Merged Musk buys Twitter!/ Elon Musk puts Twitter deal on hold....

[angrysoba]

Also, I wonder how much of Twitter's policy was secret.

This article from 2018 was posted to explain that certain tweets and posters are not as well publicized as others depending on various factors including, essentially, whether they are troll-like tweets or accounts that are attempting to be disruptive.

They pointed out that they do not "shadow ban" which they define as tweets only visible to the users who made them...

https://blog.twitter.com/en_us/topics/company/2018/Setting-the-record-straight-on-shadow-banning

 

[The Don]

It's alleged that Elon Musk has fired cleaners, replaced them with robots and has not paid severance:

Cleaners at Twitter's headquarters in San Francisco have told the BBC they were sacked without severance pay.

One of them told the BBC a member of Elon Musk's team had said their jobs would be replaced by robots.

https://www.bbc.co.uk/news/technology-63912116

They allege that a catalyst for their dismissal was that they were union members. IMO that does seem to fit with Musk's attitude:

Olga Miranda, president of the cleaners' union, said they organised a strike on Monday to protest. The cleaners were then told they had been laid off effective immediately, she says.

"They did this three weeks before Christmas," she said. "I think we were fired because we're a union."

 

[jeremyp]

It's alleged that Elon Musk has fired cleaners, replaced them with robots and has not paid severance:



https://www.bbc.co.uk/news/technology-63912116

They allege that a catalyst for their dismissal was that they were union members. IMO that does seem to fit with Musk's attitude:

When they say "replaced by robots", have they actually seen the Tesla-bot. It's an Elon decade away from being able to do a cleaning job.

 

[Gulliver Foyle]

That's... not a buyback. That's a dividend payment with extra book keeping headaches.

Dividend payments are way different to share buybacks.

 

[Gulliver Foyle]

Well, yeah if they retired the shares of course not.



I don't think thats how buybacks are done. If I hold 1000 shares of TSLA and the company buys back 1 share in 1000 I am not forced to sell anything. It just drives the price up.*

Anyways, I now realize its all moot because a company can just re-issue their treasury shares at market price anyways to prevent anyone from easily acquiring over half of the shares remaining for public ownership.

*I actually looked that up to be sure... even though I was nearly certain.

Must be different over at your side of the pond then. Unless it's a management or shareholder buyout, over here share buybacks are supposed to leave each shareholder in the same ownership position as before (with allowances for necessary rounding).

 

[Ziggurat]

Dividend payments are way different to share buybacks.

Indeed, they are way different to an actual buyback, starting with the fact that nobody is forced to sell their shares back. As a result, unlike a dividend (or the incorrect version of a buyback that was described), the money spent on an actual buyback is not evenly distributed among shareholders, but only goes to those who choose to sell their shares.

 

[Ziggurat]

A dividend wouldn't be taking away shares for money, it would be either giving a shareholder cash or, much more rarely, more stock, or REALLY rarely, a physical item.

Shares represent the amount of ownership. Numbers of shares are arbitrary, which is why things like a stock split, while requiring a bit of record keeping, don't really change anything fundamental. The number of shares changes instantly, but since everyone's amount of ownership stays fixed, nothing really changed. And you can even do that in reverse, with a reverse stock split.

A buyback in which the number of shares changes but the amount of ownership doesn't because you're buying the same fractional amount of stock from all owners is basically a combination of a dividend (paying money to stock holders proportional to their ownership) plus a fractional reverse stock split (the extra record keeping).

And yes, my point is precisely that the "buyback" that was described is NOT a normal buyback, it wouldn't work like a normal buyback, and that the effects are essentially the same as a dividend but with extra unnecessary complexity. Which is why nobody does it.

 

[lobosrul5]

Shares represent the amount of ownership. Numbers of shares are arbitrary, which is why things like a stock split, while requiring a bit of record keeping, don't really change anything fundamental. The number of shares changes instantly, but since everyone's amount of ownership stays fixed, nothing really changed. And you can even do that in reverse, with a reverse stock split.

A buyback in which the number of shares changes but the amount of ownership doesn't because you're buying the same fractional amount of stock from all owners is basically a combination of a dividend (paying money to stock holders proportional to their ownership) plus a fractional reverse stock split (the extra record keeping).

And yes, my point is precisely that the "buyback" that was described is NOT a normal buyback, it wouldn't work like a normal buyback, and that the effects are essentially the same as a dividend but with extra unnecessary complexity. Which is why nobody does it.

A buyback is buying up shares on the open market, its not the same as a split or a reverse split. I kind of think no one does it because, as described, it would be illegal. It would essentially be going into my account and forcing me to sell some shares.

https://www.investopedia.com/terms/b/buyback.asp

Doing a split of some kind and a dividend would not be moving any shares from the open market to the companies treasury.

ETA: and from the same article: "Shareholders might be presented with a tender offer, where they have the option to submit, or tender, all or a portion of their shares within a given time frame at a premium to the current market price."

Note the word "option".

 

[Ziggurat]

A buyback is buying up shares on the open market, its not the same as a split or a reverse split. I kind of think no one does it because, as described, it would be illegal. It would essentially be going into my account and forcing me to sell some shares.

Even if it were legal, there's no reason to do it because it's just a dividend plus a really awkward reverse split. And even if you want to do both, there's no reason to combine those two things into one transaction.

Doing a split of some kind and a dividend would not be moving any shares from the open market to the companies treasury.

Shares in the company treasury don't matter, they might as well not exist. They don't affect ownership. They're a book-keeping fiction.

 

[Darat]

Twitter purchase seems to be having a knock on effect:

https://www.theguardian.com/technol...erson-title-tesla-value-almost-halves-twitter

..snip…
Tesla has lost nearly half its market value since its founder, Elon Musk, bid for Twitter in April, reducing his net worth by about $70bn and putting his title as world’s richest person at risk.

Shares in the electric car company traded at $340.79 on 13 April, the day before Twitter revealed in a securities filing that the billionaire had made a hostile bid to buy the social media company for $43.4bn. Since then the Tesla share price has plunged by 49% to $173.44 (£141.29), also due to concerns around disruptions at one of its factories in Shanghai.

…snip…

However, Tesla shareholders worry about how he is dividing his time between the social media site and his many other ventures such as the rocket company SpaceX, and that running Twitter is too much of a distraction.

Adding to those concerns, Musk’s bankers are considering replacing some of the $13bn high-interest debt that he used to buy the platform in October with margin loans backed by Tesla stock, Bloomberg reported.

…snip…

 

[Trebuchet]

Wasn't Tesla massively over-priced anyhow?

 

[lobosrul5]

Wasn't Tesla massively over-priced anyhow?

Yeah. As far as Elon's net worth, its all essentially monopoly money... TSLA's market cap was at one point, IIRC, higher than all the other car manufacturers in the world COMBINED.

And then, he cannot do like a normal person and hit 'market sell' in his brokerage account and trade shares for dollars. If he did that TSLA would crash and the NASDAQ would hit "circuit breakers" before the order was filled anyways.

The danger to him, I believe, is if TSLA falls below a certain value he's going to have to start giving shares to his creditors and he could lose control of it.

 

[jeremyp]

Twitter purchase seems to be having a knock on effect:

Honestly, with Twitter taking up so much of Musk’s time, Tesla is probably in better shape.

 

[jeremyp]

Yeah. As far as Elon's net worth, its all essentially monopoly money... TSLA's market cap was at one point, IIRC, higher than all the other car manufacturers in the world COMBINED.

And then, he cannot do like a normal person and hit 'market sell' in his brokerage account and trade shares for dollars. If he did that TSLA would crash and the NASDAQ would hit "circuit breakers" before the order was filled anyways.

The danger to him, I believe, is if TSLA falls below a certain value he's going to have to start giving shares to his creditors and he could lose control of it.

He could be subject to a margin call, which means he either has to put more collateral in I.e. pledge more shares or he has to reduce the size of his loan which means selling shares.

In the former case, he still owns the shares. He just can’t do anything with them. He only has to give shares to his creditors if he defaults on the loan.

 

[lobosrul5]

He could be subject to a margin call, which means he either has to put more collateral in I.e. pledge more shares or he has to reduce the size of his loan which means selling shares.

In the former case, he still owns the shares. He just can’t do anything with them. He only has to give shares to his creditors if he defaults on the loan.

The problem is with a loan that big, and that percentage of total outstanding shares, a force sell* is going to crash TSLA. To the point that shares might start to be almost worthless. But the NASDAQ would likely just halt trading before it got to that point.

*people use margin call and force sell interchangeably but they actually aren't, in fact my broker specifically says in their terms that they don't do margin calls, they'll just sell shares if you fall below REG-T requirements

ETA: this is interesting, and worrying, because a Twitter disaster could cause a huge selloff in not only TSLA but the tech sector in general and even spill over to the market at large

ETA: that SA article sure reads like some of the loans are normal margin loans, and some are securitized by TSLA stock. But I'm not an expert, and who knows if their analysts are correct or not

 

[NewtonTrino]

I think it would be hilarious if tesla stock crashed.

 

[lobosrul5]

I think it would be hilarious if tesla stock crashed.

If TSLA dropped by three quarters, that would wipe out ~420 billion dollars. That alone is about 3% of the Nasdaq-100 (aka QQQ), or about 2% of the S&P 500. But a drop that big would cause lots of panic selling and stop-losses getting hit. I'd expect a two digit drop on the Q's and 7 or 8% on the S&P 500. Then if Morgan Stanley is coming out badly they'd crash and the selling pressure would be pretty enormous.


The other thing I'm seeing is the LTV on the loan is 20%... thats already below REG-T maintenance requirements of 25%. I feel like Michael Burry at the moment, saying the sky is gonna fall, but I'm not shorting the market. However this could potentially be pretty catastrophic.

 

[The Great Zaganza]

Tesla is on borrowed time.
It made the most out of its first-mover advantage, but failed to establish itself in China,.India or with a production presence in Europe - the new German factory seems to be doing more or less nothing.
Now all the big manufacturers are in the E game and will continue to take Tesla's market share.

 

[jeremyp]

The problem is with a loan that big, and that percentage of total outstanding shares, a force sell* is going to crash TSLA. To the point that shares might start to be almost worthless. But the NASDAQ would likely just halt trading before it got to that point.

They won't go to worthless. After all, Tesla is a car company and it makes a fair number of cars. It does have some intrinsic value.

But it does mean that Musk's collateral will decrease in value which is the kind of feedback loop he probably wants to avoid.

*people use margin call and force sell interchangeably but they actually aren't, in fact my broker specifically says in their terms that they don't do margin calls, they'll just sell shares if you fall below REG-T requirements

Well they are clearly not the same thing. In a margin call on a loan, the debtor has two options. They can either increase their collateral or they can reduce the size of the loan. The latter only involves selling shares if there is no other way to raise the money.

ETA: this is interesting, and worrying, because a Twitter disaster could cause a huge selloff in not only TSLA but the tech sector in general and even spill over to the market at large

The huge sell off in the tech sector is already happening. Look at what has happened to Meta's stock since the beginning of the year from over £300 to just over $100. This is the main reason why Musk was trying to get out of the Twitter deal: Tesla stock was on its way down anyway (actually, Tesla is not a tech company any more than any other car manufacturer, but it is perceived as such).

 

[8enotto]

Tesla could be saved by making an economy version that lose some luxurious features, reduces the exclusive aspect in service and charger options.
Make a cheaper urban model for city use.

Then it could easily compete with the others coming in for a while longer.

Twitter needs leadership and set goals again to be attractive to users. It also needs support staff that aren't using forced overtime for writing resumes.
No telling if musk can step back and save that one. I doubt he is capable of letting others run that.

Kind of related, Meta is a disaster. That has gone the wrong direction too long, nobody but Mark is really thinking it can work as he wants.
It's all about how to bail out at minimum loss of investment.