Social media is buzzing about Elon Musk’s move to take over Twitter lately. He has been very vocal about it with his 94+ million followers. At first glance, one would think this was a decision based on a whim. I think it goes much deeper than that and it has probably been in the works for quite a while. If you will recall in the first installment of “Elon Musk” he explains how he uses the Scientific Method when making business decisions:
1. Ask a question.
2. Gather as much evidence as possible about it.
3. Develop axioms based on the evidence, and try to assign a probability of truth to each one.
4. Draw a conclusion based on cogency in order to determine: Are these axioms correct, are they relevant, do they necessarily lead to this conclusion, and with what probability?
5. Attempt to disprove the conclusion. Seek refutation from others to further help break your conclusion.
6. If nobody can invalidate your conclusion, then you’re probably right, but you’re not certainly right.
“That’s the scientific method,” Musk concludes. “It’s really helpful for figuring out the tricky things.”
His tweets appear reckless and off the cuff but I suspect they are very strategic. It reminds me a lot of how President Trump used his Twitter account. Musk has made it clear through his tweets that he is a proponent of freedom of speech and has some specific ideas of what a social media platform should look like.
He began tweeting in June 2010 announcing his arrival on the platform. He didn’t tweet again for 18 months and then tweeted “Went to Iceland on Sat to ride bumper cars on ice!” Only 30 people replied. He was on the platform almost daily by 2015 but mostly tweeted about Tesla and SpaceX. By 2018 he began responding to fans and critics, and he was tweeting on average of 6 times a day. Someone then asked why he spent so much time tweeting and Musk replied “Because Twitter is fun.” Now, thousands of people reach out to him almost every day hoping to get a response. His attention usually goes to a few prominent supporters on his feed.
If you look back at some of the moves he’s made in the last few months, you can see that he was positioning himself quietly and discreetly. His Twitter stock purchases did not become obvious or made public until he had acquired a 9.2 percent stake in the company worth approximately $2.9 billion. Is it possible that he could have acquired enough Twitter stock and become the largest individual stockholder without anyone in the news or tech industry getting a whiff of the move?
The regulatory filing was posted on Monday, April 4th. Only about a week before the filing, he tweeted "Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy," and "What should be done?" He went on to say "Is a new platform needed?" Elon was asked on Twitter about creating his own social media platform and responded by saying he had considered it. He has been very critical of Twitter, regarding freedom of speech, shadow banning, and algorithms.
The day before this tweet, he conducted a poll about Twitter. Elon loves his polls and he takes them seriously. Over 2 million followers responded with over 70% voting NO when asked if Twitter rigorously adheres to the principle of free speech being essential to a functioning democracy. I knew he was up to something when he made it clear that the consequences of the poll would be important.
Somewhat of a timeline
In a Yahoo Finance article dated Nov 11, 2021, it was reported that Elon dumped, or sold $6 Billion in Tesla stock. This was after he posted a Twitter poll asking if everyone thought he should sell 10% of his Tesla stake and promised to abide by the results. 58% said yes. Musk made good on his promise. Was this part of the plan to reinvest in the purchase of Twitter? I think the decision to take a controlling interest in the platform went back at least that far and probably months before that.
Regulatory filings made public late Wednesday revealed that Musk exercised options Monday and then sold about 2.1 million shares of the TSLA stock he received to raise $1.1 billion in cash to pay taxes stemming from the transaction.
Interestingly, the option exercise and sales were pursuant to a Rule 10b5-1 trading plan. Insiders are required to adopt such plans so as to not run afoul of the Securities and Exchange Commission. The trading plan was filed with the SEC on Sept. 14, or well before Musk's infamous Twitter poll of Nov. 6.
It's also worth noting that the options were not set to expire until August 2022.
On November 24th, he sold another $1 Billion worth of Tesla. RTTNews reported he had sold a total of $10 Billion worth of Tesla stock in November alone. “Musk had hinted multiple times that he would have to pay 50% in taxes if his stock options expire at Tesla.” On Dec. 14, Musk sold off another round of his Tesla stock.
According to Forbes, Musk only sold Tesla stock twice before selling off in November 2021.
The first round of offloading shares happened in July 2010 when Musk reportedly sold just over “1.4 million shares for a pre-tax total of $24 million.” Then, in 2016, the Tesla founder sold 2.7 million shares priced at $213.22 each, which allowed him to collect a little over $593 million “to cover taxes for options he had exercised.”
Musk sold a total of 15.7 million shares by the end of 2021 bringing his federal tax bill for the year to $10.7 billion. Those numbers are way over my head. I am not even going to pretend that I understand how it all works and it doesn’t appear that I’m going to learn in the time that it takes to write this article, but apparently he has bought shares back and now owns more shares outright than he did at the start of his trading spree. Since this is only the 3rd time in 12 years that he has sold off Tesla holdings, I think it is part of his plan in buying Twitter.
He still holds more than 163 million shares of Tesla stock or almost 16% of the shares outstanding worth over $116 Billion. Vanguard is the No. 2 shareholder, holding 6.29% of the outstanding stock.
The Twitter board of directors announced on Tuesday, April 5th that Elon would be joining the board. The CEO, Parag Agrawal said in a tweet that through “conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board.” Musk also tweeted that he was “looking forward to working with Parag & Twitter board to make significant improvements to Twitter…” From these statements, it appears that Twitter had been aware of Elon’s stock purchases for weeks and had been in discussions. Joining the board would require him to keep his stock holdings of Twitter to 14.9%. By Saturday, April 9th, Musk would reject the offer, the same day it was set to become official. I believe he had much bigger aspirations all along. The CEO made this announcement:
Musk then made a takeover proposal, asking to purchase Twitter for $54.20 per share, or a total of $43 billion. In a letter to Bret Taylor, Twitter's chairman, on April 13, Musk wrote that if the offer was not accepted, he would need to reassess his status as a shareholder. He made it clear this was his last and best bid. Once the offer was made public, he immediately shared the document on his Facebook page with the post, "I made an offer." On April 15th, Twitter said in a statement that its board of directors had unanimously adopted a ‘poison pill’ defense in response to the proposal. This would allow the shareholders to buy the stock at a discount and would be triggered if anyone purchased at least 15% of Twitter stock without the approval of the board.
The next day, on April 16th, Elon tweeted “Love me tender”…
Was this plan B if the company rejected his bid? A tender offer is made directly to the shareholders usually above the current market price. He was letting the board know that he could bypass them if rejected. Musk has also made it clear that he wants to take the company private. He said that the company would save $3 million a year if the board was dissolved. Board members receive a salary between $200,000 and $300,000 per year for a part-time job. No wonder they don’t want Elon buying Twitter and taking it private. That easy money would be cut off.
One of the directions he wants to take the company is to authenticate users and get rid of spam and bots. This is not impossible, after all, Truth Social has no spam bots that I’ve seen since the beta version rolled out in February.
It has recently been reported that half of all Biden’s 22 million followers on Twitter are bots. That would not surprise me in the least if that were true.
On May 2nd, Twitter estimated in an SEC filing that false or spam accounts (bots) represented less than 5% of its daily active users during the first quarter. An article by SparkToro titled SparkToro & Followerwonk Joint Twitter Analysis: 19.42% of Active Accounts Are Fake or Spam, blows the Twitter estimate out of the water. Most conservatives on the site have been shouting this from the rooftop for a very long time.
This fight is not over. Not only is Elon Musk trolling Twitter, but he is exposing the corruption for the world to see while having fun doing it. I am sure in the process he is driving down the price of their stock. NYSE shows Twitter stock at $37.77 at the opening of trading on Friday, May 20th. The price has dropped dramatically since Musk’s offer of $54.20 per share. This is half of what it was a year ago at a little over $73 per share.
Jack Dorsey, co-founder and former CEO of Twitter, seems to be applauding the acquisition. He had this to say, “Elon’s goal of creating a platform that is “maximally trusted and broadly inclusive” is the right one. This is also @paraga’s goal, and why I chose him. Thank you both for getting the company out of an impossible situation. This is the right path...I believe it with all my heart.”
I am sure this saga is far from over and we will be seeing a lot of twists and turns in the near future. I was hoping to end the Elon Musk series here, but it looks like this story only gets better as we go. Trump has even jumped into the conversation somewhat so I better get my popcorn ready. This movie is about to get good.
Thank you SuperNana. Very informative and well written. That was a lot of digging and research.
One can see this is certainly part of a bigger and coordinated play.
It’s coming together!!!!
Thank you SuperNana, for all the research you have put in this substance! I am seeing how he is part of the bigger picture. Upward and onward!