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The 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 ac

by teeray 5y ago

The 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 ago
According 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 ago
The 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 ago
No, 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 ago
  isn'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.
  - LocalPCGuy 5y ago
    > willing to offer more than shareholders expect to see in the forseable future That is your assertion/opinion (yes, shared by many, sure). But it's not the only opinion in this case, and so I don't think the analogy holds. Sure, I could see in the abstract times where an offer it just unavoidably good, and so it would not be in the best interest of shareholders to take it. But in this specific instance, there is a lot to be said on both sides of the offer (taking vs. rejecting it). I would also argue that, depending on the purpose and goals of the company, knowing that a person intends to shut it down would be a reason to value existing (in order to continue carrying out their purpose) over money.
  - jungturk 5y ago
    Sure - if an offer is greater than the conceivable return then of course you take it, but Musk's offer is less than the stock traded at 6 months ago and 30% below the stock's all-time-high from 14 months ago.
    - LocalPCGuy 5y ago
      It's also not just about $$. In your scenario, it's just negotiating. It's possible the Twitter board and shareholders are just unwilling to ever sell, regardless of the money involved. (I don't know if that'd ever be the case, just that is is possible, and possible within fiduciary responsibilities.)
  - dundarious 5y ago
    Musk is trying to buy everyone out because he wants to influence the direction of Twitter. Why not ascribe a similar set of motivations to the other current shareholders? If that is a motivation for them, then shareholder profit is not the only relevant sense of shareholder value. This isn't an argument for the poison pill clause, but is an answer to the following quoted question. It is funny to see this motivation of most existing shareholders ignored in order to bring into being analogous motivations of another. Especially when Musk's offer for Twitter has been in order to change it promote certain values, but conspicuously, better profits has not been one of those touted values. > While this might be sad for the company, why is it not in the interests of the shareholders to take the offer? I will sabotage my own argument somewhat though and say that I believe the economic motive dominates over time and is almost always (in macro and micro) the primary force.
akomtu 5y ago
If someone offered to buy your house at a 25% premium, would you sell? A house is a place to live at, in addition to having a dollar value, and so is Twitter - a powerfool tool to control speech, in addition to its dollar value on the market.
- nostrebored 5y ago
  Absolutely, buy another one at market value and give the buyers my card for the next time they want to give me $xxx000.

by teeray 5y ago

philistine 5y ago

According 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 ago

The 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 ago

No, 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 ago
isn'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.
- LocalPCGuy 5y ago
  > willing to offer more than shareholders expect to see in the forseable future That is your assertion/opinion (yes, shared by many, sure). But it's not the only opinion in this case, and so I don't think the analogy holds. Sure, I could see in the abstract times where an offer it just unavoidably good, and so it would not be in the best interest of shareholders to take it. But in this specific instance, there is a lot to be said on both sides of the offer (taking vs. rejecting it). I would also argue that, depending on the purpose and goals of the company, knowing that a person intends to shut it down would be a reason to value existing (in order to continue carrying out their purpose) over money.
- jungturk 5y ago
  Sure - if an offer is greater than the conceivable return then of course you take it, but Musk's offer is less than the stock traded at 6 months ago and 30% below the stock's all-time-high from 14 months ago.
  - LocalPCGuy 5y ago
    It's also not just about $$. In your scenario, it's just negotiating. It's possible the Twitter board and shareholders are just unwilling to ever sell, regardless of the money involved. (I don't know if that'd ever be the case, just that is is possible, and possible within fiduciary responsibilities.)
- dundarious 5y ago
  Musk is trying to buy everyone out because he wants to influence the direction of Twitter. Why not ascribe a similar set of motivations to the other current shareholders? If that is a motivation for them, then shareholder profit is not the only relevant sense of shareholder value. This isn't an argument for the poison pill clause, but is an answer to the following quoted question. It is funny to see this motivation of most existing shareholders ignored in order to bring into being analogous motivations of another. Especially when Musk's offer for Twitter has been in order to change it promote certain values, but conspicuously, better profits has not been one of those touted values. > While this might be sad for the company, why is it not in the interests of the shareholders to take the offer? I will sabotage my own argument somewhat though and say that I believe the economic motive dominates over time and is almost always (in macro and micro) the primary force.

akomtu 5y ago

If someone offered to buy your house at a 25% premium, would you sell? A house is a place to live at, in addition to having a dollar value, and so is Twitter - a powerfool tool to control speech, in addition to its dollar value on the market.

nostrebored 5y ago
Absolutely, buy another one at market value and give the buyers my card for the next time they want to give me $xxx000.