Let's ignore personality and societal issues for a moment and look at the value proposition. The 'best and final offer' of $54.20 per share is just too low to be acceptable for major investors.
Just over year ago, Twitter shares traded at about $70 per share. Musk's offer is about 25% lower than last years peak. There's no reason to assume Twitter shares can't reach the same levels ever again, nothing much has changed fundamentally over a year.
Musk's offer is a cash only offer. $43 billion is a lot of cash. That's a lot of Tesla shares to sell, or massive loan. If Musk thinks Twitter is that valuable to take such risks, current major investors will probably want to unlock that value themselves.
I think the takeover offer is just as believable as last week's announcement that Musk was joining the Twitter board.
> There's no reason to assume Twitter shares can't reach the same levels ever again
but it depends on how far that "again" is.
If you bought at $33 a month ago, you'll be now getting a 60% return. You can put that in another less risky investment and still have a very healthy return over the next 5 years, say 5% , less than the historical sp500 rate, you'd get to ~$69.
So if Twitter gets back to $70 in five years Musk's offer is still an ok investment, but its growth has been almost zero for the last 8 years, it's not trivial that it would become a powerhouse in the next 5.
Think about it this way – if Twitter shares were to rise ~17% from where they are today, would >50% of investors immediately hit the sell button? If not, then why would the same number agree to this deal?
The difference is that one option is selling a declining company today for 17% bonus, the other option is selling a company that has shown 17% growth. Its not the same comparison
There's a selection bias you need to consider. Twitter investors probably wouldn't be Twitter investors if they thought it was on the decline without significant growth prospects.
> There's no reason to assume Twitter shares can't reach the same levels ever again, nothing much has changed fundamentally over a year.
The Fed's covid policies in terms of interest rates and money printing had a very high impact on the stock market and stocks. Why else would the market have increased to the degree it did during covid?
That is a fundamental reason why it may not see $70 again any time soon.
And yet, despite your belief that the majority of the investors should/are valuing the stock at >$70, it is trading at ~$45, which should at least provide some evidence that the majority of shareholders--today, not last year--value it at <$55; to me the next question is "exactly who is voting on this: the shareholders or the board members?", but even either way it doesn't seem insane to me that getting a guaranteed 10% increase in your purchase isn't in the best interest of the majority of the shareholders.
> which should at least provide some evidence that the majority of shareholders--today, not last year--value it at <$55
The price is only determined by who is buying and selling right now. Trading at $45 merely implies a nonzero number of shareholders value Twitter at $45.
The problem is we can use that to determine the belief of the zeitgeist: if you--or anyone else--truly believes Twitter is worth more than $45--and has any hope of getting to that value in the not-distant future (of course: time is also money)--you should go buy it, as there are apparently a number of suckers right now willing to accept a mere $45 for their shares. People trade because they think things, and if no one is trading right now it "should be" because they largely agree with the zeitgeist.
(This is also why we can use this price to indirectly learn something about how the market views the likelihood of Elon buying Twitter: if it were a "sure thing", the price of Twitter stock would be trading close to $55, as you'd be able to make a fast profit.)
It's not that binary though. Imagine you belief Twitter is worth 45.01USD but it's trading 45USD, would you throw your life savings at it (disregarding fees), no, of course not, way too risky!
The way I see it, people (and other entities!) don't think Twitter is worth X, they think there is a distribution of worth.
This means there is risk in their bet, so if I thought Twitter was worth (on average) 100USD, that wouldn't mean I would sink my life savings into it but would put in some, based on the risk and also what else I need capital for.
Also, how much one thinks Twitter is worth probably also depends on your time horizon: like the old adagium that the market can stay stupid for longer than you can stay solvent, e.g. when shorting a scam.
In short, the reason you wouldn’t buy it right now, despite believing its outlook is rosy, is because you think it’ll go lower in the short to medium term. Which is more or less what all the analysts are predicting about tech stocks broadly.
If a non-zero number of people thought it was a good idea to buy it at $60 a non-zero number of people would sell it at $60. The large number of actors each trying to outsmart each other acts as a dynamic value-setting strategy.
You’re worth your share price today. Not what your share price was last year. Not what you think your price should be.
> current major investors will probably want to unlock that value themselves.
This isn’t how risk or portfolio allocation works. Musk has offered current investors $43 billion as risk-free guaranteed cold hard cash. Depending on their portfolio and risk allocations they may prefer the $43 billion today instead of an uncertain chance at the future. And to take that cash and diversify in alternative endeavors.
That's dumb. My company IPO'ed at $20/share. Hit $50 in the first year. Second year went down to $18. Then dropped low. A few years later the company was bought out for $7 a share when we were trading at $3.
Twitter is a dying company. They would be dumb not to take that money.
> If Musk thinks Twitter is that valuable to take such risks, current major investors will probably want to unlock that value themselves.
Doesn't this depend on if you actually agree with Musk's thinking and valuation of Twitter in the first place? Given the share price has been all over the place, clearly the market is not on the same page.
your comment about the price being $70 a year ago seems off to me. that's not the value now so why should it be seen as such? if you were buying a house worth $400,000 and made an offer of $540,000 but were told no, this house was worth $700,000 a year ago the value of this fictional house now is still $400,000
Depends on your definition of “soon”. In a volatile market like the current one, tons of people sell stock in the short term despite believing the long term outlook is good. The simplest reason is to go into cash to avoid the worst of the downturn.
I do love reading about how unbelievable stuff elon does is. He should frame all the quotes. SpaceX had lots of these including from the heads of europe and russia space programs.
Does he have perhaps more of a vision for twitter than current mgmt?
Did his involvement increase / decrease the stock price?
If they turn him down could he build something for lets say $20B in spending?
Going to be some interesting times.
And by the way, twitter DID invite him to be on the board with the requirement he not get more stock.
>And by the way, twitter DID invite him to be on the board with the requirement he not get more stock.
this was a trap - both barring his ability to gain more shares, as well as putting him in a place where he can't talk about twitter publicly to the same extent as a hostile takeover.
Counterpoint: Twitter lost over half its value in the past year (share price from $70 to $33). Can the board justify that they’re on track to turn that around so quickly?
Frankly the board doesn’t seem capable of ‘unlocking Twitter’s value’ based on their recent performance.
It's hilarious why people care so much about the price of a financial instrument. Even Bitcoin. Do you care what wheat or copper or kerosene trades at? Why not take him at his word.
Plenty of Americans spend 5 to 10% of their worth on stuff. Who cares what your neighbor paid for his boat....maybe dude just likes to drink Coors light on the lake.
Another non trivial aspect is his offer price. No one seems to be pointing out the obvious half trolling nature of an offer that yet again includes the number 420. In that respect part of his motivation for doing this is self amusement.
I fully agree that part of his motivation is self amusement. It's one of the things I really like about Musk, is that he's clearly still connected to his inner child, and I think that's part of what keeps him dreaming.
I think the people most offended by it tend to be the people who have lost that joie de vivre and miss out on the fact that we're all just existing here and now. Sure, do the very serious things that need to be done for a person with his resources, but in the end, we can't even prove it's not all just a damn simulation can we.
Vanguard and Blackrock always votes with management and sadly lot of times with bad management. This is the hidden cost of passive investment. They don't do anything.
Just over year ago, Twitter shares traded at about $70 per share. Musk's offer is about 25% lower than last years peak. There's no reason to assume Twitter shares can't reach the same levels ever again, nothing much has changed fundamentally over a year.
Musk's offer is a cash only offer. $43 billion is a lot of cash. That's a lot of Tesla shares to sell, or massive loan. If Musk thinks Twitter is that valuable to take such risks, current major investors will probably want to unlock that value themselves.
I think the takeover offer is just as believable as last week's announcement that Musk was joining the Twitter board.