Author | Wang Fan
Edit | Jan Pudding
Produced by | Prism Tencent Xiaoman Studio
Whether in the electric vehicle revolution or exploring outer space, Tesla CEO Musk has always subverted the norm and is maverick. Today, the world's richest man seems to have an unfulfilled dream – from a cosmic influencer to a rule-maker redefining media platform.
On April 14, 2022, based on a filing with the U.S. Securities and Exchange Commission, Musk announced plans to acquire the veteran U.S. social media site Twitter for $54.2 per share. Musk is no outsider, and historical records show that he opened a position on Twitter as early as 2020, and at the end of January this year, he made a large increase in his position, spending nearly $2.9 billion in more than a month to buy himself into Twitter's number one shareholder, holding 9.1% of the shares, which is three times higher than the holdings of founder Jack Dorsey.
"Since making the investment, I've realized that the company (Twitter) is neither going to thrive nor serve its social mission." Musk wrote in a letter to Bret Taylor, chairman of Twitter's board, that Twitter needs to leave the stock market and become a private company again to achieve the transformation.
"Twitter has extraordinary potential." Musk puts himself at the heart of problem solving, "I'll unlock it." ”
Musk's takeover offer was like a boulder thrown at a lake, churning through the circles. The discussion about why Musk wants to buy Twitter is mixed with political reverie about whether Trump wants to make a comeback, whether emerging rich people such as the currency circle will find a new test field of wealth spring dreams, and Tesla as the crown but not invited by the White House to participate in the electric vehicle industry summit after the "difficult to flat", and so on.
Tesla fans will be Tesla and Twitter logo to merge the memes
"On the one hand, I think Musk is rich and willful, and he is not the first rich man to buy the media; but on the other hand, I think he is serious and has the ability to make Twitter change its face, and maybe become the forerunner of Internet 3.0." A Tesla fan told the author.
Once harvested love and fines on Twitter
Musk was "addicted" to Twitter before he became Twitter's majority shareholder, and he also reaped love, wealth and fines.
Foreign media have calculated that the 51-year-old Musk's tweets have jumped to the second largest on the whole network since 2018, with various contents, from promoting Tesla product marketing to responding to customer complaints; from choking with short sellers to making suggestions for Thai cave rescue.
Other American business executives or billionaires such as Apple CEO Tim Cook and Berkshire CEO Buffett have also opened Twitter accounts, but the former has almost no interaction with netizens, and the latter can count the number of tweets on two hands. Musk is different from them, not only tweeting almost every day, tweeting time from early morning to late at night, and nearly half of the tweets are replying to netizen comments, no matter how many fans the other party has.
The time he made a takeover offer to Twitter was 3 a.m. at Twitter's headquarters. "You say, ordinary people, who make a takeover offer to someone else in the early hours of the morning?" Brokerage Jefferies stock analyst Brent Thill told the media.
Another example of Musk getting involved in Twitter into his personal life is his acquaintance with his ex-girlfriend Grimes. Musk tweeted about artificial intelligence, saying that combining the word Basilisk thinking experiment (questioning the risks of AI) with the term Rococo (18th-century Baroque style) could create a new word, "Rococo Basilisk," which implyed "extremely complex and absurd."
As a result, Musk found that this stem that ordinary people could not understand had been used by Grimes. Later, he and Grimes met and fell in love on Twitter.
Musk, who harvested love through cold jokes, also paid real money because he loved to joke on Twitter. In April 2018, he joked on April Fool's Day that "Tesla is filing for bankruptcy", and Tesla's stock price fell in response, falling by 5% on the day.
Musk has tweeted that Tesla has filed for bankruptcy, "Musk was found collapsed next to the Tesla Model 3, surrounded by "Teslaquilla" bottles, and tear marks can still be seen on his cheeks."
The greater loss of wealth occurred in the farce of Tesla's privatization.
In 2018, Musk tweeted that "tesla is being considered for $420" and that it has "locked in funds." This triggered a surge in individual stocks, rising from $342 to $371 on the day. However, the SEC later ruled that Musk made "false and misleading" statements to investors, and the so-called "fund lock-in" was false.
Foreign media speculated that 420 was a cannabis culture code, and Musk may have just made a joke at the time. But as a result, as part of the settlement with the SFC, in addition to Musk personally and Tesla paying a $20 million fine, Musk also stepped down as chairman and agreed that any tweets about Tesla, a public company, need to go through compliance checks by the company's legal department in advance.
Musk, who loves and hates Twitter, is beginning to be unwilling to be just a fanatical user.
On April 4, Musk filed with the U.S. Securities and Exchange Commission that as of March 14, Twitter's stake had reached 9.2%, just one step away from the 10% line, becoming Twitter's largest shareholder at the time. He used a 13G filing form when filing, highlighting his passive investor identity positioning. In general, active investors need to file a form 13D, in addition to stating their personal positions, they also need to detail the source of funds and purchase intent.
Musk disclosed to the SEC filing the cost of buying Twitter starting Jan. 31
Before and after the time when the identity of the majority shareholder was revealed, Musk's tweets began to involve a new content - how to run the future of Twitter, and was voted on by netizens.
On April 10, after Musk received an offer to join Twitter's board, he posted multiple tweets, not only suggesting that Twitter's subscription service Twitter Blue make operational changes such as price cuts, banning ads, and accepting Dogecoin payments, but also proposing that Twitter's San Francisco office building should be transformed into a homeless shelter, "because there are no employees working in the office anyway." The tweet received nearly 2 million votes, with more than 90% voting in favor.
But the tweets were then deleted. On the same day, Twitter CEO Parag Agrawal announced that Musk had rejected a proposal to join the board.
Wedbush analyst Dan Evans analyzed the authors of Prism that Musk refused to join the board, perhaps because he and the board could not agree on whether to change the company according to the results of the netizen vote. "As a director, you often need to take a more back-seater posture, that is, a quieter position."
Dan Evans also said that as part of the agreement to join Twitter's board, Musk needs to control his shareholding below 14.9% by 2024, and once he does not need to comply with this agreement, Musk can take a more aggressive stance or even take a full takeover.
Attack Musk and Enigma's source of funding
Sure enough, Musk, who refused to join the board, began to enter a full takeover model, making a $43 billion takeover offer on April 14.
Wang Jinlong, CEO of Haitou Global, commented on the author of "Prism" that Musk made a takeover offer in his personal capacity, not Tesla. "Generally speaking, privatizations of this scale have consortiums behind them, and none of them are self-funded. He only needs to give out the equity part, and the rest is handed over to the buyer group led by the investment bank, mainly banks and private credit funds to provide loans. Loans are generally based on the company's solvency, mainly the ability to generate free cash flow, generally 5-8 times the EBITDA. ”
"The purpose of privatization is to turn the business around. Twitter was once a very successful business with good cash flow and profits, but then it couldn't keep up with the situation and needed to adjust its strategy to unlock greater value. Wang Jinlong said.
Taking Dell's privatization in 2013 as an example, Dell, which was once regarded as an innovative model in the era of personal computers, missed the time point of transformation to smart terminals such as tablets, and thus fell into business difficulties in the era of mobile Internet and cloud computing. In order to reverse the company's strategy, founder Michael Dell and private equity firm Silver Lake Capital, through leveraged buyouts, privatized Dell, which was able to get a breathing period to avoid public shareholders and regulators. At that time, Dell's privatization cost as much as $24.9 billion, of which Michael Dell himself contributed 16% of the company's shares and part of the cash, private equity Silver Lake Capital contributed $1 billion in cash, Microsoft contributed $2 billion in loans, and Bank of America Merrill Lynch and Barclays Bank provided $11 billion to $12 billion in debt financing.
Wang Jinlong believes that from the perspective of the financial environment, the current loan interest rate is relatively low and the leverage ratio is relatively high. From the perspective of the choice of target, Twitter's recent stock price downturn is also a good M&A or privatization target.
"The priority of the loan is higher than the equity, if it is not repaid, the company will belong to the consortium, and Musk's equity will be lost." Wang Jinlong said at the same time.
Coincidentally, Silver Lake Capital's 48-year-old co-chief executive, Egon Durban, is a trader for Dell's privatization and now has a seat on Twitter's board. He previously worked for Morgan Stanley Investment Banking, which was also the financial intermediary mentioned in Musk's offer.
Egon Durban joined Twitter's board in 2020 when Twitter was being sniped at by activist investor Elliott Management. The latter had quietly built up about 4 percent of Twitter's shares, disclosed positions and nominated four new directors shortly before the deadline for nominations for new board candidates, and pressured Twitter's then-CEO, Jack Dorsey, to leave. Twitter has since secured a $1 billion investment in Silver Lake and has had Egon Durban join Jesse Cohn, a partner at Elliott Management, on Twitter's board to balance forces and take a temporary truce with activist investors.
As part of the conditions for joining the board, SFC documents show that as long as Egon Durban remains on Twitter's board, Silver Lake cannot participate in the bid for Twitter. This puts a question mark on whether Musk can find a suitable syndicated foreign aid at this time.
As of press time, Musk has not disclosed the source of funding behind the offer. Bloomberg has calculated that although Musk's personal net asset value is as high as $270 billion, he is the world's richest man, but the liquidity is only about $3 billion.
Twitter may sacrifice poison pill plan
When Musk's acquisition of Twitter became the focus of the whole network, the offensive and defensive sides are releasing more information.
Twitter, who is the guardian, has publicly replied that "Twitter's board of directors will carefully review the proposal to determine what it believes is in the best interests of the company and all Twitter shareholders." ”
On the day Musk announced the offer, Twitter held a plenary meeting. Reuters quoted people familiar with the matter as saying that at the plenary meeting, Twitter's current CEO Parag Agrawal assured employees that the company was not "held hostage" by the news of Musk's acquisition. In Musk's takeover offer, he once mentioned that his offer was the "best and final" offer, and if Twitter rejected the offer, he would reconsider his status as a majority shareholder — interpreted by the outside world as a possibility to sell shares if the acquisition did not work.
Professor Zhang Qingquan of the University of Illinois at Urbana-Champaign Business School told the author that in the face of hostile acquisitions, the board still has a variety of ways to deal with it. First, the board can vote on the buyer's strategy and bid; second, it can also introduce a "poison pill plan" to reduce the proportion of hostile buyers in the company by diluting equity.
The attacker, Musk, appeared at the TED forum in Canada. In an interview at the forum, he mentioned that his intention to buy Twitter was not to make money: "I feel that having a public platform with the greatest trust and broad inclusion is extremely important for the future of civilization, and I don't care about the economic account at all." He believes that the way to increase trust in the platform is to open source the algorithm.
Asked if he had too much power over the world's richest man controlling important media platforms, Musk named Meta's founder Mark Zuckerberg to defend himself: "He already owns Facebook, Instagram and WhatsApp. He said that by open source with the algorithm, he himself would not change and edit anyone else's tweets.
He also said that although he has the financial ability to buy Twitter, he prefers to retain more shareholders within the scope of the securities law, rather than eating all the shares by one person.
But Twitter's other major shareholders seem to have other ideas.
Saudi Royal Family Alwaleed bin Talal, who claims to be one of Twitter's largest shareholders, said publicly via tweets, "I don't think the proposed offer is close to Twitter's intrinsic value." A SEC filing shows Thatale holds a 5.2 percent stake in Twitter through kingdom holding companies. Bloomberg estimates that he currently holds about 4.4 percent of the shares.
Another important shareholder, mutual fund Pilot, is also increasing its stake in Twitter. Financial documents dated April 8 show that Espier already holds 82.4 million shares of Twitter, meaning it may have surpassed Musk as Twitter's largest shareholder. Espier doesn't actually make individual bets on Twitter, it often invests through index funds, so it usually takes the side of management in votes involving corporate strategy.
Brent Thill, an equity analyst at brokerage Jefferies, said in an interview with foreign media that he judged that Twitter's board wanted to make an offer to a company, not an individual, such as Salesforces, which was once interested in Twitter, or Microsoft, which is cutting from the enterprise business to the consumer business through Activision Blizzard. "But I doubt that regulators are now allowing such a large-scale merger and acquisition." He also expects That Twitter's board of directors to rule that Musk's bid is too low, and that "more than $60 per share is the right price."
When asked if there were other plans if the board rejected the acquisition proposal, Musk publicly stated at the forum that there was "Plan B", but did not disclose the specific plan.
Whether Musk can exchange "banknote ability" for platform control is still unknown, but his "show muscles" are being exchanged for greater traffic. As of press time, Musk's tweets posting his acquisition offer have received 130,000 retweets, 770,000 likes and 70,000 comments. In the reply message, there is not only the "terrier" of Tesla users merging Tesla and Twitter trademarks, there are US congressional candidates who take the opportunity to express their support for free speech, and there are also applause from cryptocurrency Dogecoin fans.
Sun Yuchen claimed in his tweet that he wanted to buy Twitter for $60 per share
Sun Yuchen, who is well versed in traffic passwords, is also not absent. He left a message after Musk's offer tweet, claiming he was willing to bid $60 per share, higher than Musk's bid.
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