The most boring conclusion here (boringness on message boards usually being a strong proxy for accuracy) is that the board's initial reaction to Musk's offer was reflexive, the same way you'd push back on someone offering to buy your house based on a fixed premium from like Zillow, and that over the ensuing weeks they've managed to do the homework to evaluate the deal, and they've decided Musk is overpaying, so they're taking him up on it.
From everything I've read --- I'm not an expert and someone like 'JumpCrisscross could jump in and correct me --- is that the deal blowing up was essentially the default state, once the shareholder rights plan was put in place.
(not saying you’re wrong, both or neither of these may be true)
Part of my analysis is based on the rumor that Twitter completed a valuation over the weekend, and it wasn't super favorable. But I've got no reliable reporting that establishes that.
Either way, my real point is just that the board could easily have stopped this deal if they wanted to; in fact, they didn't even have to do anything to do stop it.
Maybe if the board had information that hadn't been published yet showing that the company's financials had completely tanked since the last earnings report it would be different, but other than that, Twitter's financials are obviously public, and even if the board used something like the DCF method and obtained a number much lower than the market cap, that has absolutely no bearing on whether they would accept a certain price from Musk.
So, no, it's really the share price that matters in this situation.
Also, even if you're purely talking about valuations, there are other common valuation methods like the comparable method that look at what similar companies have received based on their share price, so the idea that the board would decide to sell purely based on cashflow projections is not correct.
> Maybe if the board had information that hadn't been published yet [...]
Yes, Musk's bid may be overpaying, but in that case board's duty is to grab the money - and that's probably why he is overpaying.
I specifically mentioned the "market price". I don't really know how these US congress persons work, and you may as well imply that the idea that they "represent" you is as much bullshit, as Musk-assigned board member represent real shareholders (and I have no problem with this implication), but there surely must be difference (and it isn't even the fact that you supposedly voted for them): unlike congress people, who can decide whatever they decide in the USA congress, the board cannot decide the market price. At least, usually. Every shareholder wants market price to be higher, and the board members are supposed to try to achieve that, but they cannot appoint the price, they simply have no such power. By definition, it's the market who decides that. Otherwise, it isn't clear, what the "not so low that the government gets involved" is even supposed to be. I fully admit that I don't understand how this works, so this may sound silly, but it would seem fair to me that since the moment company became public, nobody ever can undo that, because microscopic pieces of that company legally belong to some random people now, and they can ask whatever price they want for their share. If anybody makes them sell at any price that's less than what they want — it's a robbery.
Now, I can kind of imagine the way this could be worked around. E.g., there must be some way to liquidate the company, and hence there must be way to execute the merger regardless of what shareholder minority thinks of that. Each company gets supposedly "fair" valuation before the merge and old shareholders get specific amount of "new" shares in exchange to their old shares, which is kinda like getting the cash, so here we go. I mean, I still cannot explain myself, how this can be considered fair and legal, but I suppose there is an explanation. But even this way, the natural way to do that seems to use today's market price. So even if 51% belongs to 1 person and nobody else can decide anything (so, he basically IS the board already), how can this person offer shareholders anything else than the market price for what belongs to them? This doesn't make any sense to me. It sounds like a robbery, plain and simple.
One of the stipulations of being a shareholder is that you may be forced to sell your shares under certain circumstances. Nothing illegal about it, even if you don’t like it.
Takeovers of UK-listed companies are subject to the Takeover Code [0] which is administered by an independent body called the Takeover Panel. The Takeover Code is actually a surprisingly readable document which sets out all the rules that the bidder, the target and the shareholders must follow. A "mandatory" takeover in the UK is triggered when a shareholder goes over a 30% shareholding - they are then obliged to make an offer for the stock that they do not own at the highest price they have paid in the previous 12 months.
Shareholders cannot be forced to sell until the bidder has received acceptances of more than 90% of the shares to which the offer relates. The board of the target will offer shareholders an opinion on the takeover price - they can either recommend or reject the offer. Typically, when boards recommend an offer then shareholders will accept but there is certainly no obligation to.
Interestingly, the Takeover Panel used to have no legal enforcement powers (I'm not sure exactly what their status is these days). To ensure compliance with the rules there was a punishment called 'cold-shouldering' - basically if you breached the Takeover Code in an egregious way, the Takeover Panel could instruct market participants to stop dealing with the guilty party. This has only been used in very rare circumstances [1].
[0] https://www.thetakeoverpanel.org.uk/wp-content/uploads/2022/...
[1] https://www.thetakeoverpanel.org.uk/the-code/compliance/cold...
No, this incorrect. Pending a shareholder vote, the board of a company can force you to accept an amount they determine to revoke the validity of your shares. If the value per share (which they decide) of a specific class of shares is not so low as to illicit concern from regulators then it's all above board.
So, once more, my question is: what is the underlying legal idea, that makes this supposedly "fair deal"?
At a guess I'd say the answers to the two questions are "they do legislate against some behaviours, but blocking hostile takeovers is worse than allowing them" and "the risk of that happening is built into the market price," but I don't actually know.
Publicly traded securities aren't the Wild West, and the real world has built up comparatively effective dispute resolution tooling like "courts," elected and appointed "judges," "regulators," and "prosecutors."
Not to mention "case law" and "precedence"
there is also the option of not letting people buy or sell stocks at all, which would resolve the same issues the mandatory sell provisions resolve
Those conditions and corporate structures should be regulated way more thoroughly, preventing legal fuckery such as this. Or share classes.
If you bought shares after the last annual shareholders' meeting, well... presumably you were happy enough with the current board members and the company bylaws to buy the shares in the first place. You did... do some diligence before you invested, right?
Someone noted the UK position required shareholder assent, which sounds like what you're saying here.
If shareholders vote that sounds 'fair'. If the board decided and shareholders are obliged to go with it as that's how shares are [in some particular jurisdiction/market] then it being fair seems of no concern to that system (as a sibling content intimated).
The board basically voted to stop standing in the way of the deal and submit it to shareholders themselves since they confirmed that A) it seems like an ok deal and B) it's likely to not waste everyone's time.
In this case, Reuters reported here https://www.reuters.com/technology/exclusive-twitter-set-acc... that the deal is subject to shareholders vote before it can be closed.
If you don't trust the board to do right by you, you are free to (and should) sell your shares.
> if you make me to sell my property ...
zwily explained above ( https://news.ycombinator.com/item?id=31162992 ) shares are not your property.
> US equities, corporate and municipal bonds can be issued in certificated form, though this practice has been largely replaced due to the costs and inefficiencies of keeping them. Rather holdings are kept as "immobilized" or "street name", with the beneficial owners keeping them in accounts at broker-dealers and banks, just as they do for currencies. DTCC uses a nominee firm, Cede & Co., in whose name a share certificate is held in the DTCC vaults. Each day DTCC reconciles with the relevant transfer agent the number of shares held in its accounts for its member banks and broker-dealers. In turn, other banks and broker-dealers hold accounts with DTCC member firms, creating a chain of ownership down to the beneficial owner.
https://en.wikipedia.org/wiki/Securities_market_participants...
When you purchase stock in a company, you agree to certain governance principles, rights and responsibilities. Those principles outline an individual shareholder's rights in the event of an acquisition.
Basically, you agree to those terms when you purchase the stock. If you don't like your rights, don't purchase the stock. If you own a stock and don't believe the governance structure has your best interests in mind, sell it.
I mention it here as I hadn't thought about this beforehand, and many examples were given in that podcast of the advantages of property (bitcoin, real estate, barrel of oil) compared to securities (shares). Less potential for conflict of interest, stronger concept of ownership and stability over time.
As for why it's fair - a share doesn't represent ownership of a company, it represents a voting share in an abstract entity. Normally these are pretty close to the same thing, but there are important distinctions - such as here. When Twitter goes private the abstract entity it used to be will cease to exist, along with all voting rights in such.
Every public company has articles of association which define the rules determining things like this. By purchasing a share you agree to those articles of association. You can’t just say “hold up I didn’t agree to this”, because you did.
A lot of work and planning goes into the sale of a company, and there are a _lot_ of safeguards to ensure such a sale isn't done in a way intended to "rob" a large amount of shareholders[0]. You don't really "own" a stock in the regular sense of ownership simply because of the absolute mass of laws and regulations that surround both what you can do with your shares and how much they're worth.
0: https://www.lw.com/thoughtLeadership/the-latham-and-watkins-...