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Elon Musk’s ‘best’ Twitter offer looks bogus


The Elon Musk-Twitter drama keeps taking sometimes bizarre, unexpected turns so whatever I write here might be moot not long after the ink dries. 

It’s all the time been dangerous to speak in absolutes about Musk. He is alleged to be genius-level smart but he’s done some really dumb things (weird tweets nearly got him jammed up for libel and caused him problems with the Securities and Exchange Commission). His baby, the electric-car giant Tesla, was woefully mismanaged, stricken by production issues, and nearly declared bankruptcy. It miraculously survived and got here back stronger, making him the world’s richest man.

More recently, he famously put down a “best and final” offer for financially shaky yet ubiquitous social media company Twitter. The value: $44 billion or $54.20 a share (which included a pot reference; “4:20” is the “time to toke” in weed-smoking culture). It was a hefty premium to its stock price then and even heftier now after the market sell-off.

Twitter’s board ultimately realized that Crazy Elon was offering a once-in-lifetime payday for its beleaguered investors and took the deal.

Musk was on the verge of shopping for what he called the world’s public square. He could be the king of all media by taking Twitter private and fixing its manifold business flaws (for all its influence, it has no money flow and no earnings).

Until suddenly he wasn’t.

Somewhere along the road, he got into his head that he was overpaying for a dog with fleas. He put the deal on hold indefinitely. His hardly believable reason for threatening to walk: There are too many fake accounts on Twitter that may’t be monetized by him or anyone else. He also said Twitter was hiding this bot problem, something tantamount to fraud. He desires to take a deeper have a look at the books.

The Twitter logo is seen on a sign at the company's headquarters in San Francisco, California on November 4, 2016.Elon Musk has said he’s fearful concerning the large amounts of pretend accounts on Twitter. JOSH EDELSON/AFP via Getty Images

If he were really fearful about bots, he wouldn’t have waived due diligence before signing the deal paperwork.

What’s next? The business press has all the time been skeptical about Musk’s intentions because most of Wall Street has been skeptical. That’s why the stock never traded near his offer price. 

For what it’s value, here’s the perspective of two bankers, one who has worked along with his Tesla board, and one other at a firm involved in his Twitter financing machinations.

Only on his terms

They are saying virtually the identical thing. Musk is telling people he still wants Twitter. He thinks he could make it work as a non-public company, clean up the bot problem and sell it at a profit sometime in the following five years.

But Musk wants the corporate (like every thing else) on his terms, that are all the time in flux. He doesn’t read balance sheets but goes by his gut and has no issue with flouting conventional banker norms (i.e. your word is your bond) to get his prize. His gut told him to waive due diligence. It’s now telling him that despite the fact that he signed a deal leaving him on the hook for the $1 billion breakup fee and perhaps more in damages, he can get Twitter to the table and conform to his terms, aka a much lower purchase price.

He may be right. Twitter first said it might implement the initial deal terms, perhaps even go to court, but now appears to be playing ball with Musk. It recently said it is going to turn over more data on its bot issue — a move which means talks are back on. The bankers tell me the Twitter board knows that finding one other suitor shall be difficult even at across the $40 a share it’s trading at now. The board can’t just accept anything, but in addition can’t tell Musk to simply pound sand.

Tesla CEO Elon Musk attends the opening of the Tesla factory Berlin Brandenburg in Gruenheide, Germany, March 22, 2022. Elon Musk could lose $1 billion if his Twitter deal falls out.Patrick Pleul/Pool Photo via AP, File

So the pondering amongst my two guys is that Twitter agrees to a lower cost, possibly significantly lower, and Crazy Elon gets his public square, albeit for less expensive.

Which means the deal is on, right? Seems so. But nobody really knows with Crazy Elon.

Gensler goes gaga 

Left-wing SEC chief Gary Gensler finally announced last week his intentions to overhaul the stock market. Forget concerning the pretty good deal small investors get now: zero-commission trades and mobile apps that make stock trading seamless and cheap for newbies.

Gary Gensler, Chair of the U.S. Securities and Exchange Commission (SEC), testifies during a House Committee on Appropriations Subcommittee on Financial Services hearing on the proposed budget request for the Federal Trade Commission and the Securities and Exchange Commission for fiscal year 2023 in Washington, DC, on May 18, 2022.Securities and Exchange Commission Gary Gensler is chasing after retail “meme” stock investors.Samuel Corum – CNP / MEGA

Gensler told attendees at an investor conference that bad stuff is occurring where nobody can see it; too many trades aren’t going to public exchanges. They’re being routed to non-public trading venues generally known as dark pools. Investors imagine they’re trading without spending a dime on Robinhood but might be getting ripped off without knowing it.

Gensler offered no data to indicate that markets are screwing small investors through its current structure. It’s his hunch.

Upending the markets on a hunch is pretty dangerous stuff. Particularly once you’re simply attempting to burnish your class-warfare credentials, as most observers suspect. The excellent news (and bad news for Gensler): His proposed changes will probably take years to implement as Congress — which is able to likely be in GOP hands after November — debates their merits.

By that point, it’ll all be over. His current boss, Sleepy Joe Biden, will likely be out of office, replaced by a Republican president or a sober-minded Democrat who will resist “fixing” something that doesn’t need fixing.

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