The Elon Musk-Twitter drama keeps taking sometimes bizarre unexpected turns so whatever I write here could be moot not long after the ink dries. Its always been dangerous to talk in absolutes about Musk. He is said to be genius-level smart but hes 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 plagued by production issues and nearly declared bankruptcy. It miraculously survived and came back stronger making him the worlds richest man.
More recently he famously put down a best and final offer for financially shaky yet ubiquitous social media company Twitter. The price $44 billion or $54.20 a share which included a pot reference 420 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. Twitters 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 buying what he called the worlds public square. He would be the king of all media by taking Twitter private and fixing its manifold business flaws for all its influence it has no cash flow and no earnings.
Until suddenly he was not.
Somewhere along the line 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 cant be monetized by him or anyone else. He also said Twitter was hiding this bot problem something tantamount to fraud. He wants to take a deeper look at the books. The Twitter logo is seen on a sign at the companys headquarters in San Francisco California on November 4 2016. Elon Musk has said he is worried about the large amounts of fake accounts on Twitter.
If he were really worried about bots he would not have waived due diligence before signing the deal paperwork. Whats next The business press has always been skeptical about Musks intentions because most of Wall Street has been skeptical. That is why the stock never traded close to his offer price. For what its worth heres the viewpoint of two bankers one who has worked with his Tesla board and another at a firm involved in his Twitter financing machinations.
Only on his terms
They say virtually the same thing. Musk is telling people he still wants Twitter. He thinks he can make it work as a private company clean up the bot problem and sell it at a profit sometime in the next five years. But Musk wants the company like everything else on his terms which are always in flux. He doesnt 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. Its now telling him that even though he signed a deal leaving him on the hook for the $1 billion breakup fee and maybe more in damages he can get Twitter to the table and agree to his terms aka a much lower purchase price.
He might be right. Twitter first said it would enforce the initial deal terms maybe even go to court but now appears to be playing ball with Musk. It recently said it will turn over more data on its bot issue — a move that means talks are back on. The bankers tell me the Twitter board knows that finding another suitor will be difficult even at around the $40 a share its trading at now. The board cant just accept anything but also cant tell Musk to just 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 thinking among my two guys is that Twitter agrees to a lower price possibly significantly lower and Crazy Elon gets his public square albeit for much cheaper. That means the deal is on right Seems so. But no one 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 about the pretty good deal small investors get now zero-commission trades and mobile apps that make stock trading seamless and inexpensive 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 happening where no one can see it too many trades are not going to public exchanges. They are being routed to private trading venues known as dark pools. Investors believe they are trading for free on Robinhood but could be getting ripped off without knowing it. Gensler offered no data to show that markets are screwing small investors through its current structure. Its his hunch.
Upending the markets on a hunch is pretty dangerous stuff. Particularly when you are simply trying to burnish your class warfare credentials as most observers suspect. The good news and bad news for Gensler His proposed changes will probably take years to implement as Congress — which will likely be in GOP hands after November — debates their merits. By that time itll 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 does not need fixing.
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