4 ms·

There's a bit of nuance here. Major shareholders wouldn't say "elon can buy twitter." Major shareholders don't care who owns Twitter. They don't give permissio

by agar 4y ago

There's a bit of nuance here. Major shareholders wouldn't say "elon can buy twitter." Major shareholders don't care who owns Twitter. They don't give permission. They only care about the return on their investments. They often represent limited partners or are part of a stock fund, and have their own fiduciary responsibilities. Or they just want to make their own money. In this instance, major shareholders would go to the Board and say, "show me your plan to increase the stock price to over $54/share within 12 months." This could be by finding another buyer, having a roadmap to introduce new products/enter a new market, raise prices, or even acquire another company. Shareholders would evaluate the execution risk of said plan vs. the zero risk of "Elon gives me $54/share tomorrow" and decides what is best for them. The shareholder then weighs in to the board: "I don't believe in your plan, if it comes to a vote I will vote in favor of Elon's offer." Repeat that for all of the major shareholders. In this specific case, from everything I've read Twitter had no compelling roadmap, no other buyers willing to make an immediate offer, no strategy, troubled leadership, a 10% decline in stock price, and prevailing economic headwinds. No one believed they could beat Elon's offer. So the board looks at the intent of the preponderance of the shareholders and rapidly realizes that they would lose any battle for control of the company. It would cause huge distraction and possibly open them up to lawsuits for not meeting their fiduciary responsibilities. The board then goes back to Elon and decides to accept the offer.

nullc 4y ago
Yep. Also: When people point out that twitter traded more in the past-- what matters isn't twitter's absolute price, but twitter's price relative to some benchmark. For example, if you use META as the benchmark then Elon's offer is 143% of Twitter's all time high. Meta alone is perhaps not really the fairest benchmark, but his offer is 86% of the ATH if you just use the Nasdaq composite as a benchmark which is still pretty good. A fair 'synthetic twitter' would probably price the offer somewhere between these two. I would have liked to produce a better synthetic benchmark than just those two options, but didn't really feel like doing two hours of programming and data collection just for a HN post-- what I would have done is grabbed the historical prices for all high volume US equities and ETFs and found a set of coefficients (including allowing negative ones, e.g. shorted stocks) for all equities except twitter that predicted twitter with the lowest L2 norm, and maybe applied some L0 penalty to make the collection sparse and reduce the overfit. Perhaps I'd just try all $stocks choose 5 subsets with 5 stocks and choose the best-- l2 fits are fast, and I doubt 5 stocks can meaningfully overfit a couple years of data. Why is a benchmarked price the right way to reason about this? Because a substantial part of twitter's price is the overall market, a substantial portion is its sector, etc. To the extent the investors want that non-twitter-specific exposure they can get it in other ways (e.g. by buying synthetic twitter or just a market index). If you could sell twitter today for 143% of the benchmark rate, then put the income into the benchmark then sell the benchmark later when its value goes up-- you'd do much better than just holding on to twitter for the same amount of time, unless something changed about twitter to make it perform a lot better relative to the benchmark. From that perspective twitter's roadmap would need to be pretty good to overcome the offer.

by agar 4y ago

nullc 4y ago

Yep. Also: When people point out that twitter traded more in the past-- what matters isn't twitter's absolute price, but twitter's price relative to some benchmark. For example, if you use META as the benchmark then Elon's offer is 143% of Twitter's all time high. Meta alone is perhaps not really the fairest benchmark, but his offer is 86% of the ATH if you just use the Nasdaq composite as a benchmark which is still pretty good. A fair 'synthetic twitter' would probably price the offer somewhere between these two. I would have liked to produce a better synthetic benchmark than just those two options, but didn't really feel like doing two hours of programming and data collection just for a HN post-- what I would have done is grabbed the historical prices for all high volume US equities and ETFs and found a set of coefficients (including allowing negative ones, e.g. shorted stocks) for all equities except twitter that predicted twitter with the lowest L2 norm, and maybe applied some L0 penalty to make the collection sparse and reduce the overfit. Perhaps I'd just try all $stocks choose 5 subsets with 5 stocks and choose the best-- l2 fits are fast, and I doubt 5 stocks can meaningfully overfit a couple years of data. Why is a benchmarked price the right way to reason about this? Because a substantial part of twitter's price is the overall market, a substantial portion is its sector, etc. To the extent the investors want that non-twitter-specific exposure they can get it in other ways (e.g. by buying synthetic twitter or just a market index). If you could sell twitter today for 143% of the benchmark rate, then put the income into the benchmark then sell the benchmark later when its value goes up-- you'd do much better than just holding on to twitter for the same amount of time, unless something changed about twitter to make it perform a lot better relative to the benchmark. From that perspective twitter's roadmap would need to be pretty good to overcome the offer.