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I love motivated reasoning like this. Musk's offer is well above current stock price, within the range of similar take over bids. Certainly nothing that qualif

by kjksf 5y ago

I love motivated reasoning like this. Musk's offer is well above current stock price, within the range of similar take over bids. Certainly nothing that qualifies it as "coercive low-ball bid". > first offer Yeah, because no one else is interested in acquiring money-losing business. Board's remedy should be to secure better offer, not a poison pill > stock price was higher This is an argument in favor of accepting bid. Investors are telling us that Twitter is a sinking ship. Musk comes in willing to pay well above the current price. The alternative might just as well be to watch the ship sink lower and lower. "Poison pill" that dilutes shareholders will not bring stock price higher. > Little has been done to optimize the short-term share price Love the suddenly passive voice, trying to not name Twitter board and management responsible for Twitter's bad performance. At the same implying that they can wave a magic wand and push stock price higher. Makes me wonder: why didn't they? Again, the remedy for the board and management would be to present a credible plan to improve Twitter business and therefore stock price. Instead they created a poison pill which, if triggered, will tank the stock price and dilute many existing shareholders (not everyone will decide to give Twitter money for the cheaper stock). Almost certainly it'll tank the stock price. But more importantly, reduce market cap. > not the best possible valuation by Musk Or it is actually the final offer and Musk is not bluffing. Again, it doesn't matter. Musk doesn't have to come up with better offer. That's not how any of that works. It doesn't work that way if you're negotiating a salary, a price of a house or a price of a business. If board can secure a better offer from someone else then Musk will have to up his offer or not buy Twitter. If not, then this is the best offer Twitter will ever get and it's significantly higher than the current value of the business. Again, poison pill is not a remedy here.

tptacek 5y ago
I don't know who you're arguing with. I'm describing the rationale for poison pill arrangements (I'm more or less just parroting Matt Levine). If the board is wrong, and Twitter is worth less than Musk's offer, Musk will eventually get the company --- either because the board will relent after Musk's tender is successful, or because, next year, Musk will succeed in replacing the board. The rest of your points basically just add words to things I said. It's not the case that I know for a fact Twitter is worth more than Musk's offer. It might be worth less. There is now a process for the market to judge who's right. Nor was Musk's original offer "coercive"; it couldn't have been, because it wasn't even an offer. The coercive offer is an eventuality the pill protects against, not something the pill reacts to. One outline of a coercive offer is "I will pay $54/share until I get enough shares to control the outcome, at which point I will use my control of the company to have it accept $10/share for everyone else". That's the kind of thing a shareholder rights plan prevents. So, as I said before: if you're right, Musk will end up owning Twitter. If he can't even manage the tender, the board will instead have been proven right. Of course, if he ends up with the company, the parade of horribles associated in message board consciousness with poison pills will have been debunked (the pill will not have prevented him from acquiring the company). And if he gets the company, but pays more per share for it, the board will, again, have been proven right.

by kjksf 5y ago

tptacek 5y ago

I don't know who you're arguing with. I'm describing the rationale for poison pill arrangements (I'm more or less just parroting Matt Levine). If the board is wrong, and Twitter is worth less than Musk's offer, Musk will eventually get the company --- either because the board will relent after Musk's tender is successful, or because, next year, Musk will succeed in replacing the board. The rest of your points basically just add words to things I said. It's not the case that I know for a fact Twitter is worth more than Musk's offer. It might be worth less. There is now a process for the market to judge who's right. Nor was Musk's original offer "coercive"; it couldn't have been, because it wasn't even an offer. The coercive offer is an eventuality the pill protects against, not something the pill reacts to. One outline of a coercive offer is "I will pay $54/share until I get enough shares to control the outcome, at which point I will use my control of the company to have it accept $10/share for everyone else". That's the kind of thing a shareholder rights plan prevents. So, as I said before: if you're right, Musk will end up owning Twitter. If he can't even manage the tender, the board will instead have been proven right. Of course, if he ends up with the company, the parade of horribles associated in message board consciousness with poison pills will have been debunked (the pill will not have prevented him from acquiring the company). And if he gets the company, but pays more per share for it, the board will, again, have been proven right.