“Plata o Plomo?”
In 1990s Colombia, drug lords would ask government officials who they wanted to bribe “Plata o Plomo?” Silver or lead?
The silver was a briefcase full of cash.
The lead was a bullet.
Elon has acquired 9.2% of Twitter’s Stock. This morning, he launched a hostile takeover bid for Twitter. With his offers to the the existing shareholders, he says “Accept this premium or I sell off the shares I have already acquired and the stock tanks.”
“Plato o Plomo?”
Free Speech isn’t Free
Twitter has become something of the modern day town square. Censorship on twitter has become a hot-button issue for many – including Elon Musk.
Last Friday he turned down a seat on the board of directors. Now we know why.
It’s because they wanted to limit how much Twitter stock Musk could purchase to 15%.
But Musk wants to buy ALL THE STOCK.
He has initiated a hostile takeover and submitted an offer to the shareholders. In an SEC filing, Musk writes:
Brent Taylor, Chairman of the board,
I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.
However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.
As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.
Twitter has extraordinary potential. I will unlock it.-Elon Musk
Or as the Columbian Cartel used to say “Plata o Plomo?” Do you want the Silver (A pile of cash / The thirty pieces of silver that was paid to Judas to betray Jesus) or the lead (a bullet to the head)?
Sell me the outstanding shares or I sell and the stock tanks.
Billionaires to Battle for Control?
Elon is the top shareholder. The next 3 largest shareholders are The Vanguard Group, Morgan Stanley, and BlackRock. Will they accept the buyout offer? or is their investment more about the political power that comes from owning a piece of twitter?
In days not too long ago, Billionaires would buy major Newspapers for political clout. The most recent in memory is Jeff Bezos’ buyout of the unprofitable Washington Post. The Point is not the profitability of the underlying media company: rather it’s about the power to shape public opinion.
That’s what Elon is banking on here. IMHO, he’s not trying to buy twitter for any kind of direct profitability. It’s more about having control over the “town square” of public discourse.
Will Elon’s Takeover of Twitter be Successful?
There will be many powerful people and entities who will try to prevent this takeover. Those entities could include governments or state actors. So while you can often bank on some kind premium over an initial takeover bid offer, be aware that there are more “risks” than usual in these kinds of deals.
This is not financial advice. However, in my opinion, the chance of this deal going through may be less than 50%. On the other hand, betting against Elon has cost people billions of dollars.
What does this mean for our Clients?
Even though twitter did $5.58 billion in ads last year, it has has traditionally been garbage ROAS. Could Elon change that? Does he even care to?
Regardless, it’s going to be interesting to watch!
If you want a team of Experts to maximize your Return on Ad Spend in today’s world of iOS 15 privacy, get in touch and we’ll see if there’s a fit.