I’m a little annoyed that Elon Musk raised his money for Twitter because I was so excited to say “Where’s the money, Lebowski?often. Anyway, he found the money, according to the documents he served with the SEC†
So Musk is plans to pay $21 billion itself† The rest of the money, according to the pledge letters, will come from Morgan Stanley and several other banks. in one letter, the banks offer $13 billion in loans to Twitter; the second offers a $12.5 billion personal loan against Musk’s Tesla stock, which I’m sure will excite Tesla shareholders. The dates on these letters are, you guessed it, April 20 or 4/20, blaze it, etc.
You’d think some private equity firms would sit down at the bar
These letters give his bid more gravitas than before (back then it was “idk, I’ll find the money somewhere I guess, but lol 420 is funny”), but the market still isn’t taking Musk’s $54.20 a share bid serious. At the close of trading on April 21, the shares were $47.08; that’s higher than before the whole Musk saga started, but if investors thought this was real, we’d be trading closer to the bid price.
I think it’s interesting that there’s no one else involved in this financing deal to a great extent – you’d think some private equity firms would huddle at the bar here. Reportedly, Apollo Global, a huge buyout company, wanted to do this† Private equity firm Thoma Bravo also considered his options†
So, what gives?
There are a few potential things going on. The first is that Musk publicly said his offer on Twitter was “no way to make money”. Companies like Apollo Global and Thoma Bravo are very concerned with ways to make money. I imagine that has deterred some funding for Musk. oops.
The second point is that the board of Twitter seems to oppose Musk’s offer. The board, including Jack Dorsey, has use their poison pill finally. The poison pill, otherwise known as a “shareholder rights plan,” basically dilutes Musk’s stock by giving everyone else more stock. More Twitter stock makes it harder to buy Twitter. The board hasn’t said anything about turning down Musk’s offer yet, but that poison pill seems like a hint.
If Musk buys Twitter, I feel like we all have a vague idea of how this is going
One way to get Musk out is to get a better offer. It is possible that Apollo Global, Thoma Bravo and a few other people are talking to the Twitter sign as I type these words. It’s a big world. Who knows? If it does, we expect to hear a counter offer soon.
Thing three: companies like Apollo Global and Thoma Bravo are constantly looking at their options. That’s their job! They think about deals, and then they make some! So maybe they looked and said “ha Bob Iger is right, the nausea is extraordinaryand then went to look at some other deals.
Now, if Musk buys Twitter, I feel like we all have a vague idea of how this is going. first one many Twitter employees quit because Musk’s companies are notorious miserable places to work† Second, Musk tweets about a bunch of shit and then does some of it — which may or may not include reinstating Donald Trump on Twitter, removing all the spam bots, and adding a fart button. Third: er, maybe profit?
If our twitter bid succeeds, we’ll beat the spambots or die trying!
— Elon Musk (@elonmusk) April 21, 2022
But maybe not! The deal as constructed includes $1 billion in debt servicing costs each year, Matt Levine of Bloomberg points out:† That’s an awful lot of money for a company that, uh, lost money last year†
There are other potential corporate gymnastics at work. Musk has formed three holding companies for his Twitter bid, all named after an old idea of his: X.com, the original name for what became PayPal. This could give Musk a chance to combine all of his companies — Tesla, the Boring Company, Neuralink, and SpaceX — into one big company that, idk, is shooting lasers from his eyes.
I think NFT profile pictures count as product innovation?
Let’s imagine a bid from Apollo Global, Thoma Bravo, or someone else wins. I think we’re seeing something radically different, and much more in line with Elliott Management’s ideas. Elliott Management, you may recall, is a scary company who took a large stake in Twitter last year, landed a number of board seats and was very likely part of the reason former CEO Jack Dorsey stepped down. (Getting rid of Jack Dorsey was one of Elliott Management’s goals.)
Let’s see what Elliott Management wanted, shall we? No Jack Dorsey and more product innovation. It finally got the CEO who wanted it in Parag Agrawal, and I guess NFT profile pictures count as product innovation? But I’ll bet the place where they actually wanted the innovation was around the ads – otherwise known as “where Twitter makes its money.” Just before Elliott Management came in, there were “bugs” around Twitter ads that meant the company took a hit on its revenues.
Twitter has been a huge cultural force and kind of a crappy business. That’s because it’s smaller than Facebook and Google, which are also competing for advertising dollars. So it’s losing: Twitter had $5 billion in revenue last year — while Google had $257 billion and the artist previously known as Facebook had $117 billion.
Maybe the fart button is what Twitter was missing all along
There are ways to solve that. However, Twitter has taken over Revue, a newsletter platform (where This Week in Elon initially lived). It also started Twitter Blue, a subscription service that offers users new features such as changing the color of the app icon and undoing tweets. There’s likely room to expand on both offerings, giving Twitter another revenue stream in addition to advertising.
This seems more profitable than banning bots, but what do I know? Perhaps the fart button is what Twitter was missing all along.
One possible outcome, of course, is that no one buys Twitter, and this appears to be the outcome shareholders are betting on. The private equity firms snoop on Twitter, as others have done before, and decide not to buy it, as others have done before. The board rejects Musk’s offer and he launches an offer and Twitter management poisons the case. This all ends with Twitter, still a publicly traded company, where it will have to solve the same problems as before, except that Agrawal might need some therapy because wow, this was a lot. What can I say? We love to have fun on Twitter dot com!
Correction Apr 22 7:38 PM ET: Corrects a “million to billion” error