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You're claiming that Musk's purchase of twitter is objectively good for shareholders
by themitigating 5y ago
You're claiming that Musk's purchase of twitter is objectively good for shareholders
- nickysielicki 5y agoGiven that it’s at a share price premium for 90%+ of the lifetime of the stock since IPO, yes. Most shares were bought below the price Musk is asking.
- gobengo 5y agoit's radical to equate dollar values with objective goodness
- iancmceachern 5y agoExactly. Profit does not always equal good. One of my favorite books: "Small giants, companies that choose to be great instead of big"
- tsimionescu 5y agoFiduciary duty, such as it is, only extends to dollar value; and there is no other criteria to sue the board over. Note that I'm all for companies having much more legal responsibility to other stakeholders, not just shareholders, but that is somewhat irrelevant for a discussion of whether the board could be successfully sued over adopting this decision.
- dasil003 5y agoTrue, but the GP's phrasing of "equate dollar values" implies a sort of cut and dried interpretation. A mechanical calculation of a short-term price snapshot is not the only thing that matters. If the board has good reason to believe that Musk will be bad for the stock price in the long-term then there wouldn't be any breach of fiduciary duty.
- tsimionescu 5y agoThat's not exactly true, as Musk's offer is to buy the company outright, making it private (and thus buying out all shareholders), as I understand - so there is no concept of how Musk's ownership would affect the stock price. Still, the board can easily argue "we believe shareholders will be able to achieve higher profits in the future by maintaining their ownership than by selling all stock at Musk's offered price today".
- bradleybuda 5y agoHe claims that he wants to “retain as many shareholders as is allowed by the law” [0] which is just as fictional as it was when he pretended to try to take Telsa private. [0] https://www.bloomberg.com/opinion/articles/2022-04-15/sure-elon-musk-might-buy-twitter https://www.bloomberg.com/opinion/articles/2022-04-15/sure-e...
- dEnigma 5y agoIt's not that radical to equate dollar values with "good for stockholders". At least in my impression that is what most stock holders care about.
- jungturk 5y agoThere's an entire sector of funds that include criteria around environmental, social, and governance impacts in addition to returns on investment. https://www.investor.gov/introduction-investing/general-resources/news-alerts/alerts-bulletins/investor-bulletins-1 https://www.investor.gov/introduction-investing/general-reso...
- philistine 5y agoThe board has declared the price offered to be too low. You say it's high enough, but I doubt you own as much stock as the people on the board.
- nickysielicki 5y agoTo be clear, they haven’t actually rejected the offer yet, they’ve simply limited the ability of Musk to acquire a majority stake in the case that they reject.
- jayd16 5y agoIf you think the stock could grow further without Musk then the board would be protecting your interests.
- ryoshu 5y agoIf North Korea offered $60 billion to buy Twitter would Twitter be forced to sell? Not comparing Musk to NK, but money isn't the only consideration when an offer to sell comes in.
- loceng 5y agoIndeed, what happens when Elon starts his own platform instead and uses some of the ~$40 billion he'd otherwise buy Twitter with instead on paying top users of Twitter to exclusively use his platform instead?
- metadat 5y agoI'd ditch twtr in a heartbeat, at this point it's a cesspool in every sense.
- dev_tty01 5y agoThere are already alternatives to Twitter. Why haven't you ditched it already?
- metadat 5y agoI'm aware, and do you realize nobody of note is using the alternatives? Why would you recommend someone invest time building a presence in yet another loser platform with bleak future prospects? Doesn't seem helpful or all that bright. For a real alternative to succeed, solid backers focused on dethroning tw are needed to inspire confidence and stability, then we all need to jump at about the same time to get the momentum going and bounce out of the twatterverse. As it stands now, there is no real competition.
- tsimionescu 5y ago> I'm aware, and do you realize nobody of note is using the alternatives? That's exactly the point - there is no reason to believe this would change if Musk created his own social network.
- deleted 5y ago[deleted]
- paxys 5y agoNot everyone buys a stock for a quick short-term turnaround. If I expect Twitter to 20x in the next 5 years why would I want to sell my share to Elon? And existing investors all have the option to cash out today for just 17% less than Musk's final offer.
- aetherson 5y agoIf you expect Twitter to 20x in the next 5 years, then a: You're dreaming. b: You're absolutely expecting a quick short-term gain.
- JumpCrisscross 5y ago> b: You're absolutely expecting a quick short-term gain To put this in perspective, 20x in 5 years is an 82% CAGR. And five years is far short of the length of an economic cycle. Traditionally, "long term investing" meant across at least one whole business cycle.
- EdiX 5y agoTwitter has operated for 16 years and public for about 10, explosive growth of their userbase is in their past and monetization strategies have already been implemented for years. There is no reason to believe it has the potential for such growth.
- paxys 5y agoThen why were they holding the stock the day before Musk got involved?
- mechanical_bear 5y agoThey feel there is potential for growth, just not flights of fancy like you describe.
- IMTDb 5y ago> If I expect Twitter to 20x in the next 5 years why would I want to sell my share to Elon? Vote with your dollars: buy shares at a price higher than Elon's. Borrow if you must. If you are not ready to take that risk, then maybe your expectations are more wishful thinking than anything real.
- dev_tty01 5y agoToday's price and the 'expected' future price is all that matters. The 90% lifetime price history is not relevant. All transactions of this nature are based on future value. The offer is only an 18% premium at a time when many tech stocks are being hammered due to extrinsic reasons. It is not a serious offer.
- drstewart 5y agoI take it you're highly invested in Twitter stock given how confident you are it's going to go up by more than 20%?
- aleister_777 5y agoIt closed $.18 above initial offer price in 2013.
- quickthrowman 5y agoThe share price tells you nothing by itself—you also need to know the amount of shares outstanding at both points in time to make an actual comparison.
- _v7gu 5y agoToday's price is the expected future price. If you disagree, go buy the stock and make some money.
- tsimionescu 5y agoThat is irrelevant. To show a breach of fiduciary duty with this kind of argument, you would basically have to prove that it is objectively impossible for Twitter stock to be worth more than what Musk offered over some horizon. I very much doubt there has ever been a successful case taking this approach.
- oh_sigh 5y agoGetting paid a 25% premium for my stock sounds pretty good to me.
- themitigating 5y agoWhat if the stock goes higher in the future?
- 14 5y agoWhat if the stock crashes in the future? Having a guarantee profit sounds like a pretty good deal for some.
- justapassenger 5y agoGuaranteed profit at the point in time is great for speculators. If you're doing long term investment, realizing profit at random point in time, isn't really that attractive.
- elcomet 5y agoWhat ? Even if you're a long time investor, having an instant 25% guaranteed profit is good as you can sell part of the stock and diversify.
- justapassenger 5y agoIf you follow that logic, each time stock goes after good earnings, everyone should just sell off everything.
- deleted 5y ago[deleted]
- nostrebored 5y agoThey should, provided transaction fees and gains taxes don’t exceed their estimation of the difference in value times the number of stocks adjusted for the time value of money. People with more complicated positions should consider covariance and factor in uncertainty. But if you’re a shareholder in a single stock and estimate that it’s overvalued by a significant margin, the rational choice is to sell your position, invest in a low risk, highly liquid asset, and rebuy.
- TsomArp 5y agoAnd why wouldn't be? He is offering a premium from the current valuation. You either accept it or reject it if you think the premium is low, or am I wrong?
- teeray 5y agoThe board’s mandate is to maximize shareholder value. They have an offer that will objectively maximize that value. To scorn it in favor of intangibles is to act against the interest of shareholders.
- philistine 5y agoAccording to your logic, any offer to go private above market value must be accepted. That's not the case. Stockholders might be interested in owning Twitter stock for a long time. Elon's offer might not make financial sense for them.
- avs733 5y agoThe boards mandate is one of fiduciary duty. Bluntly, that is not a mandate to maximize shareholder value, especially in the short term. They do not have an offer that will maximize shareholder value - they have an offer that will increase it. Words have meaning and concepts have definitions. They are not arbitrary of flexible for the sake of making the argument you want. The BOD's responsibility is to the company, a public company's responsibility is to the shareholders - this difference matters. Cornell's legal information institute provides a nice and cited set of definitions (albeit in legalese) - https://www.law.cornell.edu/wex/fiduciary_duty https://www.law.cornell.edu/wex/fiduciary_duty
- LocalPCGuy 5y agoNo, a board is mandated to act in the best interests of the shareholders. That might be different than just maximizing the share price. They may believe this is a bad idea for the company as a whole, and that long term, it's objectively better for the company to not be owned by Musk.
- compsciphd 5y agoisn't musks offer to buy out all the shareholders. i.e. lets take a crazy example. you have a company that is worth $1mil and we only imagine that it can be worth $100mil (based on the size of the market we are addressing). someone comes and offers $200mil but we know he will shut the company down (i.e. liquidate all its assets, or even simply the desire to destroy the company). While this might be sad for the company, why is it not in the interests of the shareholders to take the offer? so if Musk is willing to offer more than shareholders expect to see in the forseable future, why does it matter what will happen to the company after that? their interest in the company ends when their shares are purchased.