Recently, Netflix's most popular science documentary "Back to Space" is being screened, telling the story of how Elon Musk's SpaceX project has successfully helped NASA astronauts travel to and from Earth and the International Space Station in the past 20 years.
Some of the most impressive are the details of the historic delivery of spaceX rockets and spacecraft to the International Space Station to complete the task of repairing the International Space Station and replacing the key components needed for the operation of the entire space station. The film is more realistic portrayal of Musk's personal cosmic exploration feelings.
Sentiment has always been a significant label on Musk. Many of the things he does tend to surprise rational market people or financial analysts.
Given the achievements of the space exploration project, Musk has every reason to invest more resources in the development of new rockets or invest in other aerospace technology products; in view of the soaring sales of his Tesla, in the eyes of Wall Street analysts, Musk also has countless reasons to invest in building more Tesla gigafactories or to iterate 4680 cylindrical lithium batteries.
Just last week, however, Wall Street analysts who have been publicly dismissed by Musk several times may be about to be blown away by his startling moves again.
At 7:23 p.m. local time on April 14, Musk announced to the world on Twitter that he plans to acquire Twitter in full cash at a price of $54.20 per share. You know, Twitter belongs to the social media industry's established enterprises, and Musk currently has nothing to do with all the industries he has at hand, although for several years, Musk is the most beautiful boy on Twitter, almost using Twitter as the only source of his media PR and advertising marketing.
Musk's announced plan is to use about $43 billion in cash to complete the takeover of Twitter. The price of $54.20 per share is not known whether Musk calculated it himself or the advice given by his investment banking advisers, which is a premium of about 18% from the closing price of the previous trading day.
Musk tweeted the day: "This will be my best, only offer." But he also hinted: "If this offer is rejected, I will reconsider my position as a Twitter shareholder." ”
He has the ability to say that, also because his layout of Twitter stocks began earlier. According to foreign media reports, on April 4, the announcement issued by Twitter Company showed for the first time that Musk had purchased about 9.1% of the shares, becoming the second largest shareholder. Since then, Twitter's board of directors has announced the appointment of Musk as a director of the company and stipulated that his shareholding ratio should not exceed the 14.9% stipulated by the company, but Musk did not buy it.
"This is not a drill! Repeat, this is not a drill! ”
For twitter's board majority, as well as management, they suffered a dull blow. If the acquisition is likened to a war, I think their mentality on April 14 must have something similar to that of the soldiers at the radar station who experienced the Pearl Harbor attack: "It turned out that this was not an exercise. ”
It can be seen that Musk is prepared and planned for a long time. From the capital chain, Musk currently owns the market value of Tesla stocks above $150 billion, if the shareholder pledge loan according to Tesla's charter should not exceed 25%, then Musk only pledged 25% of the Tesla shares he holds can obtain more than $40 billion in bank loans, which can be described as sufficient ammunition.
In addition to stocks, according to foreign media estimates, Musk's current liquidity is between $3 billion and $4 billion, which can also be used as his own start-up capital to set up a special acquisition of Twitter portfolio. Because according to the traditional leveraged hostile acquisition (LBO) routine of Wall Street in the United States, Musk can obtain a series of interests and loan funds to acquire without even pledging his Tesla stock. Of course, the risk of such an acquisition is high, because the reward after the acquisition is completed mainly comes from the prey caught by the blood draw - Twitter.
Twitter certainly won't sit still. On April 14, the largest shareholder publicly declared their opposition to Musk's privatization acquisition. The argument for these opponents is simple: Musk's offer grossly undervalues the company.
As shown in the chart below, although Twitter's current stock price is still around $46, its stock price once soared to around $80.75 only a year ago, far exceeding Musk's offer of $54.20 per share.
Source: Wonderland
Twitter didn't just talk about not practicing, and launched the "poison pill" program the next day.
On Friday, local time, Twitter announced that it would dilute any stake in the company that had accumulated more than 15% by selling more shares at a discount to other shareholders. The plan is officially known as the Shareholder Rights Plan and will be implemented for 364 days.
The essence of the "poison pill" plan is actually to allow the original shareholders other than the acquirer to buy the newly issued shares at a discounted price, thereby diluting the proportion of shares in the hands of the hostile acquirer and making the acquirer need to pay a higher price to complete the remaining acquisition.
The side effects of the "poison pill" program are also very obvious, the original shareholders have to spend extra money to keep their shares diluted, and the diluted stock price will become unattractive to all new investors.
Musk also did not show panic in the face of a tough, quick reaction from Twitter's board and management. On Saturday, a few words were simply posted on Twitter, "Love Me Tender," the name of one of Elvis Presley's famous songs, but also very direct: the tender offer will continue to counter Twitter's poison pill plan.
The tender offer is very "gentle" relative to the poison pill, and generally the acquirer will publicly propose the acquisition plan to all shareholders of the target company, requesting that the shares of all shareholders be acquired at a specific price within a specific period of time. Generally speaking, the offer for an offer must have a certain premium rate to attract the original shareholders to sell their shares.
For Musk, the benefit of the tender offer is that it allows him to see how many Twitter shareholders are willing to sell to him at this price, and during the term of the offer, he does not have to buy Twitter shares immediately, but can wait until the Twitter shareholders cast their vote of confidence (or no confidence) in Musk before actually spending money to buy shares (or abandon the acquisition).
Twitter is facing a difficult problem
Musk's acquisition timing is great, not only because its stock price has fallen all the way from the fourth quarter of last year to the waist, but also because the veteran social media giant is currently facing difficulties in its main business.
Some foreign media analysis pointed out that Twitter's biggest problem at present is the problem of its user traffic, which has little to do with Musk's acquisition.
Although Twitter's chief financial officer, Mr. Segal, expected user growth to accelerate in 2022 at a recent earnings call. He believes that Twitter's "users successfully created new accounts" and "reactivated existing accounts" data can prove this upward trend. In the fourth quarter of 2021, Twitter had 217 million daily active users with convertible earnings, of which 38 million were in the United States, up from 211 million in the third quarter of 2021.
However, this growth rate is lower than market analysts' original growth forecast of 8 million and is lackluster compared to the more than 1.9 billion daily active users of the established social media Facebook.
The key is that user growth across the social media industry is showing signs of stagnation. A 2021 study by the Pew Research Center found that the share of users in the U.S. who use Instagram, Pinterest, LinkedIn, Snapchat, Twitter, and WhatsApp has not changed statistically significantly since 2019.
This slowdown is not only reflected in the past two years, but also in the past decade, the user growth rate of most social media sites and social apps on the market has declined year by year.
For senior social media analysts, Twitter also has a big problem is that some of its accounts are currently fake accounts or accounts created to brush traffic, which is what we commonly call zombie powder and machine powder.
If these fake accounts just brush traffic, it doesn't matter, but if they are used to spread fake news, it may create a toxic social environment on twitter. In the long run, toxic social environments are bound to keep quality real accounts away from Twitter and can pose serious regulatory risks.
In recent years, even though Twitter has been working hard to eliminate such fake accounts, it is not easy to completely clean up these accounts, which has become a problem for Twitter and a chronic disease.
In addition, even real users on Twitter are facing a trend of deteriorating social environments.
According to a Pew Research Center survey of a sample of U.S. adults among Twitter users last year, only a small number of Twitter users are spreading the majority of tweets among U.S. adults, and the most active Twitter users do not focus on maintaining a civilized communication environment in Twitter's social circles.
More specifically, from the research center's 2021 sample tweet analysis of 2,548 U.S. adult Twitter users, it was found that the 25 percent of U.S. adults who were most active on Twitter spread 97 percent of their tweets between those users, by tweet volume. And higher-traffic Twitter users have more obvious business or political motivations.
The study points out that when these most active users don't pay attention to maintaining the fairness of social discussions or the civility of communication, it can easily lead other users to leave Twitter completely. Moreover, while highly active users on Twitter log on to Twitter more often every day, they write fewer original tweets than other U.S. social media and are more accustomed to retweeting some high-traffic content. This has planted another thunderbolt in the content-kinged social media competition ecology.
Twitter's future growth potential also appears to be challenged. According to foreign media reports, young users in the United States are currently the key to the growth of social media users, and Twitter is obviously lagging behind in this regard. In a survey last year, it was found that most users between the ages of 18 and 29 in the U.S. regularly use Instagram or Snapchat, with about half saying they use TikTok. The number of people using Twitter in the sample is less than the above three platforms.
For younger adults (ages 18 to 24), Instagram is 76% regular; Snapchat is 75%; 55% regularly uses TikTok, while only 42% use Twitter regularly.
Musk's feelings
Whether it is colonizing Mars or space exploration, Musk is a person with feelings, and the old Xing next door admires him the most.
Musk certainly noticed Twitter's problems. But we can find that in all his public talk about plans and reasons to buy Twitter, it is not more about pushing Twitter's profitability reform or making more money, but is full of his personal feelings.
First of all, as a long-term absolute traffic user of Twitter and a daily active user who posts almost every day, Musk has been criticizing Twitter for not allowing users to edit and modify the content that has been sent. Musk launched an online poll in early April on whether Twitter users needed an edit button, with more than 4 million accounts participating, with more than 70 percent of them saying they did. Twitter responded at the time that the company had been working on an edit button since last year. But Musk remained unsatisfied and raised the issue again at the TED meeting on April 14.
He also expressed his dissatisfaction with the current way Twitter controls content at the TED conference, arguing that Twitter should be more cautious when deciding whether to delete tweets or permanently ban users. He added: "Twitter's decision to delete posts or silences went too fast. ”
Musk also expressed dissatisfaction that the Twitter platform does not currently follow the relevant laws of local countries. In particular, he pointed out that Twitter did not do a good job of giving users a better understanding of the impact of expanding or decreasing a Tweet (what we commonly call push/limit).
Twitter has been working for years for business purposes to advance its so-called "healthier content" program, adding content moderation.
The biggest reason Musk wants to privatize Twitter is that he is a programmer himself. I very much hope to lead the open source process of this Internet social platform.
Probably every programmer has a sacred place in their hearts called GitHub — a website for storing code for programming projects. In an interview with TED, Musk suggested that Twitter's algorithm be open sourced on GitHub, allowing programmers outside the company to view and participate in fixing and modifying its code to unlock Twitter's enormous potential.
In addition to sending Thomask's programmer feelings, he also hopes to implant his own content creator ideas on Twitter. There are two main aspects:
First, after the acquisition, Twitter's revenue shifted from mainly advertising revenue to a model that relied more on subscription fees. The bluntness of this shift is to transform Twitter from earning traffic advertising fees on public platforms to building a huge private domain traffic ecology. In the fourth quarter of 2021, advertising accounted for about 90% of its revenue.
Musk's purpose in doing so is very clear, one is to use the annual fee income of subscribers to gradually replace the advertising revenue to reduce the user's troubles by advertising; the other is to eliminate the current many zombie powder, robot powder, and fake accounts on Twitter, providing users with a clean communication and creative environment.
Second, Musk is committed to providing Twitter users with the ability to write long tweets after the acquisition. Currently, in most cases, Twitter allows 280 words (with punctuation) per tweet, which is twice as high as the previous limit of 140 words (with punctuation).
But Musk is still not satisfied, he once forwarded a tweet on Twitter (Reddit CEO), joked: "This should be a good novel-like tweet, but it is a pity that Twitter can not send long articles." At the same time, it directly ignores this big V's view of Musk himself.
But for Musk's clichéd need for long texts, Twitter never responded positively.
Of course, in addition to the above technical or creative feelings, Musk's acquisition decision may also be driven by a certain "brotherly righteousness". Want to give his buddies a blow.
According to foreign media reports, Jack Dorsey, one of the founders and former CEO of Twitter, is a good buddy of Musk. They have been successful in innovation and entrepreneurship in the field of technology, and their views on blockchain and Web3 technologies are also consistent. In addition to his involvement in creating Twitter, Dorsey is also the founder of square, a publicly traded mobile payment company, which is not much inferior to Musk's achievements.
Dorsey returned to Twitter in October 2015 as CEO for the second time, and did not step down until November 2021. The reason for the resignation was discord with Twitter's major shareholder and other executives, and was ousted by the capital side (mainly the investment firm Elliott Management) and some of the top personnel of the company.
Dorsey, who was ousted as CEO but remains on Twitter's board (to be terminated next month), must have a systematic network within the company. Regarding Musk's acquisition, Dorsey publicly commented on Friday: "The real problem with Twitter is that as a public company, it has been on the shelves. This argument may not only be a shout for Musk or simply vent dissatisfaction, but also a sword to Twitter's current weakness of the major shareholders' dispersed equity and easier to be brutally acquired by capital predators.
At present, Twitter's largest shareholders are almost all institutional financial investors (such as Vanguard, Damo and BlackRock) and do not participate in any of the company's operations. In addition to the independent directors and representatives of these institutions, the board members are mainly current and former executives of Twitter, but their stake is small, which is the main reason for Twitter's frequent high-level struggles in recent years.
In addition, Musk also proposed to cut employees and close the company's San Francisco headquarters after the acquisition to reduce expenditures. Of course, in name only, such a reduction can completely free the company from the shackles of advertising revenue, but the logic behind it may also lie in echoing some of the insights of good brother Dorsey. Musk also said on Twitter that once his bid is successful, Twitter board members will not need a salary, which is also in line with Dorsey's previous dislike of Twitter's overly commercial concept.
Epilogue: Musk's Twitter campaign wasn't easy
Twitter's "poison pill" plan may have been a tactical delay, and it is debatable whether management is really so repulsive to privatizing Twitter.
According to the academic "proxy problem" research view, the company's management may eventually satisfy its own interests more than it does to meet the interests of all shareholders of the company. Given that twitter's current key executives hold almost all of the company's shares, we can infer that the core demands of Twitter's management are as follows:
(1) Keep your job. Musk, who does not want to have a conflict of ideas with them, will clear them from the company's management once the acquisition is completed.
(2) Obtain higher equity returns. Once Twitter is unavoidable by privatization, then they definitely want to get the higher the offer the better.
The combination of these two demands leads to the best option for Twitter management at the moment: desperate resistance, trying to delay Musk's tender offer, and finding other buyers who agree with their management and bid higher.
The implementation of the "poison pill" plan may be to delay the pace of Musk's acquisition; and the latest foreign media reports also show that Twitter is trying to make acquisition progress with other investors, including Thomas Bravo.
Mr. Bravo currently runs a PE company with total assets of more than $100 billion investing in technology companies. The company notified Twitter last week that it was exploring the possibility of pitching for a bid.
Musk's Twitter campaign has also caused a battle between international investment bankers. Goldman Sachs is currently a financial adviser hired by Twitter to deal with Musk's "hostile takeover", and Musk has hired Damo as his financial adviser.
But the relationship is not so simple, Damo is also the top 5 major shareholders of Twitter, and the relationship between Goldman Sachs and Musk has always been good. Finally, silver Lake, a PE agency that currently ranks among Twitter's top ten shareholders, is also an old acquaintance of Musk and has worked closely with the project to privatize Tesla.
Do you see that? Musk's connections among Twitter's top ten shareholders may be one of the important reasons why he can publicly shout "Twitter I want it."
Twitter's management will not easily tie its hands and immediately begin to hire Xiaomo, who has a deep grudge with Musk and has a lawsuit, as one of its financial advisers. This move is considered by the outside world to be a signal of its recruitment and active preparations, and the takeover and anti-takeover campaign has been on the string.
Today's latest news shows that private equity firm Apollo Global Management will consider financing Twitter's acquirers in the form of preferred shares, although it will not directly participate in the bidding. Meanwhile, sources noted that Apollo also did not decide whether to support Musk or other acquirers.
The number of participants in this battle is expected to increase, and the hidden capital predators behind them will surface at any time. Can Musk, the world's richest man, buy this Tweet for $43 billion? We'll see.