Elon Musk’s ‘best’ Twitter offer seems fake

The Elon Musk-Twitter drama continues to take sometimes bizarre and unexpected turns, so anything I write here might be moot soon after the ink dries.

It has always been dangerous to talk about Musk in absolute terms. He’s said to be genius-level smart, but he’s done some really dumb things (weird tweets almost got him nabbed for defamation and got him in trouble with the Securities and Exchange Commission). Its baby, electric car giant Tesla, was horribly mismanaged, plagued by production problems and nearly declared bankruptcy. He miraculously survived and came back stronger, making him the richest man in the world.

More recently, he filed a “best and final” offer for the financially fragile but ubiquitous social media company Twitter. The price: $44 billion or $54.20 per share (which included a reference to pot; “4:20” is “smoking time” in growing smoking weed). That was a significant premium to its stock price at the time and even greater now after the market selloff.

Twitter’s board finally realized that Crazy Elon was offering a one-time salary to its beleaguered investors and agreed to the deal.

Musk was about to buy what he called the public square of the world. He would be the king of all media by privatizing Twitter and fixing its multiple business flaws (for all his influence, he has no cash flow or revenue).

Until he wasn’t.

Somewhere along the line, he got it into his head that he was paying too much for a dog with fleas. He suspended the case indefinitely. His barely believable reason for threatening to leave: there are too many fake accounts on Twitter that neither he nor anyone else can monetize. He also said that Twitter is hiding this bot issue, which amounts to fraud. He wants to take a deeper look at the books.

If he was really worried about the bots, he wouldn’t have given up on due diligence before signing the deal papers.

And after? The business press has always been skeptical of Musk’s intentions because most of Wall Street has been skeptical. This is why the stock has never traded close to its offer price.

For what it’s worth, here’s the perspective of two bankers, one who worked with his board at Tesla and the other at a company embroiled in his Twitter funding machinations.

Only on his terms

They say almost the same thing. Musk tells people he still wants Twitter. He thinks he can run it as a private company, solve the robot problem, and sell it for a profit within the next five years.

But Musk wants the company (like everything else) on his terms, which are still evolving. He doesn’t read balance sheets but trusts his instincts and has no problem flouting conventional banking standards (ie your word is your obligation) to get his award. His gut told him to forgo due diligence. He’s telling her now that even though he signed a deal leaving him liable for a billion dollar severance fee and possibly more damages, he can bring Twitter to the table and agree to his terms. i.e. a much lower purchase price.

He may be right. Twitter initially said it would enforce the terms of the original deal, maybe even go to court, but now appears to be playing ball with Musk. He recently said he would provide more data on his bot issue – a move that means talks are back on. Bankers tell me Twitter’s board knows it will be hard to find another suitor, even at around $40 per share it is currently trading. The board can’t agree to anything, but also can’t tell Musk to just pound sand.

So the thinking among my two guys is that Twitter agrees to a lower price, maybe a lot lower, and Crazy Elon gets his public spot, albeit for a lot less.

That means the deal is done, right? Seems so. But nobody really knows with Crazy Elon.

Gensler goes gaga

Left-leaning SEC chief Gary Gensler finally announced plans last week to overhaul the stock market. Forget the pretty good deal small investors are getting now: commission-free trading and mobile apps that make stock trading seamless and inexpensive for beginners.

Gensler told attendees at an investor conference that bad things happen where no one can see them; too many trades do not go to public exchanges. They are routed to private trading venues known as dark pools. Investors think they are trading for free on Robinhood but could be unknowingly being scammed.

Gensler did not provide any data to show that the markets are grazing small investors through its current structure. It’s his intuition.

Upsetting the markets on a hunch is a pretty dangerous thing. Particularly when you’re just trying to brush up on your class struggle credentials, as most observers suspect. The good news (and the bad news for Gensler): His proposed changes will likely take years to implement as Congress — which will likely be in the hands of the GOP after November — debates their merits.

At that time, it will all be over. Its current boss, Sleepy Joe Biden, will likely be removed from office, replaced by a Republican president or a sober Democrat who resists “fixing” something that doesn’t need to be fixed.

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