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Comment by williamsmj | Hacker News Reader

This is standard operating procedure for takeovers, but I think you're massively overestimating the amount of pressure someone selling 9% of the company places on the stock price. Someone buying 9% (with an expecation that they would buy more) moved the stock $10. The same person selling 9% stock (with no possibility that can sell more) is unlikely to move the stock more than that.

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Twitter is selling at $45, a $10 move is 22%. That's insane pressure.

I think you should look at the historical volatility of TWTR before calling a 22% move "insane pressure".

It's also worth noting that the stock price is almost unchanged today as of this writing, which tells you that the market thinks he's not serious, or his lowball offer is going to be laughed out by the board, which significantly reduces the amount of "insane pressure" he's exerting.

What does historical volatility have to do with it? If Elon can basically manipulate his investment into a 22% return why on earth wouldn't he do that? A single person able to pressure a single commodity to the tune of 22% is bonkers.

I'm not debating whether that will happen, just contending your first statement.

It's not just any single person.

I agree it's bonkers that this is possible. I agree, in an environment where the SEC seems unable to stop him, Elon Musk might well consider 22% return worth doing. None of that is relevant to the point I'm making.

I'm contending the claim that the implicit (and completely pro forma!) threat in his SEC filing places "insane pressure" on the Twitter board. The the possibility of a 20+% stock price change will not play a large part in their calculations. It's just not a big deal in the context of such a volatile stock.

Don't you think he would lose a lot of reputation in future deals like this? I wouldn't trust him.

He hasn't needed any trust to go this far, his MO here is more of a hostile takeover, and he doesn't need any permission from Twitter to do it.

Good point.

Because the existing volatility sets the tone for the underlying risk tolerance that shareholders already deal with. It sucks, it’s not insignificant, but I do agree it’s not immensely significant as you are making it seem. It’s just the exposure a public company on the market can have have these days.

He can't manipulate it into a 22% profit, for exactly the reason you articulated. His buying pushed the price up - his selling will push the price down. He might might make a small profit from the increase his buying news generated if he were to sell now, but his VWAP would be well below 22%.

It’s a cascading effect though. 9% sell off. Ticker drops by some value. This then triggers stop losses, and another set of sell offs. It goes down the line until retail is left holding the bag.

I disagree. The fact that someone is willing to buy a stake in a company suggests the company has some potential. The fact that someone having bought a company is willing to dump their entire ownership so quickly suggests the company may be rotten from the inside. The latter would exert a much stronger downward pressure on the stock, in my opinion.

That makes sense if you assume Musk has learned something shocking about Twitter from the inside in the past couple of weeks. How likely is that?

It seems spectacularly unlikely to me that a demonstrably impatient person with a pre-existing thesis about Twitter would take the time to investigate and learn new things about its product/financials/culture/governance.

It also seems unlikely that a person with a known strong stomach for legal and ethical "flexibility" would be especially bothered by anything they did learn, assuming they took the trouble. But YMMV.

His point is that it will look like Elon didn't like what he saw and changed his mind, it doesn't matter what he truly saw.

"Musk, what do your Elon eyes see?"

"They're taking Twitter to Isengard!"

As a hypothetical investor on Twitter, would you be willing to take that chance?

I do think something like twitter longterm could a big play at something like authenticity verification in the world of deep fakes, similar to what keybase was trying to do but they already have traction with public figures

> suggests the company may be rotten from the inside.

Even if there are 0 actual facts open to the public that prove this, the optics suggest that this narrative can be made. He moved the stock 30%+ in a few days by publically buying in. If he sells it, why wouldn't it give up all of the gains he brought (and maybe more)?

I don't know what he thinks he stands to gain by buying Twitter. Can a rocket scientist/electric car guru really get into tweets + advertising?

Why do rich people buy newspapers and media conglomerates? Why did Jeff Bezos "get into journalism" via Washington Post? There is your answer.

Washington Post can control what is posted through journalists, etc. (digital or not)

Twitter is like... an aggregator of a bunch of people tweeting. The people tweeting aren't being paid by Twitter to tweet (like journalists are for Washington Post, even if it's like $75 for an opinion piece/basically blogspam)

I feel like that's a pretty big difference?

Twitter can control what who can post and who cannot (remember Donald J Trump being banned?).

Twitter can control what is being read by deciding what is promoted by their algorithms and what gets buried down.

These are just few examples. We can't pretend that Twitter is a fully decentralised service and that there's no one pulling the strings.

To strongman the case for him running twitter, he clearly has significant experience and success with running large engineering oriented companies - which is the primary job of twitter executives. Both Tesla and SpaceX have significant software organizations, and he also has experience in running a pure software company back when he was involved with paypall. As a heavy user of twitter, and the de-facto PR person for Tesla and SpaceX he also has a good understanding of the product, both from a normal users perspective and a marketers perspective.

That said, I don't think this is primarily about buying twitter being profitable, but that he is motivated by a mix of politics, fun, and funny. I also don't think he's likely to get that into the day to day of running twitter, just because he's already busy with Tesla and SpaceX.

> running large engineering oriented companies

I don't disagree. It's just that... what are his plans for Twitter? Add an edit button? Tweak the algorithm that delivers timelines? None of that is really complicated. Those could be 6 month roadmap projects.

> but that he is motivated by a mix of politics, fun, and funny

1/3rd of his net worth on a company seems odd.

First, it’s more like 1/6 his net worth. But I don’t believe the proportion means anything at that level of personal wealth. He’d still have the other $210B, plus ownership of Twitter. Each of those other billions is worth a billion dollars. Almost everybody could make do with just one of them, and he’d have over 200 of them. Even luxury goods don’t scale up to that scale. All he can really do with that is buy companies anyway. And Twitter is what holds his interest right now.

It seems like Twitter's barely done anything new since going public over 8 years ago. Making a UI that was actually usable for following conversations would be a good place to start. What are all these product people doing? (I'm a small TWTR shareholder. It's one of my worst tech investments.)

Kara Swisher said this 4 days ago: https://twitter.com/karaswisher/status/1513370798815330307

Twitter likely decided to not allow him onboard just because of his constant shitposting about the company, his volatility, and really just wanting Twitter to be his sounding board for whatever offensive things he has to say, so they're trying to ensure he can't try and takeover as we speak.

Okay, but it's Elon Musk selling 9% of a company's stock.

The dude makes stocks move when he tweets memes. I think it's fair to say he's got some... extra pull.

He demonstrated precisely how much pull he had when he bought 9%. It's about $10.

No, that is not how that works.

How does it work?

Whoever knew that stands to make a lot of money.

What we do know is that it's not a 1 to 1 mathematical if one buys 9% it moves 10$ if one then sells 9% if falls $10. This has historically proven over and over.

The price moved from $33 to $40 as he bought the shares[1]. THEN it moved from $40 to $50 when he announced that he bought the shares on April 4th.

Hard to say what the stock would have done without the purchase, but Musk has both the threat of dumping his shares on the market AND the threat of him announcing that he's dropping his shares. A case could be made that he has at least $17 of influence on share price, but my guess is that the market frenzy will drag it lower if Musk backs out.

1. Purchase began March 14th 2022 https://www.sec.gov/Archives/edgar/data/1418091/000110465922...

Note: Please correct me if I misunderstand the meaning of the filing. I read it as Musk began buying up shares March 14th, and finished near the end of March, then reported Friday/Monday April 1/4. I don't think he bought and announced the same day. Musk owns ~73M shares, and trading volume was ~15M on the 13th, then jumps to ~35M/day over the next few days before settling down at ~15M/day again. https://finance.yahoo.com/chart/TWTR#eyJpbnRlcnZhbCI6ImRheSI...

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