Ask HN: What happened to Twitter poison pill? • Hacker News Board

Re: Ask HN: What happened to Twitter poison pill?

#181

Post by judge2020 » Tue, Apr 26, 2022, 2:02 AM UTC

krick wrote: post #155

mylons wrote: post #134

Earlier quoted context omitted.

1: yes. you get cash for your shares. 2: the board is representative of the share holders, like your US Congress person. they have a fiduciary responsibility to give the share holders value. the only reasonable way they could blow up this deal is if twitter had an incredible roadmap with a very good path to matching the value or exceeding the value of Elon's offer. no such roadmap exists, apparently.

2. That doesn't answer my question. Actually, I'm not even sure how it attempted to. I specifically mentioned the "market price". I don't really know how these US congress persons work, and you may as well imply that the idea that they "represent" you is as much bullshit, as Musk-assigned board member represent real shareholders (and I have no problem with this implication), but there surely must be difference (and i…

> It sounds like a robbery, plain and simple.

A lot of work and planning goes into the sale of a company, and there are a _lot_ of safeguards to ensure such a sale isn't done in a way intended to "rob" a large amount of shareholders[0]. You don't really "own" a stock in the regular sense of ownership simply because of the absolute mass of laws and regulations that surround both what you can do with your shares and how much they're worth.

0: https://www.lw.com/thoughtLeadership/the-latham-and-watkins-...

Re: Ask HN: What happened to Twitter poison pill?

#182

Post by bpodgursky » Tue, Apr 26, 2022, 2:05 AM UTC

mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

This is just flat-out wrong and it's a joke that this is the top comment on a "financially-savvy" forum.

Shares aren't a blockchain, you can't just perform a 51% attack.

Re: Ask HN: What happened to Twitter poison pill?

#183

Post by friesfreeze » Tue, Apr 26, 2022, 2:06 AM UTC

friesfreeze wrote: post #180

krick wrote: post #131

Earlier quoted context omitted.

1. How does that look for a random TWTR holder far away from SV? One day his broker just informs him that there are no longer securities on his account, but that account has received some cash? 2. Why is it even allowed (by the government) to decide the share price at the board meeting? These shares don't belong to them, somebody has purchased them already. And these people have decided what the shares are worth, tha…

Wrt 2: It's a bit complicated. The "market price" isn't really the target here, if you are talking about the price of the stock on stock exchanges. It's accepted that there is a thing called a "control premium" - basically it is more valuable to own >50% of a company because in addition to having an economic stake, you can now control the company. So when you are buying a company, you generally have to pay more (20%+…

Also - since I'm on a bit of a roll - there are definitely other stories for what is going on here.

One is that poison pills kind of soften the edges of capitalism a bit by allowing directors to decide if they want to the company to be sold or not. Call it crocodile tears by entrenched management, but there is something to be said for keeping a company off the market if the hostile bidder is going to just fire workers and scrap the company for parts. Fairly, this view is not consistent with "shareholder primacy" but it has to be said that not everyone sees the world that way.

Re: Ask HN: What happened to Twitter poison pill?

#184

Post by revicon » Tue, Apr 26, 2022, 2:07 AM UTC

ransom1538 wrote: post #135

krick wrote: post #131

Earlier quoted context omitted.

1. How does that look for a random TWTR holder far away from SV? One day his broker just informs him that there are no longer securities on his account, but that account has received some cash? 2. Why is it even allowed (by the government) to decide the share price at the board meeting? These shares don't belong to them, somebody has purchased them already. And these people have decided what the shares are worth, tha…

Pretty much. Your tdameritrade account will just update and stick cash into your account and explain what they did in the cost basis tab.

BTW, this is a taxable event where you might not have expected it to otherwise.

Re: Ask HN: What happened to Twitter poison pill?

#185

Post by nullc » Tue, Apr 26, 2022, 2:12 AM UTC

agar wrote: post #158

qiskit wrote: post #88

Earlier quoted context omitted.

This is simply wrong. The board outright rejected musk's offer and instituted a poison pill to prevent a hostile takeover of twitter by musk. So elon simply bypassed the board of directors and went to the major shareholders. It is the major shareholders who has final say, not the board of directors. Elon convinced enough of the major shareholders to accept his deal and once that happened, the board of directors has n…

There's a bit of nuance here. Major shareholders wouldn't say "elon can buy twitter." Major shareholders don't care who owns Twitter. They don't give permission. They only care about the return on their investments. They often represent limited partners or are part of a stock fund, and have their own fiduciary responsibilities. Or they just want to make their own money. In this instance, major shareholders would go t…

Yep. Also: When people point out that twitter traded more in the past-- what matters isn't twitter's absolute price, but twitter's price relative to some benchmark.

For example, if you use META as the benchmark then Elon's offer is 143% of Twitter's all time high. Meta alone is perhaps not really the fairest benchmark, but his offer is 86% of the ATH if you just use the Nasdaq composite as a benchmark which is still pretty good. A fair 'synthetic twitter' would probably price the offer somewhere between these two.

I would have liked to produce a better synthetic benchmark than just those two options, but didn't really feel like doing two hours of programming and data collection just for a HN post-- what I would have done is grabbed the historical prices for all high volume US equities and ETFs and found a set of coefficients (including allowing negative ones, e.g. shorted stocks) for all equities except twitter that predicted twitter with the lowest L2 norm, and maybe applied some L0 penalty to make the collection sparse and reduce the overfit. Perhaps I'd just try all $stocks choose 5 subsets with 5 stocks and choose the best-- l2 fits are fast, and I doubt 5 stocks can meaningfully overfit a couple years of data.

Why is a benchmarked price the right way to reason about this? Because a substantial part of twitter's price is the overall market, a substantial portion is its sector, etc. To the extent the investors want that non-twitter-specific exposure they can get it in other ways (e.g. by buying synthetic twitter or just a market index).

If you could sell twitter today for 143% of the benchmark rate, then put the income into the benchmark then sell the benchmark later when its value goes up-- you'd do much better than just holding on to twitter for the same amount of time, unless something changed about twitter to make it perform a lot better relative to the benchmark.

From that perspective twitter's roadmap would need to be pretty good to overcome the offer.

Re: Ask HN: What happened to Twitter poison pill?

#186

Post by krick » Tue, Apr 26, 2022, 2:15 AM UTC

friesfreeze wrote: post #183

friesfreeze wrote: post #180

Earlier quoted context omitted.

Wrt 2: It's a bit complicated. The "market price" isn't really the target here, if you are talking about the price of the stock on stock exchanges. It's accepted that there is a thing called a "control premium" - basically it is more valuable to own >50% of a company because in addition to having an economic stake, you can now control the company. So when you are buying a company, you generally have to pay more (20%+…

Also - since I'm on a bit of a roll - there are definitely other stories for what is going on here. One is that poison pills kind of soften the edges of capitalism a bit by allowing directors to decide if they want to the company to be sold or not. Call it crocodile tears by entrenched management, but there is something to be said for keeping a company off the market if the hostile bidder is going to just fire worker…

Thanks, that's a bit more of an explanation to what I was wondering about than most of the other answers.

Re: Ask HN: What happened to Twitter poison pill?

#187

Post by FPGAhacker » Tue, Apr 26, 2022, 2:19 AM UTC

goodluckchuck wrote: post #166

mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

Why does the board get to sell my shares?

>Why does the board get to sell my shares?

They don't. The deal has to be approved by shareholders (of stock with voting rights).

Re: Ask HN: What happened to Twitter poison pill?

#188

Post by jsmeaton » Tue, Apr 26, 2022, 2:23 AM UTC

mabbo wrote: post #121

archon wrote: post #64

Earlier quoted context omitted.

I just wanted to thank you for this. This is the most succinct and easy-to-understand-for-non-investors explanation of the concept I've seen and now I think I finally understand it.

I learned all of this (and so much more) from Matt Levine's "Money Stuff" newsletter. I cannot recommend it enough.

It wasn't immediately obvious to me how to sign up without buying a subscription, but https://twitter.com/matt_levine/status/994296126055608320?s=... provides a link to do just that.

I've read a few articles here and there but this was the motivation I needed to properly subscribe.

Re: Ask HN: What happened to Twitter poison pill?

#189

Post by diegoholiveira » Tue, Apr 26, 2022, 2:31 AM UTC

jmyeet wrote: post #137

mabbo wrote: post #63

During a hostile takeover, someone buys 51% of the shares. They then elect a board of people who will approve whatever they want. Then they can do things like 'merge' the company with some other company they own at a board-approved value-per-share. That value will be much lower than what they paid per share when buying it on the open market, but not so low that the government gets involved. Eg: Musk buys the shares a…

Sorry but this is utter nonsense. 51% of a company is not some magic ticket that allows you to do basically anything (including screwing the other 49%). It just doesn't work that way. There are certain thresholds that allow you to do more and more things but if you're in control of a company you still have a fiduciary duty to the other shareholders, even small minority shareholders. This is why minority shareholder l…

51% of valid votes is a magic number that allows you to do basically anything (including screwing the other 49%).

Re: Ask HN: What happened to Twitter poison pill?

#190

Post by tptacek » Tue, Apr 26, 2022, 2:40 AM UTC

mylons wrote: post #134

krick wrote: post #131

Earlier quoted context omitted.

1. How does that look for a random TWTR holder far away from SV? One day his broker just informs him that there are no longer securities on his account, but that account has received some cash? 2. Why is it even allowed (by the government) to decide the share price at the board meeting? These shares don't belong to them, somebody has purchased them already. And these people have decided what the shares are worth, tha…

1: yes. you get cash for your shares. 2: the board is representative of the share holders, like your US Congress person. they have a fiduciary responsibility to give the share holders value. the only reasonable way they could blow up this deal is if twitter had an incredible roadmap with a very good path to matching the value or exceeding the value of Elon's offer. no such roadmap exists, apparently.

The board could very easily have blown up the deal, which is proceeding only because they've consented to it. The game plan is simple: they do nothing, Musk executes a tender offer (which has a good chance of failing, so there's an out), the board says "nice job, but we're holding out for more money, check in with us next year", Musk launches a proxy fight, but it goes nowhere because Twitter has a staggered board and so there's no chance of a change of control within the next 12 months, 11 months go by, and we look at the price of the stock; if it's up, Twitter's board has de facto won the argument; if it's down, Musk's bid is no longer economically rational. Repeat.

The most boring conclusion here (boringness on message boards usually being a strong proxy for accuracy) is that the board's initial reaction to Musk's offer was reflexive, the same way you'd push back on someone offering to buy your house based on a fixed premium from like Zillow, and that over the ensuing weeks they've managed to do the homework to evaluate the deal, and they've decided Musk is overpaying, so they're taking him up on it.

From everything I've read --- I'm not an expert and someone like 'JumpCrisscross could jump in and correct me --- is that the deal blowing up was essentially the default state, once the shareholder rights plan was put in place.