Twitter shares, they are
surging right now. This because Tesla CEO Elon
Musk has now taken a passive Stake in Twitter. I do think that he's going
to probably try to increase His stake. And I think that
employees at Twitter are Increasingly nervous. Boom.Breaking news, Elon
Musk offering to buy Twitter For $54.20 a share. Elon Musk tweets that the
$44 Billion deal is, quote, Temporarily on hold. Elon Musk responding on
Twitter to allegations of Sexual misconduct. This is unprecedented. A single individual
spending his own fortune Over $40 Billion to buy one
company. It's been extraordinarily
unusual for everybody Involved. I mean, reporters
covering the situation, People that work at
Twitter, investors that are Trying to navigate what
Elon Musk plans to do. Years from now, I mean, this
could be a risky bet. Now betting against Musk,
it's like betting against Tiger Woods. I mean, it's
not really been one that's Worked out for the cynics. It's anybody's guess how
Elon Musk wants to change Twitter if and when he
takes over the company. So before Elon made his
takeover bid, Twitter was Just starting off with a
new CEO named Parag Agrawal. He was the hand-picked
successor to Jack Dorsey, Who had served as CEO since
2015. It was thought that Dorsey
was really going to turn Around Twitter and of
course, being CEO of other Companies, especially with
Square, I mean, there's a Distraction factor there. And Twitter started to make
some baby steps in terms of
Engagement, increasing user
growth quarter over quarter. But advertising, that was
the big issue. Twitter makes most of its ad
revenue from big brands, Blue chip advertisers. Whereas if you look at its
competitors like Snapchat And Facebook, they make
most of their revenue from Small and medium sized
businesses. And so when you think about
Twitter and innovation, they Kept creating products that
cater to big brands as Opposed to innovating on
the advertising side for Small, medium sized
businesses. In a social media arms race,
their biggest issue was Engagement, monetization
from an advertising Perspective, and just
losing more and more share From the likes of
Instagram, Facebook, TikTok And others. In early April, Elon Musk
disclosed that he had over a 9% stake in Twitter, which
he had been kind of snapping Up shares since early this
year. And it was a huge surprise. Elon Musk and Twitter, first
he became the company's Biggest shareholder, then
plans to join the board Suddenly reversed. Is there a bigger plan of
action in the works? I think when Twitter offered
Elon Musk the board seat, They saw this as a huge
win. What Elon was thinking at
the time, from my vantage Point, was this is a
temporary measure to be able To get a little bit more
visibility into how the Company works, how the
board works. So when Twitter invited Elon
to join the board, they put A cap on how many shares he
was able to own. And so we think that might
have been the sticking point For Elon, because his
ultimate goal was to buy
Twitter. So he rejected the
board seat offer and went Ahead and bought the c
ompany. $44 billion, it continues to
be a head scratcher for a Company that I believe is
probably worth closer of $30 Or $35 billion. But when you're the richest
person in the world, you Could do that. And that's
why Twitter investors, when They saw the $44 billion,
they were popping champagne Or drinking their favorite
alcohol. Now, the sentiment inside
Twitter is just sadness. There's a really bad
morale. People are worried about
their jobs. They're distracted from
being able to conduct Business as usual. For people on the sales
side, it's really Frustrating because
advertisers don't Necessarily know what to do
with their partnership with Twitter long term. If this transaction goes
through, Elon Musk plans to Take the company private. No more earnings calls, no
more printing out their Financials for the public
to look at. He's going to be able to
basically do what he wants With the company. Elon Musk is looking to be
more than just the owner of Twitter. Sources tell our
own David Faber, the Billionaire, is expected to
serve as the temporary CEO. More headlines out of Elon
Musk's Twitter deal. Speaking at a Financial
Times conference, Musk Saying he would reverse the
Twitter ban on former President Donald Trump. Elon Musk has not made it a
secret that he plans to pull Back some of the content
moderation policies at Twitter. So we know that's
coming.
I think the problem for Twitter is that in the past And at times today, it's a
cesspool. And the worry is that you
start to bring on some People that were banned. Of course, the big issue of
be Trump as he ultimately Come back on to the
platform. But you've got to keep in
mind, Twitter's been Spending years trying to
tamp down and moderate the Speech on its platform in
order to be more appealing To advertisers. This is why Elon Musk
thinks advertising shouldn't Be the main part supporting
Twitter. He's talking about a paid
product. He's talking about charging
companies and high profile Individuals to use it. Twitter makes most of its
advertising revenue from big Companies and big brands. And so if you pull back
content moderation, you risk Those big brands pulling
back their spend. For a company like
Facebook, which makes most Of its money from small and
medium sized businesses, That's not a huge issue. If that were to happen to
Twitter, it would be a huge Problem for them. Look, I mean, our view in
terms of Twitter as a Business model, it's very
difficult to turn this Around. And if you look at
Musk's success stories from PayPal to Tesla to SpaceX,
technology success, Twitter's a different
animal. There are a million reasons
why this deal couldn't go Through. Elon Musk is a
fickle individual. He could change his mind
and decide, Hey, I don't Want to do this anymore. The Tesla CEO tweeting this
morning that unless Twitter
Can prove that less than 5%
of its accounts are bots, That the deal, quote,
cannot move forward. This is probably a
negotiation tactic on behalf Of Elon. The market has
come down a lot. And so he's probably, you
know, using the guise of True active users as a
negotiation ploy. There is a clause called
specific performance where They can force him to take
it and I don't know how he Gets out of it. Reporting from Business
Insider stating that Musk's SpaceX had paid $250,000 in
severance back in 2018 to a Flight attendant who
accused him of sexual Misconduct. Now, CNBC has
reached out to SpaceX for Comment but hasn't received
any response thus far. But that hasn't stopped
Musk from responding. Late last night on Twitter
about the article saying 'The attacks against me
should be viewed through a Political lens.' So as far as the financing,
what we know so far is Elon Musk sold several billion
dollars worth of his Tesla Shares in order to help
start financing this. So you've got to keep in
mind, Elon Musk doesn't have $200 Billion in cash in his
Bank of America checking Account or whatever he
uses. So much of his wealth Is tied up in the shares of
his two companies, SpaceX And Tesla. The financing at the end of
the day is really leveraging His position in Tesla. 95% of his net worth is in
Tesla. So if you look at the debt,
the equity financing, it's Tesla shares. It's been a frustration for
investors in Tesla. They don't own Tesla to
have some sort of deal risk Exposure to Twitter.
At the same time, there are
reports that Elon is talking To other wealthy
individuals, offering them a Chunk of Twitter in
exchange for them helping Finance it if. It falls through, it's not
from a regulatory Perspective. That's not the
problem here. It would be either a
financing issue, which I Think Elon Musk has proven
himself to be determined Enough to figure that out
or because he's had a change Of heart and he doesn't
feel like taking this on Anymore.
