google Scholar.
    - kyleee 5y ago
      savage, and interestingly enough all these financial analysts still have good paying jobs
      - BenoitP 5y ago
        IMHO it falls into the same category as content farms trying to drive traffic into buying a product.
WheelsAtLarge 5y ago
Many takeover offers tend to fall towards the high end of the stock's all time high so that shareholders feel like they are at least getting out without a loss. He needs to go closer to $70 if he wants to be taken seriously. If he can't justify the $70+ price then the investment is not worth it. If it's true what he said that he is buying it to help the world rather than for profit then $70+ price should be easy to justify.
- buzzard1 5y ago
- syshum 5y ago
  >>If it's true what he said that he is buying it to help the world rather than for profit then $70+ price should be easy to justify. Where on earth do you get that $70 is insane, Twitter will likely never reach that again, it for sure will not under current leadership. Twitters current leadership is killing the platform
  - WheelsAtLarge 5y ago
    It doesn't matter whether the stock is likely to reach $70 or not. What matters is that musk must convince the majority of stock holders to sell him their shares. If he wants to take over the company. The current offer is getting rejected. He'll need to up his bid. He really needs to offer a price they or the board can't refuse. A price way closer to the all time high or above it. No shareholder is going to give up their shares for altruistic reasons, that's not why the bought them, so they are waiting for the right price.
    - syshum 5y ago
      Which is likely $54.20... a Rejection following by Elon dumping his 9% $54.20 will seem like a fortune
    - mbreese 5y ago
      > must convince the majority of stock holders I don’t think it is the majority — I think he needs all of them. Anything less than 100% and he’d have to worry about fiduciary duty to minority shareholders. And if taking a company private, you need to have all of the shareholders on board. I might not fully understand this dynamic, but I thought that was the reason why he wanted to buy 100% and not just a controlling interest.
floatinglotus 5y ago
They want the deal to be rejected (i.e call it too low), so musk sells his current shares, dropping the price into the 30’s, so they cN cover their short sale.
this_user 5y ago
One is a 12-month price target for the stock, the other is a takeover price (based on the long term) where GS is acting on behalf of the company and its existing shareholders. This is really not "gotcha" like ZH try to pretend it is.
- m101 5y ago
  A short term price target should incorporate long term cashflow expectations
- Dylan16807 5y ago
  > One is a 12-month price target for the stock, the other is a takeover price (based on the long term) If you expect a certain price in the future, then you should want to buy/sell toward a similar price (minus interest) in the present, shouldn't you? > where GS is acting on behalf of the company and its existing shareholders. That explains wanting some premium. It doesn't explain the difference between 30 and >54.
  - fgonzag 5y ago
    You want to buy 100% of the stock (think about what that does to the volume of buy orders). That obviously has a much higher price than the normal market dynamics. Both things can be accurate, the price sticking at $30 on normal trading, and a full takeover requiring a significant premium.
    - jtc331 5y ago
      By any normal measure I’d consider $54 a very significant premium to $30.
    - jansen555 5y ago
  - Retric 5y ago
    The most obvious reasons is it’s different people doing the analysis so they should come to different conclusions.
landa 5y ago
Goldman Sachs is more like a collection of companies (divisions) than one company. Further, there is often a Chinese Wall between divisions preventing them from having access to one another to prevent insider trading.
- kjksf 5y ago
  That price target is public. I'm pretty sure chinese wall wouldn't prevent the other guys and GS from reading TipRanks. Goldman Sachs will look stupid if they advise against a sale at $54 if they also advise to sell and believe the price will be $30. Twitter board is not buying GS opinion. It's clearly worthless if one guy says "Twitter is worth $30" and the other guy says "Twitter is worth more than $54". They are paying GS to tell them what they want to tell the public i.e. don't sell to Musk. Twitter board is just too incompetent to execute such cover up. I assume there's at least one bank they could hire that has buy rating on Twitter to justify their "don't sell" advice.
tootie 5y ago
People still read Zerohedge? https://apnews.com/article/russia-ukraine-coronavirus-pandemic-health-moscow-media-ff4a56b7b08bcdc6adaf02313a85edd9 https://apnews.com/article/russia-ukraine-coronavirus-pandem...
- syshum 5y ago
  US "intelligence" pushing propaganda just as much if not more than Russian "intelligence". The 3 letter agencies have lost my trust and many (if not most) of my fellow Americans trust. Like wise the AP has lost a lot of trust as well, they are not immune to posting fake stories and propaganda either. Could zh have posted Russian propaganda maybe.. likely even. That will not stop me from reading the site
  - tootie 5y ago
    I mean, they absolutely did post propaganda. The administration was 100% vindicated in this statement. They explicitly did not accuse ZH of knowingly or deliberately working for Russia, only that they ran a story without vetting that came from a source connected to Russian intel that contained disinformation related to Russia's intention to invade Ukraine. Really US Intel and the AP are very rarely wrong and I don't think they've ever posted propaganda. Us Intel usually comes with a confidence level and it's up to policy makers to react (or overreact or underreact).
    - syshum 5y ago
      >>>Really US Intel and the AP are very rarely wrong This is sarcasm right. Tell me this is sarcasm
      - tootie 5y ago
        Intel you read in the news is always filtered through the mouths of politicians laden with agenda. During the Iraq war, the Bush admin ran their own intel operations when the pros didn't tell them what they wanted to hear. That being said, the accusation against ZH is from politicians too so I guess it still applies. Still they were right and ZH ran propaganda. Whataboutism doesn't make them less guilty. Their unflinching denial makes them more guilty.
gorgoiler 5y ago
Stock price isn’t fixed. It’s based on how much you want to buy. Only the front of the order book is for sale at the quoted price. Everything after that is more expensive. TWTR trading volume is I guess $1B - $2B a day (Y! says 38M units avg) shuffling stock between lots of small buyers and sellers. Musk wants to buy 25x to 50x that. If you sell oranges, you might have them priced at a dollar each. The guy in the stall next to you thinks the exact same oranges are worth more. He prices them for sale at $2, and the guy next to him for $4. Neither of then sell anything though. A single person comes by for an orange every morning and that’s all the oranges that get sold that day in your town. This person buys their one orange from you and the town crier reports the ORNG stock quote as being $1. If some rich guy comes along and says “I will now buy all the oranges from all of you”, the average price is going to be higher. The town banker advises you all that while their offer of $2.69 is high, you could definitely, ahem, squeeze them for more.
- mromanuk 5y ago
  Following your example, after the offer of $2.69 and the counter offer of $4, there are two possible scenarios: The buyer accepts the offer (and pay $4 per share making it the real market value) or the buyer rejects it, leaving the market value at a max of $2.69. The price is not the market value (If I value my orange at $1,000,000 and nobody buy them, that's not the market value.) If it the $2.69 buyer, now happens to own a large share of oranges, and also has open and stand next to the other sellers, but priced at $0,50. What will happen with $1, $2 and $4 sellers? Let's see in a few days :)
- tmitchel2 5y ago
  Where can I tick this as the correct answer :)

66 points by htk 5y ago

In the commodities world it's expected that Goldman's physical position is the opposite of what would be expected from their analysis. It's also worth pointing out that it's perfectly reasonable for a forecast to be very different to a current price due to price being a function of time and different risks and time horizons involved.

newhaus1994 5y ago

Zerohedge really shouldn’t be tolerated here at this point in time, to be honest.

brycelarkin 5y ago

Equity Research and the Investment Banking Division are completely different groups with procedures in place to make sure they never interact with each other.

quantified 5y ago
Right.
formercoder 5y ago
Not never. They speak regularly, with an attorney on the line, following approved topics and protocols.
- version_five 5y ago
  They speak with an attorney on the line so the conversation is privileged and cant be subpoenaed.
  - jcranmer 5y ago
    ... that doesn't give the conversation attorney-client privilege, and I think it just tends to make the judge angry when you try to claim in court that it does--it's not an effective technique in practice.
  - formercoder 5y ago
    It's a phone conversation on an unrecorded line so the presence of the attorney isn't really relevant in that sense.
- JumpCrisscross 5y ago
  To synchronise schedules and blacklists. Not to discuss valuations.
fakethenews2022 5y ago
Nope. Look at the dot-com bubble and bust when in a single firm equity research pumped and investment banking got people to buy. I asked a banker this exact question back then. All I got was flowery language of great walls and reputational damage. We all know what happened. The bubble popped. The two sides don't need to talk. The equity research is public. Incentives are such that both sides want to pump.
- Kranar 5y ago
  The dot-com bubble predates FINRA Rule 2241 which was adopted in 2015. [1] https://www.finra.org/rules-guidance/rulebooks/finra-rules/2241 https://www.finra.org/rules-guidance/rulebooks/finra-rules/2...
Dylan16807 5y ago
It's still very awkward for them to have such different valuations.
- Kranar 5y ago
  It's awkward only in the sense that the valuations are absolutely worthless. You can back test the 1 year target estimates of almost any company to see for yourself that they are junk, in fact this topic has been studied almost to death if you do a search on Google Scholar.
  - kyleee 5y ago
    savage, and interestingly enough all these financial analysts still have good paying jobs
    - BenoitP 5y ago
      IMHO it falls into the same category as content farms trying to drive traffic into buying a product.

WheelsAtLarge 5y ago

Many takeover offers tend to fall towards the high end of the stock's all time high so that shareholders feel like they are at least getting out without a loss. He needs to go closer to $70 if he wants to be taken seriously. If he can't justify the $70+ price then the investment is not worth it. If it's true what he said that he is buying it to help the world rather than for profit then $70+ price should be easy to justify.

buzzard1 5y ago
syshum 5y ago
>>If it's true what he said that he is buying it to help the world rather than for profit then $70+ price should be easy to justify. Where on earth do you get that $70 is insane, Twitter will likely never reach that again, it for sure will not under current leadership. Twitters current leadership is killing the platform
- WheelsAtLarge 5y ago
  It doesn't matter whether the stock is likely to reach $70 or not. What matters is that musk must convince the majority of stock holders to sell him their shares. If he wants to take over the company. The current offer is getting rejected. He'll need to up his bid. He really needs to offer a price they or the board can't refuse. A price way closer to the all time high or above it. No shareholder is going to give up their shares for altruistic reasons, that's not why the bought them, so they are waiting for the right price.
  - syshum 5y ago
    Which is likely $54.20... a Rejection following by Elon dumping his 9% $54.20 will seem like a fortune
  - mbreese 5y ago
    > must convince the majority of stock holders I don’t think it is the majority — I think he needs all of them. Anything less than 100% and he’d have to worry about fiduciary duty to minority shareholders. And if taking a company private, you need to have all of the shareholders on board. I might not fully understand this dynamic, but I thought that was the reason why he wanted to buy 100% and not just a controlling interest.

floatinglotus 5y ago

They want the deal to be rejected (i.e call it too low), so musk sells his current shares, dropping the price into the 30’s, so they cN cover their short sale.

this_user 5y ago

One is a 12-month price target for the stock, the other is a takeover price (based on the long term) where GS is acting on behalf of the company and its existing shareholders. This is really not "gotcha" like ZH try to pretend it is.

m101 5y ago
A short term price target should incorporate long term cashflow expectations
Dylan16807 5y ago
> One is a 12-month price target for the stock, the other is a takeover price (based on the long term) If you expect a certain price in the future, then you should want to buy/sell toward a similar price (minus interest) in the present, shouldn't you? > where GS is acting on behalf of the company and its existing shareholders. That explains wanting some premium. It doesn't explain the difference between 30 and >54.
- fgonzag 5y ago
  You want to buy 100% of the stock (think about what that does to the volume of buy orders). That obviously has a much higher price than the normal market dynamics. Both things can be accurate, the price sticking at $30 on normal trading, and a full takeover requiring a significant premium.
  - jtc331 5y ago
    By any normal measure I’d consider $54 a very significant premium to $30.
  - jansen555 5y ago
- Retric 5y ago
  The most obvious reasons is it’s different people doing the analysis so they should come to different conclusions.

landa 5y ago

Goldman Sachs is more like a collection of companies (divisions) than one company. Further, there is often a Chinese Wall between divisions preventing them from having access to one another to prevent insider trading.

kjksf 5y ago
That price target is public. I'm pretty sure chinese wall wouldn't prevent the other guys and GS from reading TipRanks. Goldman Sachs will look stupid if they advise against a sale at $54 if they also advise to sell and believe the price will be $30. Twitter board is not buying GS opinion. It's clearly worthless if one guy says "Twitter is worth $30" and the other guy says "Twitter is worth more than $54". They are paying GS to tell them what they want to tell the public i.e. don't sell to Musk. Twitter board is just too incompetent to execute such cover up. I assume there's at least one bank they could hire that has buy rating on Twitter to justify their "don't sell" advice.

tootie 5y ago

People still read Zerohedge? https://apnews.com/article/russia-ukraine-coronavirus-pandemic-health-moscow-media-ff4a56b7b08bcdc6adaf02313a85edd9 https://apnews.com/article/russia-ukraine-coronavirus-pandem...

syshum 5y ago
US "intelligence" pushing propaganda just as much if not more than Russian "intelligence". The 3 letter agencies have lost my trust and many (if not most) of my fellow Americans trust. Like wise the AP has lost a lot of trust as well, they are not immune to posting fake stories and propaganda either. Could zh have posted Russian propaganda maybe.. likely even. That will not stop me from reading the site
- tootie 5y ago
  I mean, they absolutely did post propaganda. The administration was 100% vindicated in this statement. They explicitly did not accuse ZH of knowingly or deliberately working for Russia, only that they ran a story without vetting that came from a source connected to Russian intel that contained disinformation related to Russia's intention to invade Ukraine. Really US Intel and the AP are very rarely wrong and I don't think they've ever posted propaganda. Us Intel usually comes with a confidence level and it's up to policy makers to react (or overreact or underreact).
  - syshum 5y ago
    >>>Really US Intel and the AP are very rarely wrong This is sarcasm right. Tell me this is sarcasm
    - tootie 5y ago
      Intel you read in the news is always filtered through the mouths of politicians laden with agenda. During the Iraq war, the Bush admin ran their own intel operations when the pros didn't tell them what they wanted to hear. That being said, the accusation against ZH is from politicians too so I guess it still applies. Still they were right and ZH ran propaganda. Whataboutism doesn't make them less guilty. Their unflinching denial makes them more guilty.

gorgoiler 5y ago

Stock price isn’t fixed. It’s based on how much you want to buy. Only the front of the order book is for sale at the quoted price. Everything after that is more expensive. TWTR trading volume is I guess $1B - $2B a day (Y! says 38M units avg) shuffling stock between lots of small buyers and sellers. Musk wants to buy 25x to 50x that. If you sell oranges, you might have them priced at a dollar each. The guy in the stall next to you thinks the exact same oranges are worth more. He prices them for sale at $2, and the guy next to him for $4. Neither of then sell anything though. A single person comes by for an orange every morning and that’s all the oranges that get sold that day in your town. This person buys their one orange from you and the town crier reports the ORNG stock quote as being $1. If some rich guy comes along and says “I will now buy all the oranges from all of you”, the average price is going to be higher. The town banker advises you all that while their offer of $2.69 is high, you could definitely, ahem, squeeze them for more.

mromanuk 5y ago
Following your example, after the offer of $2.69 and the counter offer of $4, there are two possible scenarios: The buyer accepts the offer (and pay $4 per share making it the real market value) or the buyer rejects it, leaving the market value at a max of $2.69. The price is not the market value (If I value my orange at $1,000,000 and nobody buy them, that's not the market value.) If it the $2.69 buyer, now happens to own a large share of oranges, and also has open and stand next to the other sellers, but priced at $0,50. What will happen with $1, $2 and $4 sellers? Let's see in a few days :)
tmitchel2 5y ago
Where can I tick this as the correct answer :)