Elon Musk speaks to host Chris Anderson at TED 2022
Photo: Gilberto Tadday / TED

Elon Musk's offensive play

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Good morning! Elon Musk’s attempt to buy Twitter and take his favorite social network private is all anyone in tech can talk about. But two big questions remain: Does Elon actually want this? And does Twitter? I'm Kate Cox, and I've been waging war with a squirrel in my attic for weeks. (I finally won.)

Twitter's worst nightmare

Musk’s $43 billion bid to take over Twitter isn’t technically a hostile one, but the vibe isn’t exactly friendly.

“I am not playing the back-and-forth game,” Musk told Twitter board chairman Bret Taylor of his unsolicited offer. “I have moved straight to the end. It’s a high price and your shareholders will love it.”

But Twitter shareholders do not, in fact, seem to love it. All signs point to nearly everyone hating it, actually. And that’s the real problem for Twitter’s board: It can’t really say yes. It’s also going to have a hell of a time saying no.

Elon has become a master Twitter troll, and his takeover bid might be another bit. When you’re the world’s richest man, having “fun” just looks a little different.

  • In August 2018, he tweeted that he had reached a deal with an investor to take Tesla private at $420 per share. That got him slapped with an SEC charge for securities fraud, which he later settled. (Musk said during Thursday’s TED conference that he did have funding secured for that deal and was forced into his agreement with the SEC.)
  • He also broke SEC regulations when he purchased his initial 9% stake in Twitter, and another Twitter shareholder is already suing him over it, alleging the way in which Musk made and failed to disclose his holdings constitutes securities fraud.
  • Musk is a Twitter power user, and he has frequently engaged with his fans on the platform to discuss the ways he thinks it should operate. But some of his ideas for how the site should function would be bad for both Twitter’s service and Twitter’s business, which is likely why the company has yet to implement them.
  • In his TED interview Thursday, Musk restated his vague “free speech” aspirations for the platform. That’s nice — but it’s not exactly a business plan.

This could just be a pump-and-dump. Musk wrote very clearly to Twitter’s chair that he reserves the right to walk away entirely from the offer. “If the deal doesn’t work,” he wrote, “given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder.”

  • If Musk’s attempt to take the company over made its value rise, he could sell off his 9% investment and be much richer for it. And after the roller coaster Musk has put Twitter through this month, the board might honestly be just as happy to see the back of him.
  • But if it is a pump-and-dump, it doesn't seem to be working. Twitter shares did spike briefly on Thursday before dropping lower than Wednesday’s close.
  • No “pump” makes the “dump” part kind of hard. (That was a horrible sentence. I’m sorry you had to read it.)

OK, but what about the board? It takes two to tango. Elon wants to buy, but all signs point to the board saying absolutely not.

  • Twitter’s board so far has done exactly what it is required to do: It issued a statement confirming receipt of the offer and said it will “carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders.”
  • The decline yesterday in Twitter’s stock price signals that investors are not particularly impressed with the offer the company supposedly can’t refuse, which in turn would not motivate the board to accept the offer.
  • JPMorgan said earlier on Thursday that it did not expect the board to accept Musk’s offer, and “sources familiar with the situation” told The Information much the same.
  • Twitter’s board is reportedly considering a “poison pill” option, the Wall Street Journal reported, which would give the company’s shareholders the opportunity to thwart Musk by diluting his shares.

So how do you get to “no” with the world’s richest man? Twitter’s board has a fiduciary duty to shareholders to maximize the company’s value. And though Musk has put more than $40 billion on the table, it may not be a good deal.

  • The most common reason to turn down a takeover offer is that it undervalues the target company. Twitter’s board may argue that Musk’s $54.20-per-share offer is insufficient and does not match the company value, and it might have some justification.
  • Musk’s offer does represent a significant premium over Twitter’s average 2022 share price, but those prices reflect the market overall, which — whether you’re looking at Dow Jones, Nasdaq or your own beleaguered 401(k) — has been softer for most of 2022 compared to the previous two years.
  • In February 2021, when the market was also stronger, Twitter reached an all-time high of more than $77 per share, and it spent much of 2021 trading above $60.
It’s theoretically possible Musk could simply say, “OK, thanks, I tried,” and walk away if the board turns him down. But that seems unlikely. If Twitter finds his offer is insufficient, Musk could always offer more. He said his terms were final, but that statement is not binding, and plenty of “final offers” in history have still been negotiated. Musk said during Thursday’s TED conference that he has an unspecified backup plan if Twitter rejects his offer, adding, “I don’t like to lose.” In other words, this isn’t over — not by a long shot.


Kate Cox (email | twitter)

On the calendar

How is the infrastructure rollout going — and what does it mean for tech?

It’s been almost six months since Congress passed the landmark $1 trillion Infrastructure Investment and Jobs Act. With bad data to go on, like inaccurate broadband maps, how should the government distribute funding? Which tech companies are going to benefit most from the five-year push for EV growth? Who's getting left out? Join us at 9 a.m. PT April 21, where we'll explore how the infrastructure bill rollout is going and what it means for you. RSVP here.

A MESSAGE FROM CHECKOUT.COM

The emergence of DeFi is shaking up the way consumers think about how they store value. For reference, Visa saw $2.5 billion of crypto-backed transactions in the first quarter of 2022. We’re seeing consumers really starting to use this in a way that even a year ago was kind of hypothetical.

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People are talking

Andy Jassy said a fuel and inflation surcharge will help Amazon fight inflation:

  • “At a certain point, you can’t keep absorbing all those costs and run a business that’s economic.”

Salesforce’s Suzanne DiBianca said the company’s emissions reduction goal is aggressive:

  • “It really requires us to think differently about how we do our work and who we work with.”

Apple’s Fred Sainz called Meta’s sizable cut of metaverse sales hypocritical:

  • “Meta has repeatedly taken aim at Apple for charging developers a 30% commission for in-app purchases in the App Store.”

Making moves

Maria Renz is joining Gopuff as SVP of North America. She last worked at SoFi as EVP of Consumer Finance and Wealth Management and spent years at Amazon before then.

Meta's Sheryl Sandberg and T-Mobile's Mike Sievert joined the Welcome.US CEO Council, a group of company leaders supporting refugee relief efforts.

Chris Chen joined Sila as CTO. Chen most recently held the same role at Wyre.

Arthur Hu is Lenovo’s new CTO of its Solutions & Services Group. Hu will still keep his role as Lenovo’s global CIO.

Victoria Espinel joined the National Artificial Intelligence Advisory Committee. Espinel leads BSA | The Software Alliance.

In other news

The U.S. is investigating TikTok over CSAM, sources told The Financial Times. Separately, the Justice Department is examining how predators misuse a privacy feature on the platform.

Peloton is still trying to bounce back. The company is now cutting bike and treadmill costs while increasing the price of its monthly all-access membership.

House lawmakers want records from ID.me after backlash to the IRS’ plan for Americans to upload a selfie for verification by the company’s tools before they could access tax information.

Facebook is rethinking its audio efforts. The platform was pushing podcasts last year, but it’s now more interested in the metaverse and other initiatives.

WhatsApp introduced Communities, a Facebook Groups-like feature for clubs, high school sports teams and other small groups.

North Korean hackers are behind the Axie Infinity hack. They’re part of The Lazarus Group, the Treasury Department found.

Your every once-in-a-Musk reminder to take a break

It was hard to take our eyes off Twitter this week, for obvious reasons. But lucky for us, there are some integrations that literally tell us to get off our screens. Here’s a few you could try for a bit more balance next week:

  • Micro Breaks gives you gentle reminders to look up from your computer, even for a couple minutes!
  • Break Timer works about the same as Micro Breaks, but the reminders look a bit different.
  • Healthy Browsing will remind you to drink water and fix your posture. Which is a great note on which to end this newsletter.

A MESSAGE FROM CHECKOUT.COM

Businesses — whether Web2 or Web3-oriented businesses that don’t want to hold crypto but do want to be able to interact with crypto holders — want to be able to offer that as a payment mechanism to their communities. The other is hands-on, where merchants are comfortable accepting crypto.

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Thoughts, questions, tips? Send them to sourcecode@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you Sunday.

Correction: An earlier version of this story misstated Musk's offer in one instance. This story was updated on April 15, 2022.

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