Elon’s Next Moves

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Welcome back to Dry Powder.

In today’s note, I attempt to untangle a Twitter mystery: Why does Elon Musk, after masterfully cornering the Twitter board into a deal, seem to be searching for a way out? It’s a sight to behold—watching a businessman of his stature grabbing defeat from the jaws of victory. Here’s what to expect next.

Bill

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Elon’s Next Moves

After brilliantly orchestrating the initial stanzas of his Twitter takeover, Elon Musk has now ceded much of the power back to the Twitter board. Where will it proceed from here? A lower price? A hostile takeover? Lawsuits galore? All the above?

WILLIAM D. COHAN

In order to fully comprehend our current juncture in the Twitter saga, it’s worth recalling how masterfully Elon Musk performed the first few stanzas. Between January and March, he stealthily accumulated a $2.64 billion stake in Twitter, which gave him more than nine percent of the company. Nobody had a clue he was doing this, except probably for the Wall Street traders who helped him do it, and they were smart enough to keep quiet. Then he filed his paperwork, fended off a feckless poison pill, and pulled together, seemingly effortlessly, the commitments for the $44 billion he would need to pay the Twitter shareholders that $54.20 per share in cash that he promised.

Elon was a total Jedi. He arranged for senior debt financing. He arranged for his margin loan on his Tesla stock. He committed to providing $21 billion of equity, without naming the sources of that equity. And he elegantly put the Twitter board in a position where it would have no choice other than to accept his offer. After all, there would be no way that Twitter’s financial advisers—Goldman Sachs, JPMorgan Chase, and Allen & Co.—could legitimately argue the deal was not fair to the Twitter shareholders from a financial point of view.

And of course they didn’t. The $44 billion was an amazing deal, especially for a company that at best was making $1 billion of EBITDA a year. Forced into a corner by Elon’s chess moves, the Twitter board quickly capitulated...

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