This article says Musk agreed to buy Twitter mostly as a joke. I think there's a far better explanation. This wasn't a joke for Musk because after agreeing to buy Twitter he proceeded to sell billions of dollars' worth of TSLA stock, supposedly to finance the purchase. Even for the richest man in the world that's not a joke.<p>I think a better explanation is that Musk offered to buy Twitter as a cover for selling billions of dollars' worth of TSLA.<p>Look at this story: <a href="https://www.wsj.com/articles/elon-musk-sells-billions-of-dollars-in-tesla-stock-11651197227" rel="nofollow">https://www.wsj.com/articles/elon-musk-sells-billions-of-dol...</a>
The headline is: "Elon Musk Sells $8.5 Billion of Tesla Shares After Deal to Buy Twitter"<p>Why does he need a cover? Because TSLA is way too overvalued. He has to know that it is overvalued. Tesla's market cap is double of Toyota, VW, Mercedes, BMW, GM, Honda, Ferrari and Volvo <i>all combined</i>! [1]. If you sell stock while knowing your company's stock is way too overvalued, you're fleecing unsophisticated investors. Pretending to buy Twitter provides a convenient cover.<p>Musk pretended that TSLA valuation is reasonable. Musk even called out Gates for shorting TSLA stock [2]. If he didn't have a cover then Musk would look like a hypocrite for selling TSLA.<p>In reality, both Musk and Gates sold TSLA, the only difference is that Musk sold stocks he owned, but Gates sold borrowed stocks. But Musk used buying Twitter as a cover, so he gets to pretend to be morally superior. Even though both men sold TSLA, according to Musk, Gates' sales means that he isn't serious about climate change [3].<p>[1] <a href="https://companiesmarketcap.com/automakers/largest-automakers-by-market-cap/" rel="nofollow">https://companiesmarketcap.com/automakers/largest-automakers...</a><p>[2] <a href="https://nypost.com/2022/05/31/elon-musk-calls-out-bill-gates-for-his-multi-billion-dollar-tesla-short-position/" rel="nofollow">https://nypost.com/2022/05/31/elon-musk-calls-out-bill-gates...</a><p>[3] <a href="https://www.businessinsider.com/bill-gates-shorting-tesla-wont-hurt-musk-says-sigh-2022-6" rel="nofollow">https://www.businessinsider.com/bill-gates-shorting-tesla-wo...</a>
So much noise here and ill-informed comments fail to give a broader understanding of what's going on. Elon bought up Twitter shares early in the year for a reason, because he wanted more control over Twitter. He bought up so much Twitter shares that when it was announced via the SEC, Twitter offered a board seat under the clause that he wouldn't acquire too much % control over the company. He obliged, but then left when he realized he couldn't make the changes he desired at the company. Plus, people on the board at the time, specifically Dorsey, was nudging him to buy out the company as a whole. So he did, hastingly. That was an ill-informed decision and obviously a mistake made with respect to doing due-diligence. In hindsight, before the market crash that price may have made sense. But fast forward today with looming recession talk, it's pretty clear he realized it's overvalued (we know this from tweets about twitter deal being repriced). And so he needed an escape hatch, hence the issue with bots and the unverifiable mDAU was a great talking point. In fact, he may as well be right on the issue as Twitter doesn't want to reveal how they calculate it. What he's trying to do right now is pretty clearly force the board to give a better deal. He's not sold any stock and likely won't unless he's actually out for good. But given the amount of effort and thought he's put into it and making it clear that he should pay a lower price depending on the bot issue, I don't think there's much doubt he's not actually leaving Twitter. Whether the courts will force an acquisition at the current price however, is a looming question. My bet is they settle at a lower price.
A fun side effect of all of this: if you believe in the court's ability to force Musk to buy Twitter, you should continue to buy up stock until it reaches the price Musk agreed to pay for it.<p>If you don't believe he'll be forced to pay, you should sell and/or short until it's at whatever you think the right market value for a stock of Twitter ought to be.<p>And wherever the price is between those two is a direct function of what experts believe the probability of each outcome is. It's like a massive betting market on a legal case.
> that it has knowingly been massively understating the number of bot accounts in order to trick companies into buying Twitter ads and shareholders into buying Twitter stock<p>Wasn’t Google Ads 80% fake clicks on some studies? It won’t be surprising Twitter Ads is actually worse. There is so zero incentive to clean it up and so many shady reasons to do it.
I am reminded of Neal Stephenson's Cryptonomicon, in which a significant plot point was a hostile buyer using due diligence as a kind of DoS attack on the protagonist's company.
Recent and related:<p><i>Notice of termination of Twitter merger agreement</i> - <a href="https://news.ycombinator.com/item?id=32027341" rel="nofollow">https://news.ycombinator.com/item?id=32027341</a> - July 2022 (1361 comments)
Elon’s going to get away with this. Even though he shouldn’t.<p>The rich play by different rules and the law lets them.<p>If the rest of us did the same we would have to pay ridiculous fines and/or spent time behind bars.
> Twitter has said in its SEC filings that it estimates that fewer than 5% of its monetizable daily active users are “false or spam accounts”<p>Is this different to total percentage of false or spam accounts? The <i>monetizable daily active users</i> seems like a very specific subpopulation of total twitter accounts.
I believe he was sincere, but found out quickly that a lot of people had strong feelings about his plans for the platform. It's possible he was in danger of losing people he really needs for his other businesses. I don't blame him for bailing out on a lose/lose situation.
The law on this is clear, and the remedies are also clear. Musk playing the contemptuous clown prince aside, the court isn’t going to be ‘intimidated’, and Musk can’t simply evade/ignore judgments/orders. What a weirdly amateurish article.
If the designer of Bloomberg.com is on HN... thank your for making a decent looking news site. Literally every other site I'm bombarded with sensory overload. This site just lets me read the article in sweet serenity.
I love how Matt Levine is alternately hilarious, and then dry as dust. It's like he wants everyone to suffer what lawyers go through on a daily basis, so he lures you in with some light hearted funny, and then before you know it, you're in the middle of reading some long sentence in a contract that's so convoluted you just want to pull your eyes out. Ha, good one Matt!
Elon Musk apparently has bigger issues that should have been preventing him from playing with the idea of buying twitter, and yet, he went for it, following a tweet that simply went out of control...<p><pre><code> - Tesla plants challenges worldwide (From China to Berlin via Texas)
- Cybertruck ever postponing release date?
- SolarCity and the dissmissed promises
- Neuralink: Simply read the Wikipedia's entry [1]
- Hyperloop (or is it hyperflop)
- Boring company (more and more video demos) nothing is done...
</code></pre>
So, with so much to get in order (and I am avoiding personal matters which don't seemed any cheerful for the man), with so much, why don't we simply get ourselves a new toy, named twitter?<p>Recently USA has a president that was following his impoolsive, late night tweets, by pushing his staff to form them as a new policy...<p>[1] <a href="https://en.wikipedia.org/wiki/Neuralink" rel="nofollow">https://en.wikipedia.org/wiki/Neuralink</a>
<i>The stock closed at $36.81 on Friday, and other social-media stocks are down significantly since April. (Snap Inc. is down about 57% since April 13; even Meta Platforms Inc. — Facebook — is down more than 20%.) Meanwhile Tesla Inc. stock, the main source of Musk’s wealth,</i><p>Or maybe that was because the overall stock market was down a lot. Meta being down 20$ is about the same as the S&P 500.<p><i>Also it is obviously untrue! Companies advertise on Twitter because it sells products!</i><p>lol Twitter ads are notoriously expensive. It's mostly big companies buying them to build awareness, not to move product.
Will any of these people eat crow if the deal closes at a lower price? Probably as much every other time they’ve said Musk was done with Twitter and then escalated towards owning it.
Does anyone else see the complete pointlessness in all the cock-sure but entirely speculative comments on this?<p>You don’t know Musk, or the backend, or anything at all besides what the media tells you and that isn’t 1/10th the whole story.<p>I get why people wanna talk about it, just not be absolute “well I know this for a fact” smugness that most of the comments here have.<p>The reality is NONE of you actually KNOW anything and won’t until history determines the victor and you learn some more of that side.
There's been a lot of speculating around here on exactly what it would take for Musk to get out of this deal; here's the TLDR of the analysis from Levine:<p>> Musk cannot get out of the deal just because one of Twitter’s representations is false. He still has to close the deal unless the representation is false and it would have a “material adverse effect” on Twitter. This is a famously under-defined term but it generally needs to be a pretty catastrophic effect. If the bots are 6% of mDAUs, whatever. If the bots are 75% of mDAUs and Twitter has been knowingly misleading its advertisers, and Musk can expose that scam and advertisers flee and Twitter faces legal trouble for its fraud, then, sure, material adverse effect.<p>As to whether there is any evidence of a false representation (not even addressing material adverse effect due to that false representation):<p>> The only basis for the claim is that “preliminary analysis by Mr. Musk’s advisors of the information provided by Twitter to date causes Mr. Musk to strongly believe that the proportion of false and spam accounts included in the reported mDAU count is wildly higher than 5%.” Notice that Ringler does not say that the analysis shows that the bots are “wildly higher than 5%” of mDAUs: That would be a factual claim that, I suspect, Musk’s advisers know is false. They make only the subjective claim that Musk “strongly believes” it.<p>And then, perhaps the better grounds for Musk to prevail:<p>> The second pretext is: Twitter is not giving Musk enough information about the bot problem. This is a better pretext, for technical legal reasons, which we have also discussed previously. In the closing conditions to the merger, representations are qualified by “material adverse effect”; just finding that a representation is false would not give Musk the right to terminate the deal unless it caused an MAE. But covenants are qualified by “all material respects”: In the merger agreement, Twitter promised to do certain things between signing and closing, and it has to do those things, whether or not there would be a material adverse effect from not doing them. So if Musk can prove that Twitter hasn’t complied with its obligations, he can get out of the deal.
Musk wasn't pretending to buy Twitter, the article is using a sort of simpleton interpretation of Musk's behavior. That's the interpretation someone would take if they dislike Musk and get overly emotional about his behavior.<p>Musk is x y z. Oh my god, did you see the tweet he sent out!?! I just hate Musk, blah blah blah. He's such a terrible human. This one time he called a person a really bad name. - That's the type of person that reads Musk's Twitter acquisition attempt the way the article is.<p>I don't care much about Musk one way or another, but this is not a complicated context and the author is plain wrong.<p>What happened is the market for hyper overvalued stocks has crashed. He was faced with the scenario of paying double for Twitter vs what it was really worth. Remove the Musk prop and the stock collapses. Next up, the stock is heading south of $30 / share. It might be worth taking over for $20-$25 / share at most.<p>Musk didn't want to pay $20 billion more for Twitter than he had to, even for him that was a bridge too far. Particularly while his own paper bubble fortune is just as at risk of implosion as the rest.<p>It was really, really, really dumb timing. That was Musk's actual issue.
How much is this beneficial to the Twitter brand?<p>Twitter gets free exposure from all the news and a boost in reputation if only 5% of users are bots. Is there room for growth? I have the impression that Twitter is for information junkies who all should already have heard of Twitter.
Considering he owns 8% of shares and can't buy more than 15%, I doubt he went through all of this to shock down stock prices or for the luls, as the author assumes.<p>He is rich but doesn't usually like burning money.
So now there is a widespread support for Musk buying Twitter? Okay, he may end up owning Twitter whether he likes it or not. It is so funny and ironic. Whatever the outcome I agree.
Twitter feeds are pretty public, albeit expensive to buy the firehose. Nonetheless, shouldn't a handful of motivated hackers be able to answer the bot question??
My idea is that Elon Musk is just leveraging it's wealth and public visibility to gain a lot of money easily tricking the markets. Especially those market where people are more easily gullible.<p>I think he did it with bitcoins when it declared Tesla will accept Bitcoin payments on the same basis of ordinary payments. Just later he abruptly dismissed the whole thing because the operation was terminated. In the meantime I guess he just acquired a lot of bitcoins before the public announcement and just sold them when the price was much higher.<p>I think that stock market and Bitcoin market are easily gullible by wealthy people because a lot of people investing are inexperienced and are easily influenced by press communication without ground truth basis.
I don’t understand why we need to make things personal: a multibillionaire with practically unlimited resources is negotiating with a multibillion dollar corporation with practically unlimited resources.<p>It’s clear that the offer Elon got stuck with has an unrealistic price at this point (and Elon just want a reason to get out of the deal), just like it’s clear that Twitter’s management is incompetent in the last few years.<p>I just hope that there will be a lawsuit with juicy details so that I can get my popcorn, but I believe the 2 parties will settle.
Another hypothesis: Triggering a legal battle in the courts is a delaying technique to push out the acquisition until the economy rebounds (and Tesla and Twitter valuations with it), or until after the 2024 election, because Elon realized that he doesn't actually want to let Trump back onto the platform. (Perhaps because he perfers DeSantis)
The half-lying, half-dancing-around-legality, reminds me of Trump.<p>It's like American capitalism has a big vulnerability and Musk is hacking it.<p>Capitalism always needs to be properly regulated to work properly, but it quickly cracks when some people work hard to hack it and cause problems.<p>As always, don't hate the criminals, just hate the game.
Can we also take a moment to appreciate the tongue-in-cheek writing style of this (fairly thorough, by my impression) analysis of rather dry things like SEC filings, merger covenants,...?
Why does it have to be that complicated?<p>Twitter says only 5% of its active users are bots.<p>Anyone who has paid attention to say Joe Bidens follower count[1] would put it closer to 50%<p>[1] <a href="https://www.dailymail.co.uk/news/article-10829675/Almost-half-President-Bidens-Twitter-followers-FAKE-audit-reveals.html" rel="nofollow">https://www.dailymail.co.uk/news/article-10829675/Almost-hal...</a><p>Bloomberg says there is no evidence of this... yeah, personally I dont really see any evidence of twitter having more than 200 or 300 million real users, and only a small fraction of those will be active. "Maybe" if they werent completely blocked in China and Russia it would be possible to believe there is more.
Musk holds a key piece of America’s future in space in SpaceX. I wonder if it’s only a matter of time before he starts dangling that to get what he wants in cases like this. I still am generally favorable toward Elon, but I think we’re seeing him transform into a villain
I found this part most interesting. Public awareness of the Delaware Court of Chancery is about to skyrocket during this court battle.<p><i>The fact that Musk is working in such bad faith here — that he seems so unconcerned with law and the contract he signed — cuts both ways. On the one hand, it will certainly annoy a Delaware chancellor; Delaware likes to think of itself as a stable place for corporate deals, with predictable law and binding contracts, and Musk’s antics undermine that. On the other hand it might intimidate a Delaware chancellor: What if the court orders Musk to close the deal and he says no? They’re not gonna put him in Chancery jail. The guy is pretty contemptuous of legal authority; he thinks he is above the law and he might be right. A showdown between Musk and a judge might undermine Delaware corporate law more than letting him weasel out of the deal would.</i>
BTW, to those who don't know -- Money stuff is free if you subscribe to it as an email newsletter.<p>Link: <a href="https://www.bloomberg.com/account/newsletters/money-stuff" rel="nofollow">https://www.bloomberg.com/account/newsletters/money-stuff</a>
I find it amazing that not one of the top comments gives Elon ANY consideration that maybe, just maybe, he has a legitimate case against Twitter. We don’t know what he’s found, what he was told, what he was promised, what changed on Twitter’s side. Some very top level people bailed or were fired shortly after Elon’s acquisition proposal was announced.<p>It sure appears that Elons is just balking, but what is far more likely is that he has uncovered some deep Twitter bullshit and he plans to unveil it in court. Forced to air the dirty laundry by the court, he avoids defamation suits.<p>Elon is extremely intelligent. Not perfect, not omniscient, maybe he screwed up? Or maybe he has a lot more info than any of us internet loons at the moment?
This is an absurd article. The idea that Musk was just "pretending" to want to buy Twitter, and went through the process of tendering a purchase offer for show, defies any kind of common sense.
BIG_COMPANY will often start to buy MEDIUM_COMPANY and then find that the other company has looming problems, has been faking user numbers/reviews/accounts etc, and the deal falls through.<p>I cannot legally name names but this happens all the time.
Did anyone think he would actually be allowed to buy it? Twitter, as a weapon for propaganda and a tool for information collection, is too important and powerful to just let someone like Musk do what he wants with it.
Court can't force Elon to buy Twitter. Worst case scenario is Musk pays Twitter $1 Billion "pull out" fee which is in the contract and the article mentions. More likely Musk is able to reasonably prove in court that Twitter isn't reporting bots/spam accounts correctly, he gets out of the contract, only pays millions in court cost, data scientist, and lawyer fees.
> One of his hobbies is that he sometimes likes to pretend that he will acquire public companies...He seems to find this fun....When Musk pretended in 2018 that he was going to take Tesla Inc. private, he had to pay the US Securities and Exchange Commission a $20 million fine and stop being the chairman of Tesla’s board.<p>One past example doesn't make a hobby, and I wonder if SEC interference had any impact small or large on the privatization failing. Not to add to the defense to Musk, but deals fall through all the time when scrutiny is applied to them, whether exterior or interior.
> Would he line up billions of dollars of financing and sign a binding merger agreement with a specific-performance clause and a $1 billion breakup fee as a joke? I mean! Nobody else would! But he might!<p>What a silly thing to say. Of course he would; I'd also risk $20 (~1/200th of my assets, like $1b is for Musk) on a joke, especially if I knew I'd almost certainly never lose that much.
This is politics masquerading as legal analysis. Twitter, by its own admission, lied about their user count for years. Elon will either go without penalty, or take a slap on the wrist. Levine spends a lot of time shilling on bots because he knows that's a weak spot for the Elon haterz club.<p><a href="https://nairametrics.com/2022/04/28/twitter-says-it-inflated-user-numbers-by-1-9-million-for-3-years/" rel="nofollow">https://nairametrics.com/2022/04/28/twitter-says-it-inflated...</a><p>edit: Not an Elon fan BTW. Just don't appreciate this Levine's axe-grinding masquerading as impartial legal analysis.
I see the author's scepticism of the bots argument, but I don't think it's one that should be dismissed so easily. I don't know anything, but isn't the value of these big tech properties largely in the number of actual human daily active users?<p>When Facebook acquired whatsapp, I remember reading that it wasn't the tech per se that facebook really wanted. It was the daily active users. Whatsapp had (still has? dunno) a pretty big userbase. That was the where a lot of the value lay for facebook, or so I understand.<p>So, if daily active users are important to the value of the property, do we believe twitter's SEC filing estimates of <5% bots? Musk doesn't, or hasn't been convinced by what he has seen.<p>That really does seem like a legit reason to abort the deal. Twitter is representing <5% bots. Musk thinks that's a wildly optimistic estimate & is prepared to call bullshit. Seems fair to me.<p>A more cynical view might be that Musk is simply looking to lower the price. Exposure of Twitter's bot problems in a court might not be very good for the share price. Just having Musk pull out (9 kids, he never pulls out) probably dips the share price. So, isn't it all good leverage to bring the price down?