Toronto, May 20 (The Conversation) Is Elon Musk hesitant to buy Twitter now? Is he feeling remorse about this deal? Or is he trying to create drama for the markets, which suits his public persona? Or can Musk negotiate a better price?
Musk began buying Twitter stock in January. On March 14, he announced a 9.2 per cent stake in the company. On April 5, Twitter CEO Parag Agarwal announced that Musk would join Twitter’s board of directors, calling it a “welcome” move that would make Twitter “stronger in the long run”. On April 10, Agarwal announced that Musk had decided not to join the board.
On April 14, Musk offered to pay $54.20 per share to buy the company’s entire stock. In response, on April 15, Twitter announced a shareholder rights plan to prevent Musk from acquiring the company.
On 21 April, Musk presented a detailed plan to finance the $44 billion deal. Importantly, Musk said he would pay $21 billion from his own funds that would come primarily from the sale of his Tesla stock holdings, and that he would borrow $13 billion in return for his Tesla holdings. Seeing a solid funding plan, Twitter’s board accepted Musk’s offer on April 25.
Is everyone happy after that?
This should have been a joyous time for Twitter and Musk, but on May 17, Musk expressed concern that 20 percent of Twitter accounts were fake, that what he offered was based on the real number of Twitter subscribers, and He will not proceed with the deal unless there is evidence that less than five per cent of the accounts are bogus.
Musk’s threat made no sense, as his offer was never about the number of customers or the economics of the deal. After all, Twitter’s revenue, cash flow, dividends or profits may not justify a valuation of US$44 billion.
Furthermore, Musk never did his calculations by multiplying the cost per subscriber by Twitter’s subscriber count. His move was mainly about what he wanted Twitter to be. Or was it a sham purchase, like buying a modern newspaper, like many wealthy people do (Jeff Bezos owns the Washington Post and Rupert Murdoch owns the Wall Street Journal).
If Musk really thought many Twitter accounts were fake, why did he tweet so many times? Musk made several important announcements on Twitter, including his infamous tweet about taking Tesla private.
important factor
So, what happened since their previous announcements? In my opinion, two factors changed Musk’s mind. First, the slowdown in technology stocks, especially media stocks, meant that Twitter as a standalone company was no longer as valuable as it was in early January.
Second, Tesla shareholders were shaken by Musk’s move. They became concerned that Musk would spend his time changing Twitter rather than focusing on the task of advancing electric vehicles.
He will also be concerned about his debt-burdened CEO, who is now planning to sell or pledge Tesla shares to satisfy his personal wishes. Tesla shares fell from US$1,091 on April 5, when Twitter announced the joining of Musk to its board of directors, and were valued at US$728 on May 17, just before Musk questioned Twitter’s subscriber numbers. Went.
This fall in prices amounts to a loss of $380 billion. Musk owns approximately 175 million shares in Tesla, meaning he personally lost $64 billion, which was more than the $44 billion he planned to pay for Twitter.
Musk is a clever businessman and a shrewd negotiator – one doesn’t become the richest person in the world just by smoking a cigar. They have probably realized now that Twitter is not worth following and the chances of losing profits from this deal are high.
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Source: navbharattimes.indiatimes.com
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