Image source: Visual China
From publicly expressing his dissatisfaction with Twitter to becoming Twitter’s largest external shareholder, it took only half a month for the world‘s richest man, Musk. From Musk’s public plan to fully acquire Twitter for $43 billion, to Twitter’s brewing “poison pill strategy” to resist, to the major shareholder Saudi prince rejecting the takeover proposal, to Musk’s admission that he is not sure whether the acquisition can be acquired, it has only passed. a few days.
In the past few days, the battle for equity between Musk and Twitter is raging on the other side of the world. However, after the news was announced, it was Tesla investors who were the first to feel nervous. If Musk wanted to acquire Twitter, he might need to cash out a large amount of Tesla stock to raise funds.
So why did Musk, the world‘s richest man, take a fancy to the Twitter asset and spend huge sums of money to acquire it? What makes Twitter special compared to other social media platforms? What is the ultimate purpose of Musk’s acquisition of Twitter?
The ups and downs of the equity battle
On April 14, Eastern Time, the US social media giant Twitter showed in a filing with the US Securities and Exchange Commission (SEC) that Tesla CEO Elon Musk submitted a non-binding private statement to the company on April 13. It proposed to acquire all of Twitter’s outstanding common stock that it did not already own for $54.20 per share in cash.
Just two weeks before the disclosure of the above-mentioned regulatory documents, Musk also posted several tweets, and even voted on the majority of netizens on the editing function of Twitter content, constantly suggesting that he was dissatisfied with certain functions of Twitter. On March 26, he also tweeted, “Do (we) need a new social platform?” Netizens reacted violently to the vote initiated by Musk. Some netizens suggested that Musk should either buy Twitter directly, or Build a new platform yourself.
However, in just over half a month, Musk has become the largest shareholder of Twitter. The 13G document released by the SEC on April 4 shows that as of March 14, Musk held Twitter 7348.6938 through the “Musk Revocable Trust”. 10,000 shares, equivalent to 9.1% of Twitter’s outstanding common stock. This suggests that Musk was already buying Twitter shares aggressively before launching the vote.
In addition, SEC documents also show that as early as January 31 this year, Musk purchased 620,000 shares of Twitter at a price of less than $36.83 per share. In other words, at least two months ago, Musk had planned to buy Twitter stock.
Twitter’s SEC filing said Musk’s proposal was not binding, and even if the two sides agreed, the deal would depend on a number of other factors. Twitter said the company’s board would review Musk’s takeover proposal, adding that any response would be in the best interest of “all Twitter (existing) shareholders.”
Musk’s “savage” privatization offer was immediately rejected by Twitter shareholder Saudi Prince Al Waleed bin Talal Al Saud. Waleed believes that Musk’s bid undervalues Twitter. He tweeted, “Given Twitter’s growth prospects, I don’t think Musk’s $54.2 offer comes close to Twitter’s intrinsic value. As one of Twitter’s largest long-term shareholders, I and my investment The company Kingdom Holding Company (KHC) rejected the proposal.”
Musk later admitted that, technically speaking, he may be able to afford Twitter, but also said that he is not sure whether Twitter can actually be acquired in the future, and he does not care about the economic benefits of the acquisition at all. In the early morning of April 16, Beijing time, Twitter announced the details of the “poison pill” plan to block Musk’s acquisition. According to the plan, if Musk acquires more than 15% of Twitter stock, other shareholders will be able to buy additional new shares at a discount, making Musk’s stake diluted and the acquisition more expensive. This plan is valid for 364 days. It should be noted that the “poison pill” is aimed at preventing unsolicited hostile takeovers and does not affect the board’s negotiation or acceptance of a takeover that is in the interests of the company and shareholders.
After Twitter on Thursday confirmed Musk’s offer to buy, Wall Street analysts gave mixed feedback, with some saying Musk’s purchase price was too low, while others thought it was reasonable. Several investment banks have updated their ratings and target prices on Twitter.
Piper Sandler has a Neutral rating on Twitter and a $45 price target. The agency believes that now the situation has entered uncharted territory, but counter-offering is impossible, and the acquisition price seems reasonable; Wedbush gave Twitter a neutral rating and a target price of $42. The agency believes that Twitter’s acquisition will not be If the price proposed by Musk is completed, the company’s board of directors will not consider the acquisition proposal, and believes that the reform of the company led by Musk is not in the best interest of the company and shareholders;American Center for Financial Research and Analysis (CFRA downgraded Twitter to hold from buy, saying Musk’s offer should be attractive to shareholders. It should also be noted that earlier this month, Goldman Sachs, which Twitter brought in to assess Musk’s acquisition, gave Twitter a price target of only $30 and a sell rating.
According to the “Wall Street Journal” data, on the whole, among all investment banks and institutions covering Twitter, 7 have a “buy” rating, 1 have an “overweight” rating, and 27 have a “hold” rating. Rating, 3 gave “sell” rating. As of the close on Friday, April 15 EST, Twitter was at $45.08.
“Musk’s actions may push Twitter to pursue other possible acquisition options,” Third Bridge senior analyst Scott Kessler said in a request for comment to The Daily Economic News. Just a few years ago, Twitter Also sought by aggressive buyers. Jack Dorsey stepped down as CEO late last year, but new CEO Parag Agrawal has yet to prove he’s up to the task. Also a few years ago, companies like Disney and Salesforce There also appeared to be expressed interest in acquiring Twitter, but none of these acquisitions materialized. We know from multiple expert interviews that corporate governance and innovation have been challenges for Twitter over the years.”
Twitter loses money for two consecutive years and ranks 15th in the world by monthly active users
The “Daily Economic News” reporter noticed that compared with the current global social media giant, Twitter is relatively small.
Investors have also criticized Twitter for not realizing its full potential for years. Twitter can’t get billions of users like Facebook (Facebook’s daily activity is more than 11 times that of Twitter), nor can it develop a huge advertising business like YouTube (YouTube’s revenue last quarter was more than 5 times that of Twitter’s) ).
According to Statista, as of January 2022, all social mediaMonthly Active (MAU)In the ranking, Facebook ranked first with 2.91 billion, followed by YouTube (2.562 billion), WhatApp (2 billion), Instagram (1.478 billion), and WeChat (1.263 billion). Twitter ranks 15th on the list with only 436 million.
Image credit: Statista
However, Musk’s proposed $43 billion acquisition of Twitter — whether it works or not — shows how important Twitter is. Data shows that as a deep user of Twitter, he has sent more than 17,000 tweets and has more than 80 million followers. Therefore, there is a view that, given the large number of tweets that Musk has posted on Twitter in the past, he has become an “Internet celebrity” and his influence is growing. A single Musk tweet about Tesla, Bitcoin or Dogecoin can send the underlying asset up or down.
Musk, however, has also gotten into trouble for tweeting about Tesla. On April 17, Tesla shareholders reportedly filed a class-action lawsuit against Musk over his 2018 tweets “taking Tesla private” and won a key ruling that could lead to Tesla Ra and Musk face billions of dollars in damages.
Prosecutors argue that Tesla’s stock price has fluctuated sharply because of Musk’s “false tweets,” causing investor damage. “No reasonable jury would find Musk’s Aug. 7, 2018 tweet to be accurate or not misleading,” said the presiding judge in the case, Edward M. Chen, according to court documents released by Tesla shareholders. . Edward M. Chen ruled that Musk knowingly committed the crime.
Media reports said that if Musk did not appeal the ruling, it would put him at a disadvantage in a jury trial at the end of May.
It is argued that for politicians, business leaders, celebrities and prominent journalists, Twitter is a key platform for amplifying their messages and controlling their personal speech. When Musk was asked at the 2022 TED conference in Vancouver on April 14 why he wanted to acquire Twitter, his answer was: “My strong hunch is that having one of the most trusted, broadly inclusive The future of human civilization is extremely important, but I don’t care at all about the economics[of acquiring Twitter].”
It should also be pointed out that Twitter has recorded losses for two consecutive years – a loss of 1.136 billion in 2020, and a loss of 221 million in 2021. Twitter has failed to turn a profit in five of the past seven years. Since hitting an all-time high of $80.75 in intraday trading on February 25, 2021, Twitter’s stock price has halved so far, but it has rebounded nearly 40% after bottoming out at the end of February this year. According to Musk’s acquisition offer of $54.20 per share, it is also nearly a third less than the high of $80.75 – a price that existing shareholders are obviously reluctant to sell their shares at.
In his April 14 SEC filing, Musk also attached a takeover letter to Bret Tylor, Twitter’s independent chairman and co-CEO of Salesforce. The letter is very brief, but very informative.
Image source: SEC official website
“After investing in Twitter, I realized that Twitter could neither prosper nor fulfill this mission under the current mechanism. Twitter needs to be transformed into a private company. Therefore, I plan to buy it in cash for $54.2 per share. All Twitter shares, this offer is a 54% premium to the stock price before I started investing and a 38% premium to the share price before I publicly disclosed the investment. This is my highest and last offer, if it is not accepted, I will reconsider myself as shareholder status.”
How did the acquisition of Twitter raise money?
According to Forbes, Musk is worth more than $260 billion and is currently the richest man in the world. However, the “Daily Economic News” reporter noticed that although Musk’s net worth exceeds 260 billion US dollars, almost all of his shares in Tesla and SpaceX are held, and he does not have much cash assets. According to Bloomberg, Musk has two ways to raise cash for the acquisition of Twitter, one is to directly sell a large number of his Tesla shares to cash out, and the other is to pledge his Tesla shares for financing, and then may be carried out with external partners. According to Bloomberg estimates, Musk currently has $3 billion in cash or other liquid assets, a far cry from Musk’s $43 billion offer.
In the first way, Musk would need to sell about 36.5 million Tesla shares in order to raise enough cash to buy the remaining stake in Twitter, which is equivalent to more than 1/5 of Musk’s current Tesla stake. But such an approach could send Tesla shares down, not to mention potentially raising questions about Musk’s financial and other commitments as Tesla CEO.
In the second way, you need to pledge Tesla and SpaceX shares for financing. As of June 30, 2021, Musk has pledged 52% of his Tesla stock. Under Tesla’s policy, pledged shares can borrow up to 25% of their value. Since then, Musk has increased his stock count by exercising options. His 172.6 million shares are worth $170 billion, meaning he could theoretically borrow $42.5 billion with the full pledge. On Twitter, some netizens joked that today’s Tesla seems to have been abandoned by Musk.
Image source: Twitter
In addition, Musk said in December 2019 that he had pledged a portion of his SpaceX stake. According to SpaceX’s latest funding round in October 2021, Musk’s stake in SpaceX is worth about $47.5 billion. If SpaceX also has a cap policy like Tesla, then Musk could raise another $12 billion by pledging all of his SpaceX stake. However, since SpaceX is not listed, Musk’s SpaceX stake is relatively illiquid, causing banks to be much more cautious about financing private individuals.
On top of that, Musk has $54.1 billion worth of Tesla options, which he can also use as collateral.
Want to make your own Web3.0?
So what’s the drug behind Musk’s $43 billion takeover proposal for Twitter? Musk hasn’t yet drawn up any sort of master plan for Twitter’s vision, but he said he’ll bring “significant improvements” to the platform. At last week’s TED2022 conference in Vancouver, Musk also said publicly that he wants to use “open source algorithms” in an effort to increase public trust in Twitter.
Musk added that he believed he could still close the deal, and compared the deal to some other social and tech outlets, saying, for example, Mark Zuckerberg already owns Facebook, Instagram and WhatsApp, and he owns one. Shared ownership structure.
Some analysts believe that the three areas of Metaverse, NFT and Web3.0 are areas where Musk wants to use Twitter to make the next layout. The analysis pointed out that the core idea of the above three sectors is to return production and ownership to users who participate in the ecology and use the platform, rather than to be owned by the Internet platform or a few people who control the Internet platform company. Like NFT, Web 3.0 is also expected and practiced with the support of blockchain technology, but it is still in its early embryonic stage.
In the concept of Web3.0, in the future, every user will be the creator of participating in the operation of the Internet environment, rather than being a “tool person” who now generates traffic for the platform and earns advertising fees. In the future Web3.0 community platform, creators can use the content and influence they create to directly earn income, and even have the right to vote on the platform’s development direction and content supervision. The most special feature of Web3.0 is that the ownership and control of the digital content created by the user belong to the user, and the value created by the user can be distributed by signing an agreement with others at the user’s discretion.
Image credit: geeksforgeeks.org
It sounds like Web 3.0 and Musk’s views coincide, and Musk is a key player in the development of cryptocurrencies, including Bitcoin, and Musk should support this new technology concept that treats every Internet user equally. But at the end of 2021, Musk sneered at the current Web 3.0 on Twitter and fought with Web 3.0 supporters.
From Musk’s previous series of tweets, it can be seen that Musk may already be building the future Internet in his mind. Although Musk has repeatedly “criticized” Web3.0, he did not completely deny the concept, but criticized the phenomenon that deviates from the essence of Web3.0 in current development.
In addition, there are also speculations about Musk’s future layout. With a social platform with a large number of users, Musk can experiment in many ways. For example, the token between Twitter and Tesla (maybe Dogecoin DOGE), or future users can use the token by tipping on Twitter, and after earning the token, they can directly use it to buy Tesla.
The “Iron Man” business empire has covered six areas
No matter how Musk raises money, acquiring Twitter would be a clear diversification of his assets. Musk first disclosed his acquisition of a 9.2 percent stake in Twitter last week, marking his first major move outside of Tesla and SpaceX.
“I’m not playing the game back and forth, I’ve gone straight to the finish line. $54.2 is a high price, and Twitter’s shareholders will love the offer. If this offer doesn’t make a deal, given that I don’t have any interest in Twitter’s current management Confidence, and I don’t believe in being able to push the necessary reforms at Twitter in the public markets, then I will need to reconsider my position as a (Twitter) shareholder.”
The “Daily Economic News” reporter noticed that Musk did not randomly choose a company and propose an acquisition. Musk has also worked to downsize some of his assets in recent years. Musk has sold several of his California mansions after vowing in 2020 to “have no real estate.” Musk, who currently lives in Texas, also moved Tesla’s headquarters there last year.
If Musk’s acquisition of Twitter is successful, Twitter will become Musk’s second-largest stock asset after Tesla. If the acquisition is successful, then Musk will own Tesla shares ($170 billion), Tesla options ($54 billion), Twitter ($43 billion), SpaceX ($40 billion), Boring Company ($101 million) ).
Image credit: Bloomberg
Of course, the picture above doesn’t illustrate Musk’s entire business empire. The reason why Musk is called the “Iron Man of the Real World” is that he has always dared to think and act, frequently cross-border and open-minded, and is committed to turning every crazy idea into reality. Specifically, Musk owns many top companies, spanning electric vehicles (unmanned driving), satellite Internet, brain-computer interfaces, underground tunnels, photovoltaic power generation and hyperloops.
Next, take a brief inventory of the companies in Musk’s business empire:
Tesla:
Tesla is the largest electric vehicle and solar panel company in the United States, and cooperates with Panasonic in the battery business to produce and sell electric vehicles, on-board computers, solar panels and energy storage equipment and system solutions. Tesla is the world‘s earliest self-driving car manufacturer, and by 2018, Tesla Motors has become the world‘s best-selling plug-in car company. In October 2021, it will become the sixth giant company with a market value of over $1 trillion. The market capitalization as of April 15, 2022 is $1.02 trillion.
SpaceX：
SpaceX (Space Exploration Technology Corporation) is an American private aerospace manufacturer and space transportation company headquartered in Hawthorne, California, United States. SpaceX was founded by Musk in 2002 with the goal of reducing the cost of space transportation and colonizing Mars. SpaceX has now developed the Falcon series of launch vehicles and the Dragon series of spacecraft to transport payloads to Earth-centered orbit. SpaceX has accomplished what many national space agencies have never accomplished. After completing the latest round of financing in October 2021, it will be valued at $100 billion.
Starlink launched by SpaceX is a high-speed Internet access service that provides global coverage through a constellation of satellites in low-Earth orbit. On October 22, 2019, SpaceX CEO Elon Musk successfully sent a tweet through Starlink and said that Starlink has been able to provide space-based Internet services.
Neuralink
Neuralink is an American neurotechnology and brain-computer interface company founded by Musk and eight other co-founders to develop implantable brain-computer interface technology. Neuralink was established in 2016 and made public in March 2017. In June 2016, Musk discussed a science fiction concept “neural lace”, that is, the interaction between the human brain and the machine. On July 17, 2019, Neuralink announced a brain-computer interface system developed by the company. On August 29, 2020, Neuralink demonstrated a pig implanted with a Neuralink device, which successfully read pig brain activity. After completing the latest round of financing in June 2021, it will be valued at $500 million to $1 billion.
Boring Company：
The Boring Company (boring company), “Boring” with a double meaning, both “boring” and “drilling”, is an American infrastructure and tunnel construction company founded by Musk in late 2016. Although its current project is designed for intra-city transportation systems, the company says the Hawthorne test tunnel could be used for Hyperloop R&D, and tunnels currently under construction also support the eventual transition to intercity hyperloop. The Boring Company has completed a tunnel in Los Angeles County for testing Hyperloop and Tesla electric vehicles, and is building another tunnel in Las Vegas that could run Tesla electric vehicles.
SolarCity：
SolarCity is the largest solar power generation company in the United States, specializing in the development of residential and commercial photovoltaic power generation projects. Founded in 2006 by Musk, Lyndon Rive, and Peter Rive. SolarCity is a leading supplier of solar power generation systems in the United States, providing comprehensive solar energy services such as system design, installation, financing, and construction supervision, and provides electricity to customers at lower prices than power companies. On November 17, 2016, Tesla Motors acquired SolarCity for $2.6 billion, the largest transaction in the history of the solar industry, and SolarCity officially became a Tesla Motors company.
Hyperloop：
The super high-speed rail is a kind of transportation with “vacuum steel pipe transportation” as the theoretical core. It has the characteristics of ultra-high speed, high safety, low energy consumption, low noise and low pollution.The technology is still in the research and development stage. The transport cabin of this system runs in a decompressed and near-vacuum pipeline, and runs on a track based on the principle of magnetic levitation. The transport cabin is propelled by a linear induction motor and an air compressor, so the resistance can be greatly reduced, and the train is expected to be accelerated. Up to 1080 kilometers per hour.
Cover image source: Visual China
