Why will the price tank? None of this changes the value of Twitter if he walks away.
for example at market close of $45.08, the market is betting there is a $45.08/$54.20 = 83% chance that this transaction goes through.
there are certainly individual stockholders who are buying because they like his involvement, but that is tiny compared to people buying and selling a very near-term bet
This assumes the price without the transactions goes to $0.00!
> The social media company’s shares were little changed at $45.81 in New York on Thursday, a sign there’s skepticism that one of the platform’s most outspoken users will succeed in his takeover attempt. -- Bloomberg
So while the news of a major stakeholder with the power to join the board and affect how things are run did cause a significant blip in Twitter's stock price, the attempt to buy it outright doesn't seem to have affected things much. Even if we (incorrectly) assumed that all of the rise from ~$40 to ~$45 is associated with the possibility of Musk paying $54 a share, that suggests the market assigns only a ~36% chance of the deal going through.
Musk’s recent stock purchase and discussion about joining the board made the price jump significantly. You’re right that there’s no obvious reason that his involvement should change Twitter’s value, but the market appears to think otherwise. If he walks away, at a minimum, I would expect that the stock price will drop to what it was before he started playing around.
But if he walks away, I believe he’ll also do something to make the stock drop more. For instance, he’ll stop Tweeting, which should have a measurable impact on the number of people actually using Twitter regularly.
There are that many people whose engagement depends entirely upon whether Elon Musk is actively tweeting? I don't use Twitter much, but that seems pretty amazing if true.
2. The market observes a very capable businessman, after discussion with management, deems it incompetent and value-destructive.
3. Said businessman, with a track record of remarkable success in a variety of ventures and demonstrated skill with social media, may launch a competitor service.
All three of these are bad signals for Twitter's future cash flows.
He will start something to compete against Twitter.
Twitter will be stuck with their current management and cultural problems.
(By “nobody” I mean both nearly 0% of users and only people who will not be missed on Twitter)
Meanwhile any number of near-exact replicas of it exist with a different flavor: freer speech, paid service, decentralized, specifically for particular political affiliations to name a few. None of them have made a dent.
I don’t claim to know exactly what it takes to successfully achieve this but one or even several content / creator verticals won’t cut it IMO.
Twitter won’t be destroyed by someone making a slightly different Twitter clone, it’ll be destroyed by something that re-imagines entirely in a way that also supplants it, and it’ll probably come from someone we don’t know yet.
Pop culture places MySpace somewhere contemporary with the rotary phone, but there were undoubtedly people who heard of and used The Facebook first.
Gettr seems to be making positive inroads on the conservative/libertarian population, particularly those for whom twitter is not an option due to previous banning/shadow-banning, and de-boosting.
As I expect there to be consolidation between truth social, gettr, parler, and others, think this will only get stronger.
Part of this is also that younger populations are preferring tiktok to Twitter imo.
If the board acted against the usual shareholder interest (to make money) by turning down an offer 54% above premium, would it not be easy to claim that the board is not in it to make the average investor money on $TWTR?
Therefore, wouldn't the value of $TWTR as an investment be far far less than companies who do make it their primary goal?
That's not to even mention the 9% of Elon's stock that he claimed he would now sell.
In reality though, the shareholders are a giant mob of people with wildly varying views about Twitter’s place in society, its true value as an asset, its ability to achieve its true value, and just generally what the best way to “make the most money for the shareholders” is. So I don’t think it’s an open-and-shut case that the board betrayed the shareholders. It’s probably a muddy case that’ll play out in court over months or years.
Does management want to maximize the value of Twitter? Er, no. Management wants to maximize some combination of their compensation, their agency controlling a company, and their social capital controlling a social media platform. Maximization of shareholders' value is a legal objective to which management must pay legal lip service, but it is not in any way shape or form the interest of management, save insofar as management compensation is related to share price.
If management cared about shareholder value, it would not have induced the board to enact this poison bill nonsense.
Shareholders can appoint, remove or replace directors, or even the entire board.
But at the end of the day, if the board thinks that Twitter may be worth more long term than what Musk is proposing to buy it for, then it’s perfectly reasonable to argue that it’s in the shareholder’s interests not to sell it.