>So almost $6/share was left on the table.

This is only true if the there is no uncertainty.

If you think the value without the takeover is $30, and it is trading at 48, and buyout is $54, that means the market thinks it 75% likely.

downside -$18, upside +$6 = 75% likely

It means the market doesn't think it's likely but it doesn't mean it's 75%. To illustrate why that makes no sense, if Musk had offered $35 instead of $54, the buyout would be much less likely, since the price would be way lower and the board and shareholders less likely to accept it, yet under your model the likelihood would go up.

Estimating probability from price action is something you can do, but not like you did it.

Why would the likelihood go up under his model? If Musk had only offered $35 and people thought that was only 20% likely to happen (for the reasons you listed) then the market price would have only gone up to $31.

Say I offer to buy Apple for a penny/share. The price for their shares won’t move because of my offer but may move from normal market conditions. If the shares increased a dollar the day after my offer, would you say there’s a greater than 100% chance of my offer being accepted?

There of course the implicit assumption here that Musk's offer is causally related to Twitter's stock price. OPs comment make sense if you keep that in mind.

Interesting. As a point of comparison, when Microsoft bid a 62% premium for Yahoo back in '08, Yahoo stock spiked about 48%. Doing the math, the market placed the likelihood at 48÷62=77%.

In other words, the market is wildly optimistic.

If it is a general trend on takeover optimism, we should play that angle and become millionaires

Where does the $30 come from? The last time Twitter was that low was May 2020. There’s no evidence that the market values Twitter at $30 without Musk’s bid.

That fair value valuation is subjective. The $35 number was arbitrarily chosen and is unknown, so the derived probability is meaningless as well. The possibility of a take over changes the potential long term valuation of a company and thereby changes the demand for the stock. Basically, if enough people think the buyout would happen, or would just make Twitter more valuable (as a stock) than it is now, that increases the number of buyers and hence drives the price of the stock up.

If a buyout is certain, then the demand for free money is 100%, and demand for a sure loser is 0% of potential buyers. Hence the share price would quickly converge to a buyout price in that situation.

It’s definitely just a stunt… he doesn’t have the money, and said he expects larger shareholders to sign on to the deal… so he can take the company private and do great profit-maximizing ideas like turning their office into a homeless shelter. He’s presented no ideas that would increase twitters profits or market share. What shareholder would sign up for this?

Why would Twitter profits matter to shareholders after they divest?

The parent believes, based on Elon's own claims, that part of his plan of raising the money is to get some existing shareholders on board, essentially having them finance the deal, obviously by promising them a stake in the future private company.

They are also assuming an existing shareholder would only do this if they believe the future private Twitter would be a more profitable endeavor for them, which Musk's comments really shouldn't inspire confidence in.

That does make it seem less serious IMO, given he made the same claim about somehow keeping shareholders when he pretended he was going to take Tesla private

Ah, thanks for clarifying. I misread the parent's comment. Looks like they were referring specifically to the shareholders that choose to stay on as investors.

They wouldn't be divested. He's said he intends to allow the maximum number of shareholders legally allowed to continue as shareholders, that is, the biggest investors get to not divest if they want.

GP is implying that since Musk is relying on this in order to finance it since he doesn't have 43B in cash.

>He's said he intends to allow the maximum number of shareholders legally allowed to continue as shareholders, that is, the biggest investors get to not divest if they want

If this is a plausible scenario, and I don't know that it isn't, do you think it's what he means or is trying to express?

Because it seems to me that the way he says he'll keep the shareholders, it's intended to communicate to his countless groupies that they will somehow still be able to own Tesla in their Robinhood accounts. Which would be nonsense, right?

The real question is why would shareholders that care about profits own Twitter stock? In its entire history there have been 2 years it didn’t lose money and actually recorded a profit.

It's all about potential future profits. Not everyone agrees on what those profits could be, and hence why there is a market for shares, and is the reason why share prices are not stable.

Essentially, the holders believe that past performance is not reflective of possible future performance. The shorts and sellers and non buyers believe that us the case or that there are more efficient allocations of their money.

The hard part about these companies is user engagement.

Currently, Twitter userbase is ripe for monetization.

The employee’s RSUs?

Good point! I wonder what happens to unvested RSUs in an acquisition like this.

Went through a similar situation where a company was taken back private. The RSUs converted to cash value day of deal close and had a staggered payout with roughly the same vesting schedule.

Wrong. He could probably borrow $43bn against Tesla shares in a few weeks at the most. He doesn't have to sell any Tesla shares.

Tesla has a rule that you can only borrow 25% of the value against the shares. From Money Stuff:

> Or Musk could borrow more against his Tesla stake. Tesla’s own policies prohibit Musk from borrowing more than 25% of the value of his shares, which is barely enough to buy Twitter, even ignoring the fact that he has already used at least some of that capacity. Of course he’s in charge of Tesla and its board is famously deferential to him, so I guess he could change those policies, but that still requires finding a bank to lend him $40 billion against his Tesla stake to finance this lark. Tesla’s stock has quadrupled since mid-2020; if it fell back to mid-2020 levels — say because its charismatic attention-seeking CEO found a new toy — then the loan would be underwater, and selling out of a gigantic Tesla margin loan does not seem like a lot of fun for a bank.

Well he do own approx 50% of another company worth around 100 billion.

I'm sure he could manage to finance this just fine.

He also does not need to fund all of it; just enough that a bank would be willing to consider the Twitter shares he is purchasing as collateral for the rest of the loan.

You're not allowing for risk and exposure.

This is a lot of money, even for Musk.

I don't see this deal happening. He can't afford it (without exposing himself to unnecessary risk). If it does go through in the ways described here, he's an idiot ... and I don't believe that, despite my personal opinions about him.

Of course it's a lot of money and a lot of risk, but like him or hate him one thing Musk has consistently showed is that he's willing to take huge risks.

This deal likely won't haooen, but due to the poison pill, not due to the risk.

But in any case, my point was merely exactly what I wrote: he does not need to raise anywhere near the full amount, because he can utilize the shares he buy as part of the collateral.

I didn’t know that, thanks!

shareholders that have seen how "proximity to musk"=money right now.

> So almost $6/share was left on the table.

A few when ago when Microsoft announced it was buying LinkedIn, the shares were trading around $10-$15 less than the announced acquisition price for months. I wouldn't put too much weight into any sort of imputed probability from the price.

> I wouldn't put too much weight into any sort of imputed probability from the price.

It's absolutely fair to impute a rough probability of deal closure from the stock price. The whole "merger arbitrage" industry works around that premise.

Sometimes the market doesn't think a deal has a 100% chance of closing (like MSFT and LinkedIn) and it still closes. There were valid antitrust concerns circling that deal, e.g. https://thehill.com/policy/technology/298573-salesforce-rais...

That's not the same as saying the market wasn't taking the offer seriously.

> The whole "merger arbitrage" industry works around that premise.

If the market price reflected the probability, then an arbitrage strategy should not be profitable.

Usually, these folks have better experience/skills/knowledge about M&A, antitrust, etc than the market average. In other words, the market doesn't reflect the probability of an event happening.

Yes, I wasn't commenting on the original "taking it seriously" language.

> If the market price reflected the probability, then an arbitrage strategy should not be profitable > The market doesn't reflect the probability of an event happening.

No, the market's implied probability could be right, on average, across all deals...and the top merger arb funds could absolutely still be profitable by selecting deals when they think the market is mispricing the probability (for the reasons you mention: better experience, knowledge, etc.)

It's like the sports betting market: you can roughly impute a team's win probability from the (opening) betting line...and even if that's right on average, the top gamblers are still profitable.

And, of course, sometimes things with a say, 40% chance of happening do happen...so that doesn't mean the market was "wrong" about the chance (i.e. your LinkedIn mispricing exmaple).

But sounds like we're in full agreement you can't look at the implied probability from the market price and draw some conclusion about it definitely happening, or definitely not happening (e.g. the market not taking it seriously).

Yeah, I think we're in agreement.

Another point however, about the market voting that the Musk takeover won't happen - we can only speculate as to why they predict it won't happen.

It doesn't necessarily mean they think he can't line up the financing. It could just mean they don't think the board will accept his offer.

It’s important to also note that one of Musks strengths is marketing. He makes bold claims that makes headlines. We should be all used to his charade by now.

A lot of the stuff he claims that actually works has teams of people supporting him. Those weren’t one man efforts like this.

I see Tesla cars all over the place. I saw rockets take off from SpaceX.

What charade?

Also he often publicly thanks, congratulates and credits the Tesla and SpaceX teams. Here's a sample:

https://twitter.com/search?q=from%3A%40elonmusk%20%22team%22...

As you can see yourself, he's saying "great job team!" not "great job me!".

I just don't get all these olympic level contortions around denying the achievements of an immigrant who made good on the American dream, and has done more for climate change than literally anyone. This is to be celebrated and embraced!

FSD, Starlink never being jammed in Ukraine, Tesla Solar Roofs, and other such things are all things Musk has hyped up that are somewhat counter factual.

Why does it matter where he came from?

Because he’s an immigrant that made good on the American dream. That’s a powerful thing - some might even dare say, inspiring.

I realize he’s white, so it doesn’t count, but it should.

He was a RICH immigrant that made good on the American Dream. Having a truckload of money ready for you before you venture out in the world would be inspiring for anyone, believe me.

He may have started with less than the median American when he emigrated. Rich parent doesn't always equal rich kids. The ones that are mostly just consume. It's plainly obvious he's not some rich trust fund kid.

Which is why so many people are threatened by Elon's success and project their own insecurity onto him. Unresolved personal insecurity and envy are a potent combination. I promise this is unhelpful and it's better to resolve one's own insecurity than to spend time projecting it.

> He may have started with less than the median American when he emigrated

Except it is known that he didn’t. There is no need to speculate on the facts.

Elon Musk is far more successful than anyone else who started with his financial resources. He has outperformed everyone in his wealth bracket. There’s no need to pretend he was abandoned by his family and came to the US destitute.

Do we know that?

There are internet rumors vs what he, his mom and brother say about him showering at the YMCA and only being able to afford one computer when starting Zip2.

That's why I said "may have", because his mom and brother aren't non-bias sources, and nor are insecure people on the Internet who want to explain away why they have achieved little despite having relatively the same or more privilege. The latter project this discomfort the most aggressively.

Proof that he was rich? Everything I've read says he arrived to America with a couple grand.

Assuming this is correct he had money from someplace.

https://www.investopedia.com.cach3.com/university/elon-musk-...

"After two years at Queen's University, Musk transferred to the University of Pennsylvania. He took on two majors, but his time there wasn’t all work and no play. With a fellow student, he bought a 10-bedroom fraternity house, which they used as an ad hoc nightclub."

That says his father claimed to be rich on the past, and the Musk children made about $100M each from selling zip2 which they founded.

Exactly! Many people underestimate the value of privileges'. Privileges' give "unfair" advantage. Anyway, there are many people like these and Elon is few among them that have successful ventures like Tesla or SpaceX.

Very interesting editing to your original post, when making such drastic edits that change the tone as much as you did it would be useful to make note of them so everyone knows.

You asked about things he had said/promoted, or something like that, which I listed in the first sentence of my response, care to respond to them?

Aha is the American Dream be born to well off parents and emigrate to dodge a draft now?

The idea that his success is due to that is another olympic level contortion. He wasn't given millions of dollars to start, let alone billions. Even if he was, it would still be impressive converting that into Tesla and SpaceX, as opposed to a yacht.

Realize that most people born to well off parents don't do shit. If insecurity needs an outlet, maybe redirect it to the rich kids of Instagram, not the guy who is helping solve climate change and get us back into space.

I was not really commenting on how he achieved his success.

I was commenting on the appeal to the "American Dream(tm)".

Though if you want to follow it to the root if he was born black in the townships he likely would not have amounted to much, no matter how hard he worked it is unlikely he would have ever made it out of the country.

Seems a little strange to criticize the American Dream on the basis of South African apartheid.

yes, the american dream being "born rich" is the postmodern satire re-enactment of the original. It features a white african for diversity.

I don't understand why there would be something ironic, postmodern, satirical, or unexpected about a relatively privileged white South African who grew up in the era of apartheid being associated with space travel or other technology that is considered futuristic.

Nothing has changed. It is still as it has always been.

The US space program and the Moon landings can be traced directly back to Wernher Magnus Maximilian Freiherr von Braun and his work at Peenemünde, utilizing slave labor to build rockets for Nazi Germany.

"More people died building the V-2 rockets than were killed by it as a weapon"

The course of history was shaped by Von Braun being terrified of the Soviets and choosing to surrender to Americans.

Some people see this sort of historical note as extremely relevant to everything today, and some don't. I see nobody trying to bridge that gap.

Okay i explain the joke to you: First and foremost note how the comments upthread used the term "the american dream". Second note that "the american dream" is a media trope, a literary device and story we tell people to inspire them to follow certain ethics.

The traditional american dream is about social upwards mobility from rags to riches, about a promise that all that is needed to become wealthy is hard work, determination, a bit of ingenuity and puritan virtues. In its classic version it often features an immigrant family who comes to america with nothing but worn out clothes, works hard jobs and long hours to create a livelihood, overcomes hardships and struggles so their kids can get an education and better jobs. It often also calls out oppression, poverty and war in the old world as reasons for migration and to further highlight the ideals of liberal society in america.

The modern version ignored the generational aspect and instead focused on individuals becoming millionaires. Entertainment loves extremes, the lower the start and higher the end, the better. The quicker the journey, the better. And this became accelerated to the absurd. Be poor, wash dishes, millionaire. Since this is so very unlikely, and real people who fit it, like Rockefeller, became so unpresentable, media turned more and more towards fictitious comedies. Yet this version is still very dominant in culture, because it calls out a truth: when asked what the american dream is, many will say it is about becoming very rich. That is, what the modern american dreams of.

Now in contemporary media we see a return to the original idea, but with twist lampshading its problems. Migration is no longer a central topic, america no longer the beacon of hope for the tired, poor, huddled masses. Instead we see a focus on the disenfranchised and marginalized within american society. The post-modern MTV generations version of the american dream is B-Rabbit living in a trailer park with his alcoholic mom, making it as a rapper despite his peers attacking him for having the wrong skin color. It plays the core straight about making it with hard work and being virtuous, but it doesn't only look at materialism and individualism, as it also expects society to hold its promise of being liberal. The postmodern loves to play with dualities and reversing structures.

Lastly the post-modern satire version instead picks up the part that got dropped, the dream of becoming very rich. It teasers a protagonist from an african minority and reveals a wealthy and well educated white man from south africa. It shows upwards social movement from upper class to ultra rich, subverting the idealistic to instead highlight the reality that those who start well have more opportunities to venture and do even better. It holds up "being born rich" like Diogenes holds a plucked chicken, and calls out "behold: the american dream"

The pattern that I pointed out, that includes Von Braun, and Musk, is of people who, whatever their advantages and sins, were not privileged enough to be born in the US, and they then found unimaginably more opportunity in the US than in their homeland.

Is that how some people conceive of the "American dream"? I don't know, but I think it's the easiest to find factual evidence of happening over a long period of time.

The only version of the "American dream" I've ever heard was getting a small house on a ~1 acre lot and starting a family. I don't know what all this about becoming a millionaire is from.

-- a idk probably 10th generation American living on the East Coast.

"American dream" suggests to me something distinctive that happens in America.

Neither your modest scenario nor becoming a millionaire are specific to the US. And neither can possibly happen for all Americans.

So if that's really what the American dream is defined as, I think it inherently defines the US as a failure.

> and has done more for climate change than literally anyone

What a sensationalist claim! What is the carbon offset of one rocket launch? If Elon stopped focusing on Mars, and instead bought every coal plant to then shutter and replace them (could be done for under 40b), then maybe. Until then, the few percentage of market share for EVs does not justify this claim. You also have to assume that every purchaser of a Tesla would have bought a gas car instead, which is seemingly not a safe assumption. So, citation needed! Maybe if elon purchased a train system and made public transit exceptional and widely used could a person start to make this claim. I thunk the sad reality is that elon is bored and us focused in sci fi that is more possible 500 to 100p years in the future (ie mars), at the expense of actually solving present day problems. Any regulation reducing coal emissions has an out-sized impact compared to a few percentage of emissions from non-commercial transport, the claim "more than anyone else" seems hyperbolic and just flat out wrong

Unless this takeover is being conducted by M&A professionals, and not the result of wine and ambien, I think OP has a point.

> one of Musks strengths is marketing

I don’t deny that, but it is not what he is doing here.

I am not sure why people shy away from the obvious: another of Musk’s strengths is market manipulation.

On 4 April, the announcement[0] of his becoming the largest shareholder jumped his Twitter stock[1] from a 73486938×33.03 = $2.4B purchase to a $3.7B asset, a $1.2B gain.

He sold 371900 stocks, for a $6M gain.

His 14 April announcement[2] of his offer to purchase Twitter was likely intended to boost the price further before the expected poison pill would justify him divesting everything as he stated he would do in the SEC filing[3], thus netting an even bigger gain.

It didn’t boost as he expected, but the value has remained higher than it started at. He will still make half a billion and his actions, this time, are hard to sue, since he did not lie on anything but intent, which is impossible to prove.

[0]: https://www.cnbc.com/2022/04/04/twitter-shares-soar-more-tha...

[1]: https://www.sec.gov/Archives/edgar/data/1418091/000110465922...

[2]: https://twitter.com/elonmusk/status/1514564966564651008

[3]: https://www.sec.gov/Archives/edgar/data/0001418091/000110465...

> He will still make half a billion

These paper profits are hard for him to realise, since he has to sell 9.2% of Twitter's stock without the price falling. Given the current price depends on his claimed intent to takeover, the market will react swiftly to any evidence that he is in fact reducing his stake.

> Given the current price depends on his claimed intent to takeover

Does it? Others have argued there has been no effective "pricing in" of this "intent", due to...nobody thinking it'll happen.

How do these others explain the bump in stock price that occurred when news of Musk's stake was published?

> On 4 April, the announcement of his becoming the largest shareholder jumped his Twitter stock[0] from a $2.9B purchase to a $3.7B asset, a $779K gain.

You mean a $779m gain

Yes, sorry. I also updated the information, since I found the SEC purchase filing, which indicates a much bigger gain.

Now uses the proceeds of profiting to build a competitor

I would upvote this as insightful if we were still on Slashdot. These one-man pioneers like to further the impression that they are the sole reasons for their success, but the reality is that we all build on the shoulders if giants. I am not shitting on his ability to make his endeavours successful - I am just saying that the proportion of his responsibility for it is much lower than most people think.

I'm not sure what it is about some societies that like to make a single person out to be an idol. We see it in team sports, scientists who work in large teams, businesses where CEOs are deemed several thousand times more of a factor than other workers, medicine where doctors are placed on pedestals. I guess people like a hero, and the alternative explanation, that hundreds of hard working and bright people came together to make something happen, is less compelling.

I would also mod your comment insightful ;) Egocentric individualism makes people forget that everyone, absolutely everyone, is indebted to people past and present, from his current fellow co-inhabitants of earth to the past generations all over the world that bequeathed him the world and the culture he inherited.

Ad hom is pushed by the media because “small minds talk about people,” and that sells ads/clicks. Another example beyond personal fanboyism is the vilification of a person which surpasses rationality. Or the vilification of other groups of people. In all of these you will see fundamental attribution error, ignoring the situational factors and placing all perceived agency on the individual, like most all of our media were doing from 2016-2020. The reality is, few humans are all that important in and of themselves, and those that are often have become so as the result of external factors like the quality of the people that surround them, or “luck.”

> small minds talk about people

This rings so true for Elon Musk fanboys. I also like the full quote, "Small minds talk about people. Average minds talk about events. Great minds talk about ideas."

Musk mentions both his team, and his family office, in his communications to Twitter, and includes transcripts of those in his SEC filing.

Not "one of", by far the most important one.

Just look at his totally fully autonomous autopilot(TM), coming ~2014~ ~2016~ ~2017~ ~2018~ ~in 6 months~ any day now this time I swear.

You're missing a couple of points:

1) It's not a Trumpian charade because many of the things he says actually work out. He'd already be done otherwise.

That's what makes it so interesting. I suggest he would buy Twitter if he could - and - he benefits from the free PR either way.

Yes, it's a bit cynical of him, but the PR is worth it, and, it's not like he's playing with election outcomes, or starting wars.

2) We know he's not 'doing it himself' and I suggest his Eng. knowledge is way overstated, at the same time he is very 'detail / hands on / insightful at that level' and with the big vision stuff he gets people motivated. I disagree with almost everything he says publicly and loathe is fanboys, but he still deserves enormous credit.

The whole thing seems like a stunt by Elon. I don't care either way, but it would have been interesting for the board to call Elon's bluff and watch him back out at the last minute.

Elon should really focus on his unfulfilled promises to folks he already took money from, not playing immature games to keep himself on the front page. I don't know what drugs he did with his ex-girlfriend, but they don't appear to have had a positive effect on his well being.

This makes no sense because if the market was 100% confident in Elon’s offer, but saw a 25% chance of a poison pill you would end up at the same place. The market was in fact incorrect in the likelihood of a poison pill, not Elon’s wealth or ability to raise funds.

Yes, so many ignorant commments above.. hard to believe software developers are so well paid.

Are you saying that if a share is destined to be sold for 54.20 people will buy it for 54 prior to that? its only reasonable to think it will be somewhat lower.

Musk could probably raise the money.