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Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR
- yqsk 4y agoInspired by Matt Levine's awesome reporting on the Elon/Twitter purchase fiasco. Just a little app to model the arbitrage (gamble) opportunity.
- metadat 4y agoDo you have a link to the ML reporting?
- hrrsn 4y agohttps://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthew-s-levine https://www.bloomberg.com/opinion/authors/ARbTQlRLRjE/matthe...
- orlp 4y ago> Just a little app to model the arbitrage (gamble) opportunity. This isn't arbitrage at all. That is taking advantage of a price difference of an asset between two markets by buying and reselling it (nearly) simultaneously. If you are holding the asset longer than strictly necessary it isn't (only) arbitrage. Your intended action is just timing the market: buying stocks based on the belief they will soon rise in price.
- rckrd 4y agoThis is a classic merger arbitrage spread. [0] https://en.wikipedia.org/wiki/Risk_arbitrage https://en.wikipedia.org/wiki/Risk_arbitrage
- shkkmo 4y agoHow do you short "Elon Musk" stock? You can only short companies the acquirer owns, not the acquirer himself, so this does not count as "merger arbitrage" under the definition you linked.
- tedunangst 4y agoThis is a cash merger. You buy TWTR stock.
- shkkmo 4y ago
- tedunangst 4y agoI have edited nothing.
- shkkmo 4y agoYou edited your comment to change the link.
- robocat 4y ago> ninja edited The Wikipedia article says “Last edited 1 year ago by GreenC bot”. Making serious accusations is extremely bad behaviour - at least check your facts.
- shkkmo 4y agoThe comment was edited after I responded to it. I made no claims about the wikipedia article though I see how the 'it' in not clear.
- jdsully 4y agoIt doesn’t need to be simultaneous, just be very low risk. Usually simultaneous execution is a factor in having low risk though, but some deals take longer. An example is Bill Gates buying DOS from SCP. The deal making wasn’t instant but he still bought it for a certain profit as he had the contract with IBM.
- deleted 4y ago[deleted]
- vpribish 4y agothe world of arbitrage calls this arbitrage. there are other, more pure, arbitrages - but this is very mainstream one. you are buying the stock at the market price, while you think it will be worth the offer price - there's a risk that it blows up. risk arbitrage. (not to be confused with garbitrage)
- mhh__ 4y agoArbitrage is practically just a cooler way of saying making clever money the nerdier the trader is.
- robinsta 4y agoFrankly, I’m disappointed I can’t pick prices that end in $X4.20!
- angry-tempest 4y agoOr $X.69! OP, do you even Matt bro?
- jreese 4y ago$42.69/share is just sitting there, patiently waiting.
- yqsk 4y agoLol
- pxx 4y agoThis needs a discount rate knob. We're no longer in a low interest rate environment!
- zeusk 4y agoThat discount would be built into either Elon's buy price or Twitter's nominal price if deal falls through.
- tedunangst 4y agoI could believe that there is a 100% chance Elon is forced to buy twitter at $54, but if the deal takes 10 years to close, I'm not buying in at $38.
- shadowpho 4y agoIt's filed in delaware courts which are famously fast. Expectation is 3-5 mo
- martincmartin 4y agoBut then Elon might ignore the ruling, and it's not clear what happens, or long it takes.
- wjnc 4y agoAren’t US judges given a large leeway in forcing rulings? (This might be overly influenced by Law and Order TV.)
- dontreact 4y agoThat's how long it takes to get a ruling, but how long will it take them to enforce it?
- roflyear 4y ago
- rossdavidh 4y agoSeems like "Chance that Elon Musk forces Twitter to divulge really embarrassing info about their business prospects during trial" should be in here. If he gets away with just paying the $1B, it makes a big difference to how much Twitter is worth without him. But, even if this info exists, there is a <100% chance of it coming out in trial; Delaware court may anticipate this strategy and try to stop it.
- elicash 4y agoOne of the questions is, "If Elon doesn't buy Twitter, what will the share price be?" If you think embarrassing info is likely, then you could answer with a lower price there. You can also factor whatever odds of him doing well at trial into your answer to other questions. The formula itself doesn't require a direct answer to your question.
- Sebb767 4y agoI think this is contained in the question of what the share price will be if Elon gets away. In fact, the math in this test only rounds to straight-forward if you either have a good idea of what the value of the stock will be if the deal falls through or you think is very unlikely.
- dragonwriter 4y ago> If he gets away with just paying the $1B “Musks gets away with paying the ’things fell through on my end but without fault’ fee” (designed mostly for failure of financing despite Musk fulfilling his good faith commitments to make it happen) seems by far the least likely scenario, especially if the case reaches trial (it's just barely plausible as a settlement if it doesn't.)
- roflyear 4y agoNo, you just consume too many memes. There is not a real chance of that happening.
- RONROC 4y agoIt looks nice and feels snappy. How did you build it?
- taspeotis 4y agoWith Firebase, presumably: FirebaseError: [code=resource-exhausted]: Request failed with error: Too Many Requests
- yqsk 4y agoYep I was using it as the database to track results, but I guess we went over the limit. Fun problem to have! But it's back up.
- Hammershaft 4y agoIt is now back down! A real victim of success.
- deleted 4y ago[deleted]
- yqsk 4y agoThanks! It's Sveltekit + Tailwind. Hosted on Netlify. I'm not a developer, so it's a real testament to how good and simple a framework SvelteKit.
- deleted 4y ago[deleted]
- gnicholas 4y ago> It looks nice and feels snappy. It's currently being HN-hugged to death...
- TrapLord_Rhodo 4y agoPeople seem to be discounting the fact that Elon still owns 9% of the company and is one of the largest shareholders. He just wants a chance to renegotiate as he know if he actually walks away he will lose around $5B.
- Eji1700 4y agoIf he's allowed to actually walk. Legally speaking he waived due process and twitter is suing with the specific performance clause. If it were just about anyone else I'd say there's 0 chance they'd be getting out of this, but since it's musk he might be able to walk.
- cwkoss 4y agodidn't he waive due diligence, not due process? Or do those mean the same thing in this context?
- Sebb767 4y agoHe signed that he knows everything he needs to know about the company and wants to buy it. Now he wants to back out with the claim that he actually did not know everything, which is a pretty hard sell. Though it's important to note that his lawyers are well aware that this will never fly and therefore the actual court case is them trying to find an edge case where Twitter actually broke the contract (that's the shoddy talk about Twitter apparently rate limiting the data analysis). Which is still a hard sell, but there's at least a chance they'll get away with it.
- formercoder 4y agoHe’s not claiming that he actually didn’t know everything, he’s claiming that Twitter lied in public filings not related to the deal.
- dragonwriter 4y ago
- paulpauper 4y ago500 Request failed with error: Too Many Requests FirebaseError: [code=resource-exhausted]: Request failed with error: Too Many Requests darn
- yqsk 4y agoSorry! It's back! Had to upgrade my firebase plan...
- deleted 4y ago[deleted]
- crikeyjoe 4y ago
- tinyhouse 4y agoGood chance TWTR is going up 10-15% tomorrow (Tuesday) when the court approves Twitter's request for a fast trail. (risky of course cause the stock can drop even more if the court rejects the request but I think it's unlikely)
- elicash 4y agoMy guess is that the Court picks a date in between what each party has requested. I do think it'll be closer to Twitter's proposed date than Musk's. That said, I read both filings and thought Musk made a good argument that because the "drop dead date" specifically extends in the case of a legal dispute that both parties INTENDED that there was no need to rush a hearing beyond when financing expires. Where he goes wrong, I think, is his expectation of being owed significant discovery. Either this is a fishing expedition to find a justification after-the-fact, or else his briefing didn't outline key evidence of fraud that he's saving for later. My guess is the former, but we will see. So I think we go a bit beyond the drop-dead date, but not much more because I don't think the judge wants a drawn-out process.
- motohagiography 4y agoImo, the only hypothetical reason for Musk not to buy it would be because the real numbers on the bot issue showed the company has seriously defrauded investors, and the stock goes to almost zero. That's implausible to me. It's kind of an outsider case where shorts could get squeezed pretty hard if they're wrong about that, as a Musk owned Twitter has huge growth in front of it. However, I'd propose there is also a counter-intuitive case to be made that Twitter's management has an incentive to drag out the court case and delay the sale even at the cost of wrecking the company stock if it preserves their control for just a few more months because it gives them one last election cycle of popular narrative influence before the U.S. midterms. It's just a company that has made money for some people, but the party is facing an existential threat at the ballot box in November, and it's plausible they agree to damn the torpedoes and unleash legal chaos that sinks Twitter's stock price but hangs on to control of the company (and its narrative) for just a few more weeks in support of the elections. They would even have tacit support of establishment (R)'s who would be glad to see their MAGA problem handled for them with deplatforming policies. The strategy there is like burning your ships during a retreat to prevent the enemy from using them after it overruns your perimeter with an (R) controlled house and senate, and a weak record going into 2024. These platforms are political operations, and they're not going to risk a repeat of 2016. This is wildly speculative, but maybe Twitter takes advantage of Musk's balking on the deal and holds on to content policy control until after midterms, then they scuttle the ship and hand over the ashes to him at the reduced price. Crazy?
- madeofpalk 4y ago> Imo, the only hypothetical reason for Musk not to buy it would be because the real numbers on the bot issue showed the company has seriously defrauded investors, and the stock goes to almost zero. My understanding, at least from reading Twitter's lawsuit and other's commentary on it, is that Twitter lying about bot numbers is irrelevant because Musk agreed to, in contract, buy it regardless of those facts.
- cmer 4y agoBased on information publicly available deemed correct and accurate by the company. This is false representation and downright fraudulent. If indeed Twitter lied about their not numbers, there will be a major lawsuit against the company.
- Sebb767 4y ago> Normally, valuing a stock is hugely complex. But every once in a while, circumstances come along that make the math relatively straightsforward[sic]. This is one of those moments. Technically, we just moved the really hard part to the question of "what will Twitter be worth if the deal fails". For this to work as value strategy, you either need to be really good at estimating that hard price or assign a really low chance to it.
- BbzzbB 4y agoThat's only part two of the hard question, part one requires knowledge of M&A law, Delaware corporate precedents and Delaware chancellery psychology/game-theory to establish odds of the deal being forced, cancelled or in-between. Then part three is establishing the probability Elon Musk of all people will follow thru any given ruling and what happens if he doesn't play ball. I wonder if it's not easier to just project cash flows into the future. Or to play a number of other merger situation with more reliable participants, like Activision-Microsoft for 23% upside (versus Twitter's 42%).
- andrepd 4y agoOff-topic, but am I the only one who finds it incredibly grating to speak of Elon Musk with his first name? You don't do that with other people, other billionaires or tech people or whatever, you say Bezos, not Jeff, and Bill Gates, not Bill. What gives? I find this irrationally annoying.
- rodion_89 4y agoElon is a unique-enough identifier whereas Jeff and Bill aren’t
- deleted 4y ago[deleted]
- thornewolf 4y agoI personally don't find it grating. My supposition is that is it not very fun to say the word "musk" so people call him Elon instead. So perhaps your dissatisfaction with him being referred to by his first name can be offset by the understanding that he is unfortunate enough to have a last name that people seemingly universally do not like that much? Alternatively, Elon is a "normal" celebrity like Kanye. It might be more common to refer to people in that domain by their first name. I'd say Elon is closer to Kanye when it comes to public perception.
- CSMastermind 4y agoI saw the "Buy my dog treats" link at the end and assumed it was the same as "Buy me a coffee". And I was like, "heck yeah I'll purchase some snacks for their puppy". When in reality it meant, "shop at my dog treat store." I don't have a dog myself so I didn't purchase anything haha.
- patwalls 4y agoThe guy who made this is a good friend of mine. He's a hacker but for his day job he creates dog treats [1] and my dog loves them. [1] https://earthlypet.com/ https://earthlypet.com/
- renewiltord 4y ago> So you think it's relatively well priced with an estimated ROI of only 6%. Probably not enough upside for a fun gamble. Sad day, because so far I'm just annoyed I couldn't get my allocation in.
- gnicholas 4y agoIt would be interesting to see how estimates vary based on the starting value that is pre-populated.
- gnicholas 4y agoI can imagine the following happens at trial: 1: Musk's team provides evidence that 18% of users are bots 2: TWTR's stock drops the next day 3: Musk argues that the drop in the stock value demonstrates just how material his team's revelation/accusation is, suggesting that the misstatement was material 4: TWTR argues that the stock dropped not because of any material misstatement, but simply because it changes shareholders' estimates of the likelihood of a settlement that is favorable to either party
- tptacek 4y agoA change in Twitter's stock price presumably wouldn't matter; what you'd need to see is a 40%+ drop in Twitter's profitability or revenue.
- roflyear 4y agoNone of what you said has anything to do with MAE
- gnicholas 4y agoWhat is your take on what would constitute an MAE? I haven't followed the transaction as carefully as some, but I have seen some coverage of it, including from fellow lawyers. I've not heard anyone claim that news regarding the number of bots has nothing to do with MAE.
- roflyear 4y agoIDK seems most lawyers covering this are saying that bots are a stretch for MAE, unless the bots somehow suddenly start to impact Twitter's revenues ...
- seanhunter 4y agoHave you read the merger agreement that Elon signed? Bot’s aren’t even mentioned. For anything about bots to be relevant to the deal Musk’s team don’t have to show that their were more bots but that Twitter’s statements about how they measure bots were incorrect and that the difference caused by those incorrect statements caused a materially adverse change. Since Twitter’s statements about bots are very specific and caveated (they label a small random sample, and estimate how many bots there are in the overall population using the number of bots they see in the sample, they use “significant judgement” and the number could be higher than what they say) it’s really hard to see Elon prevailing on this question. Matt Levine has a customarily excellent analysis here https://www.bloomberg.com/opinion/articles/2022-07-18/elon-wants-to-fight-the-bots https://www.bloomberg.com/opinion/articles/2022-07-18/elon-w...
- deleted 4y ago[deleted]
- WelcomeShorty 4y agoThat was quick: Name: shouldibuytwitter.com Address: 0.0.0.0
- Dorothy014 4y ago[dead]
- eternityforest 4y agoApparently, I think my ROI would be 9%. Sounds about right, to someone like me who doesn't know anything at all about stocks. They seem to generally always go up and twitter probably isn't going to go away until some better(For an average consumer) platform comes.