Malt Liquidity 59

Some quick thoughts on Twitter

Elon, I Guess

I hate to add on to the pile of cold takes that surround everything Elon does, but it’s also impossible to be a markets newsletter that doesn’t give you a push notification on something Elon’s done.

The first thing that struck me about Elon’s share purchases of Twitter (before the offer to buy Twitter, but more on that later) was that this is the first time I’ve seen a tech luminary deliberately swerve into someone else’s lane. You know, Zuck has his thing, Jack had his thing, Tim Apple was making his own business… but now Elon owns 4 times as much of Jack’s thing as Jack does. Part of this is an ego thing, but part of it is also not investing in a potential existential threat, as a large company like Amazon is immersed in so many different businesses that one successful side investment could spell doom for Tesla down the line.

The second thing that struck me is that Twitter isn’t anywhere near the same level as an Amazon or an Apple. It’s a meandering stock that hasn’t really gone anywhere since IPO that has a borderline-malfunctioning core product given the incredible amount of bot accounts and spam present on the site. However, it holds a unique importance in the minds of all the powerful people - it has control over the popular narrative given that journalists, popular accounts feeding into podcast hosts, and an oversensitive algorithm that spams your feed whenever you interact with any active account all work together to engage you more with a product that again, doesn’t really make any profit. It also happens to be the world’s richest man’s favorite toy. Of course, the irony is palpable when the logic of the acquisition to go private being “it’s the town square”.

For what it’s worth, I find the stock somewhat shortable post-Elon bump. I don’t think it’s likely the acquisition will go through given the board, the shareholders, and the market seemed to all react negatively, and given that Elon might just dump 9% of the company if he doesn’t get his way. I doubt Twitter finds any suitable bidders that won’t run into antitrust concerns.

It’s always useful to remember when betting on mergers that you’re betting on the implied probability that the merger goes through, priced at (offer price - pre-offer price)/original premium, which makes it interesting that Twitter’s share price actually went down on the day of Elon’s offer. Either way, we will return to this topic over the coming days as I return to posting.