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So this just happened, Elon Musk has offered to buy 100% of Twitter and take the company private.
This is a special emergency episode and to break down the crazy news.
I am thrilled to welcome Ben Thompson, no relation, the Great Tech writer and author of The must-read, strata Curry newsletter, but first a brief history of how we got here.
So last week, if you can remember back that far, Elon Musk, the CEO of Tesla CEO of SpaceX, world’s richest human announced that he bought a bunch of stock in Twitter, so much stock.
In fact that he had become the largest individual shareholder of Twitter with Over 9% of the company.
Twitter made it known that he would be joining the board of directors.
This wasn’t like some kind capitulation.
This was an attempt to rein in the famously unrest in in a bowl musk.
If Muska joined the board of directors, he would have had to agree, not to buy up, more shares to company and his fiduciary duties, would theoretically keep him from, you know, firing off a barrage of embarrassing tweets about Twitter soon thereafter as we reviewed in a previous episode.
Musk fired off a bunch of embarrassing tweets about Twitter.
He pointed out that none of Twitter’s biggest accounts.
Like Justin Bieber.
Do much tweeting, which is true.
He asked is Twitter dying, which I think is not true and he wrote that Twitter’s headquarters are empty and ought to be converted into a homeless shelter.
On Sunday, five days ago, parag, Agarwal the CEO of Twitter.
Announced surprised that the guy tweeting about how Twitter was dying was in fact, not very interested in joining the board of the public.
So what was most interested in?
Well, now we know the answer buying the whole damn company late, Wednesday night or early, Thursday morning must offer to buy Twitter and to take it private saying he believes the company needs to be transformed entirely.
In an SEC filing must offered just over forty three billion dollars for the company.
By the way, his net worth is just over 200 billion dollars that offers a 38 percent premium over the closing price.
April first, before musk started this shopping spree.
It is a huge premium for anybody who is holding this stock say, at the end of March musk called his cash offer, his best and final offer and the share price.
He offered was fifty four dollars and twenty cents. 5420.
Yes, Elon Musk managed to slip a little 420 reference into this.
Offer in a letter to Twitter musk wrote quote.
I invested in Twitter as I believe in its potential to be the platform for free speech around the globe.
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.
And quote, the reaction on Twitter.
I would characterize a strange blend of delight and horror delight at all.
This delicious chaos and minor horror about what a It’s formed Twitter will look like in the future and that is the history.
Let’s talk about the news.
I’m Derek Thompson.
This is plain English.
Ben Thompson, welcome to the podcast.
Happy to be here.
Thank you so much for joining me on very, very late notice first.
I have a couple, very specific questions about what Elon Musk might be up to, and how his acquisition of Twitter could change Twitter, but first, your immediate reactions to the news that he has.
Now officially bid to buy the company and take it brother.
I think my exact words were holy smokes.
Which I, which I put on which I put on Twitter appropriately enough, but I’m not hugely surprised.
I mean, I’m surprised.
If you ask me, you know, two weeks ago.
Would I be surprised?
I’d be very surprised and my surprise in the context of what has happened.
Over those two weeks.
No, I’m not super surprised.
I think there are a lot of signals here that this might happen.
I think that frankly, I mean, it’s quite interesting to think musk is quite right on a couple of points.
One Twitter would do very well as a private company.
I their current model doesn’t work.
It’s a poor business.
I have a hard time, seeing them ever reaching the valuation that must offer to be honest.
And part of it is just like it’s this advertising model on a platform that doesn’t lend itself.
Very well to advertising and and it’s a model where people are there.
Intense the reading in, it’s not a Leanback experience where you’re sort of like on a Facebook or Instagram you’re scrolling through, there’s some ads and you’re just you’re you’re whole A sort of posture and how you consume it is very different, as well as a Twitter, which is very textual.
That’s why Twitter has a smaller audience.
There’s like a small egg has people like you and I right where we’re super textually.
Want to inhale information just like give me more and more and more but he give me an IV and that’s not a great sort of environment to like be sucked in by ads, right?
It’s it is and tutors.
The only have that worker sort of just broaden bike brand ads like the sort of direct response ads at Facebook.
Specializes in where oh, we’ll get the sweater on.
That’s what are all get his belt, whatever might be have never worked.
And I think they should be much more heavily into more subscription type of products.
But all these sort of shifts are going to be very hard to do in the public markets.
And and so from a business perspective that actually makes a lot of sense.
Number one, number to the, you know, to the extent that I think must rhetoric around Free Speech are, would are legitimate and he put it in his offer letter.
So it sounds pretty legitimate.
He’s Gonna face real obstacles within Twitter.
Like, I that’s from everything.
I understand about Twitter internally.
That’s no, they’re not receptive to that.
And so given those two factors.
I’m not surprised.
This happened is also sort of foreshadowing, right?
When he, when he didn’t take the board seat, didn’t take the restriction on his ownership.
And when the CEO of Twitter is like, there’s going to be distractions ahead.
Well, here you go.
Here’s your distraction.
So sorry, that was that, was it?
That was a long drawn-out answer, but there’s one interesting.
Piece is going on here.
Yeah, there’s two.
It is at least two pieces.
I want to nibble on a little bit.
It seems like you’re analyzing this from a pure business perspective and I think that’s important and also from a cultural perspective which is how a lot of people on Twitter are reacting.
How is this going to change the culture in which I marinate?
Informationally every single day.
I think you’re one of the great initial observation when Ilan first dipped his toe in the water, which is that there’s always been this fat.
This fascinating disconnect between Twitter’s value as a business about 30 billion dollars and its impact on the world, which is mess.
If it feels like orders of attitude higher than its market cap.
No, I think Twitter is the most impactful product in the world.
I really how?
And, and, and the reason is because, you know, used to be in, sort of the analog era that this sort of head of the food food chain, was the New York Times, right?
New York Times, do they talk about you write that?
Then we have the evening news, then read every newspaper in the country, the next day and it sort of set the agenda for the country and broadly for the world.
We have a situation here where the New York Times and everything else is Downstream from Twitter.
Stuff happens on Twitter and Twitter is Not just where stuff happens.
It happens again at the head of the media ecosystem.
That’s why even though Twitter, only a small portion of the population is on it, what happens on Twitter affects everyone via the media but it also has this effect where Twitter because everyone’s on it, whether it be sort of academics or whether it be like journalists or those are the sort of that the heavy on inside there W people in Tech.
It has this sort of harmonizing effect where people sort of Of move at in unison.
And these different directions, you get these sort of mass sort of movements.
And so you have things, whether it be this, this wave of support for the Ukraine word.
And this is not a commentary where that supports right or wrong, but the dramatic shifts.
We saw in Europe, for example, or the way that people you like this.
Nothing like that has happened previously.
Like, Switzerland gave up neutrality, right leg?
Like, it’s it in.
It was because of the popular fervor and it distorts and is Field and sort of like congealed on harmonize sort of on Twitter in a very sort of powerful way because of the spread of information, the fact everyone’s on their and and you just goes back to Kovac like why?
Why has the response to covid perhaps not been in line with the relative severity of covid?
Which is, you know, I saw some study yesterday.
The Spanish Flu is fifty to five hundred times worse, right was, but the response to covid-19.
Well, I think it happened there of Twitter.
You go back to Summer of 2020.
I think and I think like these these are sort of ground shaking impacts that that start there.
And so, you know, it the impact is absolutely tremendous.
But again, it’s a crappy business.
There’s not that many people on their, its impact is because it sits at the top of the food chain.
And and so there is this big disconnect where, you know, this distance, always existed to a degree, like, billionaires would buy newspapers for a reason, and we’ve seen that Because the, you know, but it’s even magnified even more.
So, in the case of Twitter, yeah, you said so much that I think is so interesting, you know, the Cass sunstein has pointed this idea.
He calls group polarization, which is the idea that if you take a bunch of people that have an opinion on anything, you know, to be climate change, the covid could be, you know, whether or not, you’re honest and serious MVP and you put them in a room together, their views will radicalize because simply by being around people who seem to share the same.
It will discourage the softer views and it will encourage people to speak up more strongly.
And Twitter is just this extraordinary bonfire of group polarization.
Its this petri dish of micro revolutions, whether you’re talking about epidemiology and pandemics or what people should think about Ukrainian, or what people should think about Donald Trump or AOC and you see this over and over again, and I totally agree with you that for good.
And for ill, and we are not going to do a whole Drive on cashing out.
Now just as great analysis and nothing normative here.
It’s just extraordinary the degree to which you see this group polarization.
These micro revolutions on Twitter and I think you’re right that for that reason.
It might be one of.
If not the most important player in the entire information space.
I want to go back to the business.
You mentioned, the Twitter is not like television.
It is not a Leanback experience where you just sort of sit in the couch and lie back and let the ads for F-150s wash over.
Or your face.
It’s a lean forward textural experience.
It’s almost like an academic Journal, which like doesn’t have a lot of like glossy ads in it, you know, and I think that’s really interesting.
So, what is Elon do you think going to do on the what what might he want to do on the business side?
Because Twitter will always be this Lean Forward experience, which means it’s not ideal for supplementing with advertising Revenue, but at the same time, turning it into a subscription business is going to cut against its role.
As a digital Public Square of sorts.
So what plays are available for him to raise the market cap of this company that you and I agree is severely under priced relative to its cultural impact.
I mean, it’s a good question.
I do think the, the I mean musk has made comments in line with other comments that I think Jack Dorsey is made about this idea of there being Twitter, the service and then lots of manifestations that service.
And so this is a way around like well, some people don’t want to see this up on Twitter.
Some people want to see this stuff.
Well, what if there’s Multiple clients, multiple ways to sort of consume Twitter, where Twitter actually backs backs, into being more of a protocol and there’s different ways to experience it.
And so, that’s number one.
There’s all this data on Twitter, like, Twitter sort of gives it stayed away to Google.
They do have modernization agreements with different with different things.
With where you can buy, like the Twitter feed and just consume the data and, you know, Harvest insights.
I think there’s a lot more potential there.
And I think there’s an aspect where I think the description business bit underrated.
I mean, I wrote an article advocating for that and a lot of pushback, which is very fair and very right, is that, while, you know, people aren’t going to pay for this, right?
Like the, and if you, and if you charge a price for it, or that it’s going to sort of, you know, reduce the impact because no one’s knows Get No One’s Gonna Pay, but you think about it, Twitter’s Irreplaceable?
Right, that we do.
And I could sit here and talk about all the problems with Twitter and meanwhile, as soon as we’re finished.
We’re going to both get back on Twitter and stuff without you.
I saw these people online who were look, they were definitely left of centers left of center too far left to Center.
Who said, if Elon Musk buys Twitter.
I am leaving Twitter and I was like, are you?
Are you really?
I don’t think you are.
You’re is addicted to this thing.
Is I am.
And also for people that are in the media space.
It’s not just an addiction.
It’s not just alcohol.
It is a newspaper.
If you curate your Twitter list, it is an extraordinary tool for unemployed.
And being fed information from Corners, you never would have looked for like I’ve compared it before online to a library with a food fight in the basement.
Like you walk into the library and you want to like go up two floors and learn about the world that people get stuck in the foyer.
They get stuck in the basement.
People are throwing tomatoes and pizza and they’re like, oh that’s fun.
I’ll throw tomatoes and pizza, but if you can find your way beyond that foyer into the elevators and go up in the library Stacks, it is an unbelievable resource of knowledge and people like you and me are just in the business of of accumulating knowledge as so many others are.
So I can’t imagine as well to be.
She ideas, you could do to.
I mean, like imagine, if you start out for free and the price, you pay for Twitter increases, the more followers you have, right?
Are you gonna walk away like, I’ve 230,000 Powers whenever I’m gonna walk away from the no, of course not.
I mean, I like right, it’s Priceless.
So, it’s not portable.
You can’t, it’s not like sound like sub stack, but you can take your email list and take it home to ghost.
You can’t take your Twitter followers and move them to I don’t.
And we see It’s with the, we see this with people on the right, trying to start their own Twitter quotes, right?
Like completely get in the water.
And because you like the network effect is a real.
It’s a powerful thing and also people want the food fight.
No one actually wants to hang out on a network that’s only their side.
They wanted their like part of the whole point is to be there and interact with the other side and pretend like you’re actually really mad about it.
When actually, it’s all you want to do all day long.
I mean, there’s a lot of sort of revealed preference on Twitter.
Yeah, very different than when people say their actions, Alai, something different.
And so I mean, but again, all this sort of stuff, you’re not going to pull it off as a public company.
And again, I’m not sure.
This is the driving force for Elon Musk.
I mean again because of this disconnect, you have a situation where someone can use a fraction of his net worth, you know, or I mean, I’m buying it as a larger fraction, but it’s still a fraction of his debt worth, you know, because he wants to have it more free speech or or whatever.
His agenda might be.
But I actually do think there are There are business possibilities here and at the end of the day, the one that weird things that get about about Elon Musk.
I was just in this chat group and someone is saying how about how much they hate him, and I’m like, what?
Like, at the end of day, like, Tesla is a remarkable, accomplishment SpaceX is a remarkable accomplishment.
And by the way, one of the single most important strategic assets, the US has like he’s single-handedly has saved our rear end as far as like, the future military conflict and space in all these sorts of things.
There’s all this do.
You’ll use applications SpaceX that no one thinks about her talks about.
And yeah, he’s done some dumb stuff online on Twitter in particular and said some stupid stuff, but can we have like a weighing of the balance here of, like, the what has been done?
And what hasn’t?
And yes, you had government contracts.
It still has those were available to anyone.
Like there’s a there’s, there’s a reason he’s the one that actually pulled it off and other people didn’t.
But these, for some reason, he’s become this totem, particularly like being on like a Wing or something.
When his greatest accomplishment is is starting a company that reduces greenhouse gases.
I mean, it’s it’s very, it’s very weird.
It’s a very easy fashion and guy and I agree.
I think that, that, you know, doing the whole cultural equation, is a little bit difficult because on the one hand, this is a genius.
Who lapped NASA, while on the side building, the most valuable car company in the world and also is a dick on Twitter.
Like all these things are true.
And I think it’s important to just like put them all out in the sentence.
I will say this is a point.
That’s been made on this podcast before I think you met have made it too.
I think Kevin ruse was the one who brought it on a, brought it up in a previous episode.
The fact that Elon Musk codes as conservative, or at least anti-liberal is good for climate change, because it codes his product as anti-liberal, which means that conservatives are more likely to buy electric F-150s, which is not something that was being talked about 15 years ago when electric cars refer people in Berkeley with Birkenstocks.
Tesla’s, great Triumph is making electric cool.
Well, I like In people forget, I mean, we’re old enough to remember, this isn’t, this is a stunning transformation of the entire concept.
Like, like they gave me in this is the mosque in a nutshell, right?
It’s like, if you index on the, the latest thing, or the current thing, it’s it’s a more complicated story, for sure.
All right, very last question for you.
And thank you so much for staying up late for doing and doing this.
What’s the most interesting thing about the SEC letter itself that Elon Musk scent and what should it tell us about the next shoe to drop here.
No, I mean the most interesting thing is that must-haves from the moment.
He is share, was announced.
He had total control of Twitter.
And the reason is because Twitter had this huge jump in stock price that was predicated on Elon Musk, only 9% of it.
And the implicit threat that If he exited that position one that gains in to go away and to it’s actually probably go lower because it’s not just that musk left his position.
It’s that he implied.
He doesn’t have trusted management.
Well now it’s explicit.
He’s like Twitter is worth a lot.
It needs to be private management stinks and and he’s Lenny and so he offered like a 20% premium over Twitter’s price, you know yesterday, which is a very small amount for a hostile takeover.
But as he noted that’s actually a 54% Mium over when he started buying in a 30-some percent premium of when he announced that he was a shareholder, and, and he said, like, under the current management.
It’s not worth that much.
I’m going to sell.
And so it’s not just, it’s not just that he’s offering, you know, Twitter’s accept this price.
They have to realize, if they turn it down, Twitter’s stock pricing be cut in half if not more and so he kind of has them, you know, I mean honestly from a from a fiscal Financial perspective.
It’s very hard for me to see why Twitter showing accept this and this isn’t a this Isn’t a company that it has great growth.
The stocks been flat for ages.
I mean, it, like, I’d be dying it, but at the same time, Twitter does have poison pill.
He can’t go in and get a new board elected.
They can issue as much as they want to counterbalance his majesty very quickly for those of us who aren’t obsessed with succession.
What is a poison pill provision?
How does that work?
There’s so there’s lots of stuff you can put in your bylaws that basically make it very hard to do a hostile takeover, like you could imagine most Most of the time that there would be some situation where, you know, you just buy a bunch of shares and you put or you make an offer and then you call a shareholder meeting and say put it to a vote.
Cheryl should vote, who gets to decide, you know, should we accept this offer or not?
A poison pills, make that impossible, so they can stop shareholders from calling shareholder meetings.
Only the board in called meeting the board Is Not Elected at all at once.
They’re elected in different terms.
You’d have to call multiple meetings and select multiple board members.
Can authorize blank check preferred stock which basically means they can issue new stock that says oh this stock has Preferred voting rights.
So every stock is worth 100 votes compared to regular stock.
They could give that stock to management and say, oh not lose.
Hope now we all voted you.
So, like, basically, it’s basically impossible and this is sort of the sort of stuff that it’s to disclose their 10 case.
Because in the reason, they disclose it, as a risk factor is having these poison pills makes the company West valuable, right?
And right company less valuable because for everything.
Seeing right now, right here, at Elon Musk, can essentially apply his 54 percent premium, to, to the company’s value and help shareholders.
That’s so interesting, so great, and it’s a risk factor because now they can cover the rent.
When they reject it and Cheryl’s can’t sue them.
Because, hey, it was in the 10K.
Who you knew this was a risk of buying Twitter stock.
So tough luck, but if you’re betting this, right?
This, this podcast, unlike my boss’s is not sponsored by FanDuel, but if you were, if you were doing the odds in Vegas, you’re saying that the Musk’s acquisition of Twitter now is, is, is the highest odds bet.
Is the best.
I don’t know.
I don’t know.
I mean, this literally just broken like like an hour ago.
I would guess that it probably.
I’m going to say it does not happen, but But I don’t know II.
Really don’t know.
I’m being I’m being a terrible analyst here.
I’m going to say it probably doesn’t but it radically because good analyst by pointing out the fact that this is actually just extremely uncertain because the company’s 10K makes these kind of Acquisitions unlikely, but also you’re looking at the richest man in the world who happens to be very determined as evidenced by the fact that he napped.
Well, that’s a little from the fact that like like Twitter’s board, despite.
They have this ass-covering position, does have a new series duties for their sake.
And it’s hard for me to imagine a scenario where Twitter stock price reaches this level anytime soon.
And so, maybe they just should do it.
And, you know, the other reason why musk has been effective here is obviously must can just walk away.
I mean like it and, and he can walk away, and you can sell his shares, and he’s not going to lose that much money because he bought the shares when they were cheap and that is precisely why he has the board in a tough place because he is, you know, there’s a term batna.
Best alternative to negotiated agreement.
Must Just batna is very high.
They can just walk away.
And that’s why he can like he Weber’s them to this position and they’re going to have to make a choice and Thompson.
Thank you so very much.
I appreciate it.
Take a man.
Good talk, many thanks to Ben Thompson for pop it on the podcast.
There’s two other issues that I want to flag at the end of this emergency podcast episode, which is not or was not as as formally structured as a typical episode is because this news was was so late breaking.
Issue number one is exactly how Elon Musk will finance this acquisition.
He doesn’t have the cash literally, like money in a checking account, cash to make this deal.
He would have to sell stock that stock would likely come out of his Holdings of say, Tesla and SpaceX.
Or it could come from coal financers.
It’s a big open question.
What the acquisition of Twitter if it comes to pass?
Would do to the public stock values of SpaceX or Tesla.
If its largest shareholder sells out of those positions, or who exactly would join Elon Musk to outright by Twitter.
Even as musk is making allusions to the fact that he might gut, its business model advertising.
In order to shift it toward what Ben was talking about.
Some combination of Ian’s and data services.
The second issue.
I think it’s going to be a really, really loud part of the conversation about Elon Musk and I’m not exactly sure how I think about it yet is what happens if the world’s richest person becomes singularly in charge of the world’s most important information platform.
And that was Ben’s I think entirely credible case.
But in many ways from a Discourse standpoint.
Twitter is the most important information platform in the world, even though that importance is not reflected in its market cap.
What happens if the world’s richest person is singularly in charge of that platform?
I don’t know.
But you bet that we’re going to have a reboot of Gilded Age style conversations about exactly how much power is too much power for the world’s richest people, and how Financial power cashes out as cultural and political power, when they have this kind of influence over.
So those are two issues that financing question, which I think is up in the air and the cultural question, which I think is going to be chewed on for, as long as this new story is in the cycle.
That’s all from us today.
Thank you for listening.