Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR • Hacker News Board

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#61

Post by danans » Tue, Jul 19, 2022, 1:12 AM UTC

motohagiography wrote: post #52

MonkeyMalarky wrote: post #44

Earlier quoted context omitted.

>Twitter has huge growth in front of it. Twitter has been around for 16 years. In western countries, I think everyone who was going to join, has joined by now. What growth is left? Children becoming old enough to join, people with multiple accounts?

An internet protocol for short message services with an established user base. This was Dorsey's vision, and one Musk appeared to nod to. A t.co product could compete with Signal, Slack, and WhatsApp. Further Slack has wasted what I thought was a huge opportunity to create a Twitter competitor where channels could have public facing boards that published curated highlights from Slack chat. They could have done federa…

> A t.co product could compete with Signal, Slack, and WhatsApp.

Entering a crowded and poorly differentiated market where there already huge players with major network effects is the plan? Seems unlikely.

More likely he wanted to do exactly what he said: reduce content moderation (hence expenses) and get people to pay for verified accounts. But none of that is likely to pay back the 20B premium he'd have to pay for it today, so he wants out.

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#62

Post by robocat » Tue, Jul 19, 2022, 1:14 AM UTC

shkkmo wrote: post #31

tedunangst wrote: post #19

Earlier quoted context omitted.

This is a cash merger. You buy TWTR stock.

Quoted post unavailable.

> ninja edited

The Wikipedia article says “Last edited 1 year ago by GreenC bot”.

Making serious accusations is extremely bad behaviour - at least check your facts.

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#63

Post by Sebb767 » Tue, Jul 19, 2022, 1:15 AM UTC

> Normally, valuing a stock is hugely complex. But every once in a while, circumstances come along that make the math relatively straightsforward[sic]. This is one of those moments.

Technically, we just moved the really hard part to the question of "what will Twitter be worth if the deal fails". For this to work as value strategy, you either need to be really good at estimating that hard price or assign a really low chance to it.

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#64

Post by SXX » Tue, Jul 19, 2022, 1:18 AM UTC

sweezyjeezy wrote: post #33

TrapLord_Rhodo wrote: post #18

People seem to be discounting the fact that Elon still owns 9% of the company and is one of the largest shareholders. He just wants a chance to renegotiate as he know if he actually walks away he will lose around $5B.

Why would he lose $5B? He wouldn't have to forfeit the shares already owned as far as I know?

I guess it wouldn't be 5B loss, but there is a good chance shares will drop enough in value for him to lose more than $1B.

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#65

Post by motohagiography » Tue, Jul 19, 2022, 1:20 AM UTC

danans wrote: post #56

motohagiography wrote: post #34

Imo, the only hypothetical reason for Musk not to buy it would be because the real numbers on the bot issue showed the company has seriously defrauded investors, and the stock goes to almost zero. That's implausible to me. It's kind of an outsider case where shorts could get squeezed pretty hard if they're wrong about that, as a Musk owned Twitter has huge growth in front of it. However, I'd propose there is also a c…

> Crazy? Not crazy. More like a garden variety conspiracy theory that sounds especially silly due to its use of poorly cloaked expressions like "the party". Why not just say "Democrat[ic] party"? Obfuscation doesn't make the theory any more credible, and probably makes it less credible.

Every macro investment hypothesis is a conspiracy theory. By 'crazy' I meant to be asking, has this been said before and already been discredited?

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#66

Post by ergocoder » Tue, Jul 19, 2022, 1:21 AM UTC

Sebb767 wrote: post #57

formercoder wrote: post #53

Earlier quoted context omitted.

He’s not claiming that he actually didn’t know everything, he’s claiming that Twitter lied in public filings not related to the deal.

And the "not related to the deal" part is the problem - even if he wins this claim, this does not necessarily constitute MAE and therefore does not get him out of the deal. Due diligence includes verifying those numbers or at least checking where they come from, especially if they are as important to the deal as they now appear to be.

It may or may not help.

But it would certainly be a major bargaining chip for Elon.

No execs want to go to jail for fraud. These execs are worth 50m+. Losing money is insignificant. Going to jail is a very huge deal

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#67

Post by kmeisthax » Tue, Jul 19, 2022, 1:22 AM UTC

motohagiography wrote: post #34

Imo, the only hypothetical reason for Musk not to buy it would be because the real numbers on the bot issue showed the company has seriously defrauded investors, and the stock goes to almost zero. That's implausible to me. It's kind of an outsider case where shorts could get squeezed pretty hard if they're wrong about that, as a Musk owned Twitter has huge growth in front of it. However, I'd propose there is also a c…

Yes, very crazy, but not for the reasons you think.

If Twitter was a Democratic Party institution they would have banned Trump in 2015. Instead, they bent over backwards and created a new policy specifically to justify not banning @POTUS when his rulebreaking[0] became apparent in 2017. The only reason why we even think of Twitter as (D) Media is because January 6th forced them to reverse course.

Your theory is inconsistent with Twitter's prior actions, too. While management initially geared up to take a poison pill, they never actually committed to it. Once Musk had actually lined up a purchase proposal, management actually agreed to it, and then Musk tried to bail out from that deal. If Twitter was actually (D) Media, they would have committed to the poison pill plan instead of backing down. Likewise, if Musk was buying Twitter with the intent of turning it into (R) Media he wouldn't be trying to back out[1], he would be following through.

A much easier explanation is that Twitter management was caught off-guard by Musk, and then later realized Musk was bullshitting in a way they could take advantage of. Conversely, Musk figured he could pretend to buy Twitter while unloading Tesla stock and then realized way too late that he was actually committed to buying Twitter.

[0] Which, interestingly enough, included ignoring DMCA 512 takedown notices

[1] Interestingly, Donald Trump has gone on a rampage on Pravda Social about how Musk is a bullshitter.

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#68

Post by vpribish » Tue, Jul 19, 2022, 1:26 AM UTC

orlp wrote: post #6

yqsk wrote: post #2

Inspired by Matt Levine's awesome reporting on the Elon/Twitter purchase fiasco. Just a little app to model the arbitrage (gamble) opportunity.

> Just a little app to model the arbitrage (gamble) opportunity. This isn't arbitrage at all. That is taking advantage of a price difference of an asset between two markets by buying and reselling it (nearly) simultaneously. If you are holding the asset longer than strictly necessary it isn't (only) arbitrage. Your intended action is just timing the market: buying stocks based on the belief they will soon rise in pri…

the world of arbitrage calls this arbitrage. there are other, more pure, arbitrages - but this is very mainstream one. you are buying the stock at the market price, while you think it will be worth the offer price - there's a risk that it blows up. risk arbitrage. (not to be confused with garbitrage)

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#69

Post by Sebb767 » Tue, Jul 19, 2022, 1:30 AM UTC

ergocoder wrote: post #66

Sebb767 wrote: post #57

Earlier quoted context omitted.

And the "not related to the deal" part is the problem - even if he wins this claim, this does not necessarily constitute MAE and therefore does not get him out of the deal. Due diligence includes verifying those numbers or at least checking where they come from, especially if they are as important to the deal as they now appear to be.

It may or may not help. But it would certainly be a major bargaining chip for Elon. No execs want to go to jail for fraud. These execs are worth 50m+. Losing money is insignificant. Going to jail is a very huge deal

It would be quite funny if he got Twitter into SEC trouble, just to become it's owner a bit later; especially given their history.

Anyway, this is just my unprofessional opinion, but for him to be able to prove intentional deceit is already going to be quite hard. Conditional on him managing that, he'd need to use a number he - by his own statements - hardly believed to clear the incredibly high bar of MAE in Delaware. I think it's very unlikely that he will be able to exit the deal this way.

To address your edit: I don't see how he'd manage to prove fraud without already providing enough evidence to send execs to jail. Also, the SEC would be the one prosecuting people anyway - he has nothing to bargain with. Lastly, this does not change the fact that the bot number, no matter how made up, will very likely not be sufficient to get out of this deal.

Re: Shouldibuytwitter.com – A tiny takeover arbitrage model for TWTR

#70

Post by danans » Tue, Jul 19, 2022, 1:37 AM UTC

kmeisthax wrote: post #67

motohagiography wrote: post #34

Imo, the only hypothetical reason for Musk not to buy it would be because the real numbers on the bot issue showed the company has seriously defrauded investors, and the stock goes to almost zero. That's implausible to me. It's kind of an outsider case where shorts could get squeezed pretty hard if they're wrong about that, as a Musk owned Twitter has huge growth in front of it. However, I'd propose there is also a c…

Yes, very crazy, but not for the reasons you think. If Twitter was a Democratic Party institution they would have banned Trump in 2015. Instead, they bent over backwards and created a new policy specifically to justify not banning @POTUS when his rulebreaking[0] became apparent in 2017. The only reason why we even think of Twitter as (D) Media is because January 6th forced them to reverse course. Your theory is incon…

> A much easier explanation is that Twitter management was caught off-guard by Musk, and then later realized Musk was bullshitting in a way they could take advantage of.

Doesn't that mean Musk was caught off guard (or in a self-own) by Twitter, not the other way around? Or that it seemed like a good deal for all parties until the floor fell out from under both Twitter and Tesla stock, at which point it became an incredibly bad deal for Musk.