It was becoming obvious that to buy Twitter, TSLA value would have to decline severely. IIRC, Musk only got around to selling $8 Billion pretax before quitting.
Musk thought he could afford Twitter. He sells some TSLA and the market collapses, and he suddenly decides against it.
Everything else is smoke and mirrors. Musk doesn't have the cash for the deal anymore (maybe he never had the cash for the deal). I guess Musk is looking at the $1 Billion ejection clause now and trying to weasel around it.
But at this rate, it looks like Musk owes Twitter $1 billion cash for this broke deal.
The merger contract provides the option to pay $1b to walk away under only limited circumstances: either the acquisition is blocked by a government, or Musk fails to get financing for the deal. The latter can't really be easily faked: if he said 'sorry, I thought I had the money, but I checked my couch cushions and it turns out I don't,' and paid the $1b to walk away, Twitter would sue and this assertion that his financing broke down would be tested by the courts.
In fact, out of those limited allowances to pay the $1b and walk away, Musk is bound by the contract to 'specific performance'. That is, he's bound to actually do it. Pay the $54.20.
A good M&A analysis of the situation is below.
https://yetanothervalueblog.substack.com/p/quick-twtr-though...
But digging deeper, the "people in the know" are now pointing out that this $1 Billion escape clause is actually very restrictive and unlikely to be invoked. Musk might be forced into buying Twitter at the previously negotiated $54.20 price.
But there's also the question: will Twitter's board really go to court to force Musk to buy it at $54.20? There's also the question of politics here. Even if Twitter's board is in the legal-right to do so, forcing Musk to become the new owner is bad politics.
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There's also the possibility of the Twitter Board's incompetence. Maybe they don't realize the advantageous position they're in and give up before testing Musk in court?
Yeah. Wealthy individuals advised by the best experts can't figure out what is good for them. Only if they would have someone in their orbit who knows how to read hacker news comments. </sarcasm>
Is there some kind of politics more important for corporate decision making than claiming the $20bn or so you're entitled to by contract?
What we're really seeing here is: can a very rich person completely flout a contract, ignore legal obligations he signed, and abuse the legal system to the point that contracts are basically unenforceable against him? Sure, he has no case, and there is no real conventional legal way to wiggle out of this, but that's not really the question, is it?
As Matt Levine said in his column today, a merger arb told him that "if you're reading the contract, you've already lost."
In all likelihood, it seems the most probable outcome is a modest adjustment of purchase price to further "secure the deal" (whatever that means). But Musk is a bit crazy, so while that's the most likely outcome, it's hard to say it with much confidence.
Matt Levine had a pretty different take, pointing out that if Elon Musk suddenly appears to be unwilling to buy Twitter, his financing might see that and - suddenly, but perfectly legitimately - evaporate, which would be a valid reason for Musk to walk away.
It really is true that lending someone a lot of money to make an investment they aren't interested in is a much worse financial move than lending the same money to the same person to make an investment they are interested in.
This has been repeated at nauseaum .
Just because you don't know their names and aren't shitposting on social media they are not incompetent.
They managed to screw Musk over, they basically looked at macroeconomics, regrouped after the initial no and sold Twitter to Musk at the very top of a 13 year old bubble in the making.
If you look at Musk carrer each and every time he sold onto bigger fools. Compaq, Ebay and of course all the equity raises of his overvalued businesses.
Twitter board managed to screw him over and demonstrate that only idiots don't change their minds, all in one swoop.
They have the upper hand now.
If everything goes as it should this would be like Trump election loss. Meaning a defeat that makes it so that you don't hear from a guy for a long time. A severe wound and an existential threat to the ego.
We can only hope.
Musk can claim that he relied on these numbers when making the offer. "Material misrepresentation" is the term he'd use and it just might work. There's an implied good faith in every contract, so irrespective of how "strict" the terms are, Twitter may have difficulty enforcing the agreement in this scenario.
That is, Twitter would have had to literally disclose that these numbers were unreliable, and have Musk agree under those terms in order to not have a fight on their hands.
They wouldn't be suing him to make the courts force him to buy them.
They would be suing him for damages - loss to Twitter's reputation and stock market value as a result of Musk's shenanigans.
Which would be....very tough to prove, but I wouldn't say they DON'T have a case.
They'd probably have a duty to try.
This is very common in large acquisitions and mergers. Remember, Must didn't have to include the $1B walk-away fee. But if he didn't, then the board may have been much less likely to accept the offer.
The lawyers came up with the terms and contingencies. Once signed, you're expected to hold up your end of the deal. I'm sure the lawyers have experience with court-cases / whatnot and have the precise court-cases which led to this style of agreement... but that doesn't matter anymore.
Musk agreed to it, so it must be upheld in that manner.
IIRC, Musk makes Twitter a 100% cash offer. Twitter accepts, but writes the deal such that if either side pulls out of the deal, then a $1 billion penalty will be applied.
Musk goes to the banks and secures a $20 billion-ish loan, putting TSLA as collateral.
Musk starts to sell TSLA for the other $20 billion of cash. Stock tanks as a result, only ~$8 billion sold on public filing documents.
Musk runs around looking for another $12 billion for the last week or so.
And now we have today where it looks like he is failing his side of the deal. If Musk lost the $20 billion-ish from the banks due to TSLA being too low, it makes sense for him to give up.
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All that is going on right now is Musk trying to blame Twitter for the failed deal, so that he avoids the $1 billion penalty written into the contract.
TSLA has a problem with its stock. It's way overpriced for the size of the company. For Tesla, the company, to grow into its stock price, it has to make more cars than Toyota, GM, Ford, Volkswagen, and the rest of the top 12 car companies put together. Toyota alone makes 5x as many cars as Tesla.
Which means TSLA is a meme stock. And the bottom is falling out of meme stocks.
You’re right that Tesla is valued on future performance but this part is just factually wrong. They will need ultimately to make more profits than those companies combined, but the number of cars is not that important. Apple has a ~25% share of the phone market but makes most of the profit.
When Elon Musk's networth is almost entirely tied up in TSLA shares, when the price of those shares declines by 20%+, it changes plans. Banks are less likely to take Elon Musk's collateral (almost certainly TSLA shares), Musk himself loses a chunk of networth and loses an ability to raise dollars, etc. etc.
Most if not all of these people can't liquidate even close to their "net worth"
Larger sums are only really useful for making big-splash investments. Like this. As far as personal spending goes, it's no obstacle, so it doesn't matter that they can't easily turn their entire net worth into a literal billions-of-dollars balance in a checking account.
Twitter, you can't buy Twitter on a whim.
There's little you can do as a billionaire that you couldn't do as a hundred-millionaire when it comes to simply buying things for liquid cash. You can buy all the houses, boats, private islands, etc. that you want.
The only meaningful difference in wealth at that scale is buying fundamentally scarce things: specific real estate and private islands, favors from politicians, private time with other powerful people. For all of those, you are competing with other wealthy people to win them, so it's relative wealth that matters.
It's probably ridiculous to most to think of hundred-millionaires being financially constrained, but I do think there's a material difference in the buying power of $100M and $1B without getting into unique goods.
I think that's broadly true, though some of the older ones might be able to. Bill Gates, for example, has diversified his wealth out of Microsoft (and he doesn't control the company these days, anyway). I don't think the market would punish Berk or AutoNation, for example, nearly as hard as they've punished Tesla for Elon cutting his ownership stake.
Under the original plan, Musk needs to sell approximately $20 billion more of TSLA stock before the original deal could be accomplished.
What do you think will happen to TSLA share price if Musk did that?
It's a hard job to find $40+ billion dollars. You gotta sell assets, and when you sell those assets, they fall in price significantly.
And, of course, the counterstrategy is to wait until next Wednesday, when the price of TSLA moves upward, then sell and catch the falling knife when other institutional buyers ease off the stock price.
To be clear, I hold no shares of TSLA because you can get hurt trying to catch falling knives.
Why wouldn't he put up more Tesla as collateral? How do you know he can't get more financing? How much BTC, Doge and eth does he have? No one knows how rich this man is, people need to stop acting like they do.
Because he didn't. If Elon Musk had easy access to Tesla-as-collateral, he would have put more of it up as collateral.
> How do you know he can't get more financing?
Because he's cutting himself out of the deal. That suggests he has run out of options to get money.
Besides, surprise +50 BPS from the Fed just made it incredibly more difficult to get financing from the banks, and -20% to TSLA's stock price in the past couple of weeks compounds upon this fact, and makes it more difficult to use TSLA-shares as collateral.
> How much BTC, Doge and eth does he have?
Whatever amount he has, it is worth about 25% less than two weeks ago.
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EDIT: I mean, maybe Musk has the money and is just trolling all of us? Which sounds on-brand for him frankly. I don't know why he'd want to do that, but he's not exactly a "stable" figure.
Just because he doesn't put up more, doesn't mean he doesn't have access to more. You shouldn't use more collateral than necessary.
PDF: https://d18rn0p25nwr6d.cloudfront.net/CIK-0001418091/e61e437...
I don't see mention of the number of Twitter users and investigation on fake accounts. I guess that falls under the misrepresentation of accounting section. It looks like a fairly standard acquisition/merger contract.
The mention of the 1 Billion penalty is however pretty easy to find.
Musk should be in for several billion, surely, but the rest of the money should have come fro Private Equity / Buyout partners.
I assumed that this was the case, not just him putting up Tesla stock as collateral.
I'm pretty sure "funding secured" in this case.
Everything is down this year - TSLA isn't down as much as Ford in 2022... I'm not sure twitter had tons to do with TSLA stock being down.
