Elon Buying Twitter? Probably Not

Elon Musk bid $43 billion to buy Twitter & take it private cuz...free speech. Or: Elon was bored. Pulled stunt to irritate SEC. Gets attention. Collects cash! Bolts before paying the check...on 4/20

Tesla (TSLA) CEO Elon Musk today made an unsolicited bid to buy Twitter (TWTR) for $54.20 per share, $43 billion, and take it private.

And there are plenty of signs, as I describe below, that this is not a serious offer. He may already be planning his exit…on 4/20.

For one thing, it’s a meager 18% premium to yesterday’s closing price for Twitter and 24% below the stock’s peak last year. Nevertheless, Musk proclaims that his first bid is also his “best and final offer.”

And if Twitter management refuses his offer, which seems almost certain, Musk threatens to sell his 9.2% stake which he only started accumulating in January.

Musk said Thursday, “Having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. I don’t care about the economics at all.”

That’s easy to say now, after he has already made nearly hundreds of millions of dollars in gains on his Twitter shares after the price was driven up on news he created.

Never mind that Twitter is an independent business and free to set its own rules for acceptable behavior, just exactly like he does (for everyone else) at Tesla.

Nor has Musk seemed willing to fight for anyone’s free speech except his own, however wrong or false or horrific, especially if that speech came from his critics or regulators or journalists or Tesla employees calling out concerns about safety or persistently toxic working conditions, for example.

He even shut down Tesla’s public relations department in 2020 and routinely ignores journalists and even regulators:

Tesla's sycophantic Board has been virtually useless as Musk defied the SEC, US Occupational Safety and Health Administration (OSHA), the Environmental Protection Agency (EPA), the National Transportation Safety Board (NTSB), court orders and law enforcement, and so on—with impunity.
Nikola’s Troubles And Tesla’s History Shadow Battery Day, 9/21/20

That is, of course, unless many of the same complaints and criticisms come from the Chinese government. Then Musk seems very amenable to their every wish (see Notice How Tesla Behaves So Much Better For China Than The US?).

So I’m not buying Musk’s purported motive in his letter to Twitter management explaining his hostile bid:

I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.  

Or that he only recently decided, as he also claimed, what he wanted to do about it:

However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.

Instead, I suspect this all could be just another stunt.

Musk is offering $54.20 to take Twitter private, with funding assumed secured. Sound familiar?

Elon Musk @elonmusk

Am considering taking Tesla private at $420. Funding secured.

Musk’s bid and secured funding claim turned out to be bogus. Which got him convicted of securities fraud and cost him the Chairman’s seat at Tesla (see Tesla: Musk Fought the Law, the Law Won, So What? on 9/28/18).

Oh, and Musk was mandated as part of his very lenient, in my view, 2018 settlement with the SEC that all his tweets be monitored and even pre approved by Tesla counsel before he can publish them on Twitter—a requirement the SEC says Musk has violated.

In response, Musk has freely expounded on his disdain for the SEC (see Tesla - Truth and Consequences) and posted numerous, even vulgar insults about the SEC on Twitter:

Elon Musk @elonmusk

SEC, three letter acronym, middle word is Elon’s

He even bragged that the nominal $20 million fine for his fake Tesla buyout stunt was, to the world’s richest person, “worth it.”

But in February Musk sued the SEC for “harassment” over his tweet oversight requirements and asked the Court to throw out the 2018 settlement. The Court was not persuaded.

This, by perhaps no coincidence, occurred just as Musk was starting to accumulate Twitter shares. Musk also failed to publicly disclose said share purchases to the SEC as required by law when he had acquired at least 5% of the outstanding shares, which he did as of March 14th.

Instead, he continued to accumulate shares up to and past the 10-day deadline, posting this on Twitter on March 25th:

Elon Musk @elonmusk

Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?

Of course Musk didn't tweet that he was building a 9.2% stake in Twitter. When he finally did announce that on April 1st Twitter stock jumped 30%, netting him nearly $160 million.

Musk also indicated by filing as 13-G transaction that he was buying as a passive investor which proved, days later, to be false when Twitter revealed it had been in discussion with Musk for weeks about joining the Board. Take that, SEC!

Investors have already started filing lawsuits over his delayed disclosure, but those will likely take years to settle and for far less than Musk will likely collect in stock gains, so he probably thinks worth it.

In any case, I doubt Musk really intends to buy Twitter. For one thing, he doesn't have the cash.

As the Wall Street Journal noted, Musk keeps his fortune tied up in Tesla stock. He takes his salary in Tesla stock and (which also lets Tesla juice its margins, as I have noted) just borrows whatever he needs to support his lavish lifestyle and to avoid paying any and all taxes by not having income.

Given that, it’s not clear he has enough margin available to come up with $43 billion if Twitter accepts his bid—which I doubt they will. Worst case if I'm wrong—he'll just do an LBO.

We already know Musk doesn’t really part with his own money to fund his alleged “charity” or “jokes.” And now I suspect he’s just waiting for the punchline so he can cash out.

Here’s one he could do next week, just in time to distract investors from Tesla’s potentially disappointing first quarter results:

Sold $TWTR on 4/20; funding secured.
Elon Musk on Twitter

Hilarious.

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