17 ms·

Even before the poison pill was adopted, the evidence is the market wasn't taking Musk's offer seriously. That's because he was offering $54.20 per share (ha ha

by not2b 5y ago

Even before the poison pill was adopted, the evidence is the market wasn't taking Musk's offer seriously. That's because he was offering $54.20 per share (ha ha, 420), but the stock price never closed higher than $48.36. So almost $6/share was left on the table. Part of it is that Musk doesn't have $43B in cash, he'd have to raise it or borrow it. He's worth more than that but it isn't liquid; as an officer of Tesla there are some restrictions on when he can trade. Another part is that many doubt whether Musk is serious or if he is playing games again, like the last time "420" appeared in a financial announcement from him.

s1artibartfast 5y ago
>So almost $6/share was left on the table. This is only true if the there is no uncertainty. If you think the value without the takeover is $30, and it is trading at 48, and buyout is $54, that means the market thinks it 75% likely. downside -$18, upside +$6 = 75% likely
- umeshunni 5y ago
  Interesting. As a point of comparison, when Microsoft bid a 62% premium for Yahoo back in '08, Yahoo stock spiked about 48%. Doing the math, the market placed the likelihood at 48÷62=77%. In other words, the market is wildly optimistic.
  - s1artibartfast 5y ago
    If it is a general trend on takeover optimism, we should play that angle and become millionaires
- vasco 5y ago
  It means the market doesn't think it's likely but it doesn't mean it's 75%. To illustrate why that makes no sense, if Musk had offered $35 instead of $54, the buyout would be much less likely, since the price would be way lower and the board and shareholders less likely to accept it, yet under your model the likelihood would go up. Estimating probability from price action is something you can do, but not like you did it.
  - IshKebab 5y ago
    Why would the likelihood go up under his model? If Musk had only offered $35 and people thought that was only 20% likely to happen (for the reasons you listed) then the market price would have only gone up to $31.
    - sahila 5y ago
      Say I offer to buy Apple for a penny/share. The price for their shares won’t move because of my offer but may move from normal market conditions. If the shares increased a dollar the day after my offer, would you say there’s a greater than 100% chance of my offer being accepted?
      - omegalulw 5y ago
        There of course the implicit assumption here that Musk's offer is causally related to Twitter's stock price. OPs comment make sense if you keep that in mind.
- mcintyre1994 5y ago
  Where does the $30 come from? The last time Twitter was that low was May 2020. There’s no evidence that the market values Twitter at $30 without Musk’s bid.
- seadan83 5y ago
  That fair value valuation is subjective. The $35 number was arbitrarily chosen and is unknown, so the derived probability is meaningless as well. The possibility of a take over changes the potential long term valuation of a company and thereby changes the demand for the stock. Basically, if enough people think the buyout would happen, or would just make Twitter more valuable (as a stock) than it is now, that increases the number of buyers and hence drives the price of the stock up. If a buyout is certain, then the demand for free money is 100%, and demand for a sure loser is 0% of potential buyers. Hence the share price would quickly converge to a buyout price in that situation.
01100011 5y ago
The whole thing seems like a stunt by Elon. I don't care either way, but it would have been interesting for the board to call Elon's bluff and watch him back out at the last minute. Elon should really focus on his unfulfilled promises to folks he already took money from, not playing immature games to keep himself on the front page. I don't know what drugs he did with his ex-girlfriend, but they don't appear to have had a positive effect on his well being.
- ranjitcool1 5y ago
jcampbell1 5y ago
This makes no sense because if the market was 100% confident in Elon’s offer, but saw a 25% chance of a poison pill you would end up at the same place. The market was in fact incorrect in the likelihood of a poison pill, not Elon’s wealth or ability to raise funds.
- twoneurons 5y ago
  Yes, so many ignorant commments above.. hard to believe software developers are so well paid.
rgbrenner 5y ago
It’s definitely just a stunt… he doesn’t have the money, and said he expects larger shareholders to sign on to the deal… so he can take the company private and do great profit-maximizing ideas like turning their office into a homeless shelter. He’s presented no ideas that would increase twitters profits or market share. What shareholder would sign up for this?
- 4khilles 5y ago
  Why would Twitter profits matter to shareholders after they divest?
  - puffoflogic 5y ago
  - GoOnThenDoTell 5y ago
    The employee’s RSUs?
    - 4khilles 5y ago
      Good point! I wonder what happens to unvested RSUs in an acquisition like this.
      - base698 5y ago
        Went through a similar situation where a company was taken back private. The RSUs converted to cash value day of deal close and had a staggered payout with roughly the same vesting schedule.
  - tsimionescu 5y ago
    The parent believes, based on Elon's own claims, that part of his plan of raising the money is to get some existing shareholders on board, essentially having them finance the deal, obviously by promising them a stake in the future private company. They are also assuming an existing shareholder would only do this if they believe the future private Twitter would be a more profitable endeavor for them, which Musk's comments really shouldn't inspire confidence in.
ranjitcool1 5y ago
nowherebeen 5y ago
It’s important to also note that one of Musks strengths is marketing. He makes bold claims that makes headlines. We should be all used to his charade by now. A lot of the stuff he claims that actually works has teams of people supporting him. Those weren’t one man efforts like this.
- espadrine 5y ago
  > one of Musks strengths is marketing I don’t deny that, but it is not what he is doing here. I am not sure why people shy away from the obvious: another of Musk’s strengths is market manipulation. On 4 April, the announcement[0] of his becoming the largest shareholder jumped his Twitter stock[1] from a 73486938×33.03 = $2.4B purchase to a $3.7B asset, a $1.2B gain. He sold 371900 stocks, for a $6M gain. His 14 April announcement[2] of his offer to purchase Twitter was likely intended to boost the price further before the expected poison pill would justify him divesting everything as he stated he would do in the SEC filing[3], thus netting an even bigger gain. It didn’t boost as he expected, but the value has remained higher than it started at. He will still make half a billion and his actions, this time, are hard to sue, since he did not lie on anything but intent, which is impossible to prove. [0]: https://www.cnbc.com/2022/04/04/twitter-shares-soar-more-than-25percent-after-elon-musk-takes-9percent-stake-in-social-media-company.html https://www.cnbc.com/2022/04/04/twitter-shares-soar-more-tha... [1]: https://www.sec.gov/Archives/edgar/data/1418091/000110465922041911/tm2211482d1_sc13g.htm https://www.sec.gov/Archives/edgar/data/1418091/000110465922... [2]: https://twitter.com/elonmusk/status/1514564966564651008 https://twitter.com/elonmusk/status/1514564966564651008 [3]: https://www.sec.gov/Archives/edgar/data/0001418091/000110465922045641/tm2212748d1_sc13da.htm https://www.sec.gov/Archives/edgar/data/0001418091/000110465...
  - moonbooth 5y ago
    > On 4 April, the announcement of his becoming the largest shareholder jumped his Twitter stock[0] from a $2.9B purchase to a $3.7B asset, a $779K gain. You mean a $779m gain
    - espadrine 5y ago
diebeforei485 5y ago
> So almost $6/share was left on the table. A few when ago when Microsoft announced it was buying LinkedIn, the shares were trading around $10-$15 less than the announced acquisition price for months. I wouldn't put too much weight into any sort of imputed probability from the price.
- ckelly 5y ago
  > I wouldn't put too much weight into any sort of imputed probability from the price. It's absolutely fair to impute a rough probability of deal closure from the stock price. The whole "merger arbitrage" industry works around that premise. Sometimes the market doesn't think a deal has a 100% chance of closing (like MSFT and LinkedIn) and it still closes. There were valid antitrust concerns circling that deal, e.g. https://thehill.com/policy/technology/298573-salesforce-raises-microsoft-linkedin-antitrust-concerns-with-eu/ https://thehill.com/policy/technology/298573-salesforce-rais...
  - diebeforei485 5y ago
    That's not the same as saying the market wasn't taking the offer seriously. > The whole "merger arbitrage" industry works around that premise. If the market price reflected the probability, then an arbitrage strategy should not be profitable. Usually, these folks have better experience/skills/knowledge about M&A, antitrust, etc than the market average. In other words, the market doesn't reflect the probability of an event happening.
    - ckelly 5y ago
      Yes, I wasn't commenting on the original "taking it seriously" language. > If the market price reflected the probability, then an arbitrage strategy should not be profitable > The market doesn't reflect the probability of an event happening. No, the market's implied probability could be right, on average, across all deals...and the top merger arb funds could absolutely still be profitable by selecting deals when they think the market is mispricing the probability (for the reasons you mention: better experience, knowledge, etc.) It's like the sports betting market: you can roughly impute a team's win probability from the (opening) betting line...and even if that's right on average, the top gamblers are still profitable. And, of course, sometimes things with a say, 40% chance of happening do happen...so that doesn't mean the market was "wrong" about the chance (i.e. your LinkedIn mispricing exmaple). But sounds like we're in full agreement you can't look at the implied probability from the market price and draw some conclusion about it definitely happening, or definitely not happening (e.g. the market not taking it seriously).
jollybean 5y ago
Musk could probably raise the money.
aliswe 5y ago
Are you saying that if a share is destined to be sold for 54.20 people will buy it for 54 prior to that? its only reasonable to think it will be somewhat lower.

by not2b 5y ago

s1artibartfast 5y ago

>So almost $6/share was left on the table. This is only true if the there is no uncertainty. If you think the value without the takeover is $30, and it is trading at 48, and buyout is $54, that means the market thinks it 75% likely. downside -$18, upside +$6 = 75% likely

umeshunni 5y ago
Interesting. As a point of comparison, when Microsoft bid a 62% premium for Yahoo back in '08, Yahoo stock spiked about 48%. Doing the math, the market placed the likelihood at 48÷62=77%. In other words, the market is wildly optimistic.
- s1artibartfast 5y ago
  If it is a general trend on takeover optimism, we should play that angle and become millionaires
vasco 5y ago
It means the market doesn't think it's likely but it doesn't mean it's 75%. To illustrate why that makes no sense, if Musk had offered $35 instead of $54, the buyout would be much less likely, since the price would be way lower and the board and shareholders less likely to accept it, yet under your model the likelihood would go up. Estimating probability from price action is something you can do, but not like you did it.
- IshKebab 5y ago
  Why would the likelihood go up under his model? If Musk had only offered $35 and people thought that was only 20% likely to happen (for the reasons you listed) then the market price would have only gone up to $31.
  - sahila 5y ago
    Say I offer to buy Apple for a penny/share. The price for their shares won’t move because of my offer but may move from normal market conditions. If the shares increased a dollar the day after my offer, would you say there’s a greater than 100% chance of my offer being accepted?
    - omegalulw 5y ago
      There of course the implicit assumption here that Musk's offer is causally related to Twitter's stock price. OPs comment make sense if you keep that in mind.
mcintyre1994 5y ago
Where does the $30 come from? The last time Twitter was that low was May 2020. There’s no evidence that the market values Twitter at $30 without Musk’s bid.
seadan83 5y ago
That fair value valuation is subjective. The $35 number was arbitrarily chosen and is unknown, so the derived probability is meaningless as well. The possibility of a take over changes the potential long term valuation of a company and thereby changes the demand for the stock. Basically, if enough people think the buyout would happen, or would just make Twitter more valuable (as a stock) than it is now, that increases the number of buyers and hence drives the price of the stock up. If a buyout is certain, then the demand for free money is 100%, and demand for a sure loser is 0% of potential buyers. Hence the share price would quickly converge to a buyout price in that situation.

01100011 5y ago

The whole thing seems like a stunt by Elon. I don't care either way, but it would have been interesting for the board to call Elon's bluff and watch him back out at the last minute. Elon should really focus on his unfulfilled promises to folks he already took money from, not playing immature games to keep himself on the front page. I don't know what drugs he did with his ex-girlfriend, but they don't appear to have had a positive effect on his well being.

ranjitcool1 5y ago

jcampbell1 5y ago

This makes no sense because if the market was 100% confident in Elon’s offer, but saw a 25% chance of a poison pill you would end up at the same place. The market was in fact incorrect in the likelihood of a poison pill, not Elon’s wealth or ability to raise funds.

twoneurons 5y ago
Yes, so many ignorant commments above.. hard to believe software developers are so well paid.

rgbrenner 5y ago

It’s definitely just a stunt… he doesn’t have the money, and said he expects larger shareholders to sign on to the deal… so he can take the company private and do great profit-maximizing ideas like turning their office into a homeless shelter. He’s presented no ideas that would increase twitters profits or market share. What shareholder would sign up for this?

4khilles 5y ago
Why would Twitter profits matter to shareholders after they divest?
- puffoflogic 5y ago
- GoOnThenDoTell 5y ago
  The employee’s RSUs?
  - 4khilles 5y ago
    Good point! I wonder what happens to unvested RSUs in an acquisition like this.
    - base698 5y ago
      Went through a similar situation where a company was taken back private. The RSUs converted to cash value day of deal close and had a staggered payout with roughly the same vesting schedule.
- tsimionescu 5y ago
  The parent believes, based on Elon's own claims, that part of his plan of raising the money is to get some existing shareholders on board, essentially having them finance the deal, obviously by promising them a stake in the future private company. They are also assuming an existing shareholder would only do this if they believe the future private Twitter would be a more profitable endeavor for them, which Musk's comments really shouldn't inspire confidence in.

ranjitcool1 5y ago

nowherebeen 5y ago

It’s important to also note that one of Musks strengths is marketing. He makes bold claims that makes headlines. We should be all used to his charade by now. A lot of the stuff he claims that actually works has teams of people supporting him. Those weren’t one man efforts like this.

espadrine 5y ago
> one of Musks strengths is marketing I don’t deny that, but it is not what he is doing here. I am not sure why people shy away from the obvious: another of Musk’s strengths is market manipulation. On 4 April, the announcement[0] of his becoming the largest shareholder jumped his Twitter stock[1] from a 73486938×33.03 = $2.4B purchase to a $3.7B asset, a $1.2B gain. He sold 371900 stocks, for a $6M gain. His 14 April announcement[2] of his offer to purchase Twitter was likely intended to boost the price further before the expected poison pill would justify him divesting everything as he stated he would do in the SEC filing[3], thus netting an even bigger gain. It didn’t boost as he expected, but the value has remained higher than it started at. He will still make half a billion and his actions, this time, are hard to sue, since he did not lie on anything but intent, which is impossible to prove. [0]: https://www.cnbc.com/2022/04/04/twitter-shares-soar-more-than-25percent-after-elon-musk-takes-9percent-stake-in-social-media-company.html https://www.cnbc.com/2022/04/04/twitter-shares-soar-more-tha... [1]: https://www.sec.gov/Archives/edgar/data/1418091/000110465922041911/tm2211482d1_sc13g.htm https://www.sec.gov/Archives/edgar/data/1418091/000110465922... [2]: https://twitter.com/elonmusk/status/1514564966564651008 https://twitter.com/elonmusk/status/1514564966564651008 [3]: https://www.sec.gov/Archives/edgar/data/0001418091/000110465922045641/tm2212748d1_sc13da.htm https://www.sec.gov/Archives/edgar/data/0001418091/000110465...
- moonbooth 5y ago
  > On 4 April, the announcement of his becoming the largest shareholder jumped his Twitter stock[0] from a $2.9B purchase to a $3.7B asset, a $779K gain. You mean a $779m gain
  - espadrine 5y ago

diebeforei485 5y ago

> So almost $6/share was left on the table. A few when ago when Microsoft announced it was buying LinkedIn, the shares were trading around $10-$15 less than the announced acquisition price for months. I wouldn't put too much weight into any sort of imputed probability from the price.

ckelly 5y ago
> I wouldn't put too much weight into any sort of imputed probability from the price. It's absolutely fair to impute a rough probability of deal closure from the stock price. The whole "merger arbitrage" industry works around that premise. Sometimes the market doesn't think a deal has a 100% chance of closing (like MSFT and LinkedIn) and it still closes. There were valid antitrust concerns circling that deal, e.g. https://thehill.com/policy/technology/298573-salesforce-raises-microsoft-linkedin-antitrust-concerns-with-eu/ https://thehill.com/policy/technology/298573-salesforce-rais...
- diebeforei485 5y ago
  That's not the same as saying the market wasn't taking the offer seriously. > The whole "merger arbitrage" industry works around that premise. If the market price reflected the probability, then an arbitrage strategy should not be profitable. Usually, these folks have better experience/skills/knowledge about M&A, antitrust, etc than the market average. In other words, the market doesn't reflect the probability of an event happening.
  - ckelly 5y ago
    Yes, I wasn't commenting on the original "taking it seriously" language. > If the market price reflected the probability, then an arbitrage strategy should not be profitable > The market doesn't reflect the probability of an event happening. No, the market's implied probability could be right, on average, across all deals...and the top merger arb funds could absolutely still be profitable by selecting deals when they think the market is mispricing the probability (for the reasons you mention: better experience, knowledge, etc.) It's like the sports betting market: you can roughly impute a team's win probability from the (opening) betting line...and even if that's right on average, the top gamblers are still profitable. And, of course, sometimes things with a say, 40% chance of happening do happen...so that doesn't mean the market was "wrong" about the chance (i.e. your LinkedIn mispricing exmaple). But sounds like we're in full agreement you can't look at the implied probability from the market price and draw some conclusion about it definitely happening, or definitely not happening (e.g. the market not taking it seriously).

jollybean 5y ago

Musk could probably raise the money.

aliswe 5y ago

Are you saying that if a share is destined to be sold for 54.20 people will buy it for 54 prior to that? its only reasonable to think it will be somewhat lower.