Web Excursions 2022-05-10
Musk Stuff
last week, Musk announced that Alwaleed will not be taking the $54.20.
His Kingdom Holding Co. has agreed to keep its shares and roll them over into the new, Musk-owned Twitter.
Incredibly, Elon Musk is finally going to take a public company private with Saudi funding.
The advantage for Musk is mostly that it saves him some cash:
Paying $54.20 per share to Alwaleed for his 34.9 million shares would cost almost $1.9 billion in cash.
Rolling him over costs nothing.
Actually it costs Musk something like 6% of whatever profits he ends up making on Twitter.
But it doesn’t cost him any cash, now, which probably matters.
Alwaleed’s plan to roll his shares into Musk Twitter was disclosed in a filing last week
describing equity commitments that Musk has gotten from investors who plan to join him in owning the new, private Twitter
The co-investors are sort of a random group; there’s
fellow billionaire Larry Ellison,
venture firms like Sequoia Capital and Andreessen Horowitz,
crypto firm Binance,
Qatar Holdings, and
some asset managers who seem to be Elon Musk fans.
There is also Fidelity Management & Research Co.,
which is an existing Twitter shareholder and seems to be effectively rolling some (though not all) of its public Twitter shares into Musk Twitter.
There is an idealized model of an Elon Musk merger
People who don’t own shares of the company, but who like Elon Musk and want him to run the company and want to be a part of that, buy stock
People who do own shares of the company, but who don’t particularly want to be involved in the Elon Musk situation, sell stock
Ideally the orders [from the two groups] would exactly balance, so that all the Musk fans can get in and all the Musk haters can get out.
Then the company is 100% owned by fans of Musk and they elect him chief executive officer, Technoking, Memelord, whatever.
Elon Musk is not, I think, especially interested in owning Twitter.
He is interested in controlling Twitter.
The goal is not to make a financial model that generates a 30% internal rate of return on Musk’s concentrated levered equity stake in Twitter.
The goal is for Twitter to be
(1) run by him (as CEO, initially, and I suppose eventually by some other CEO chosen by him) and
(2) owned partly by him but mostly by a bunch of loyal shareholders who will let him do what he wants.
Musk is clearly open to current Twitter shareholders keeping their shares.
He said publicly that his goal “is to retain as many shareholders as is allowed by the law in a private company.”
The point is that if you take a public company that is mostly owned by dispersed diversified shareholders who are not directly involved in the management of the company,
and you transform the shareholder list so that it is now owned by dispersed diversified shareholders who are not directly involved in the management of the company and who all love Elon Musk,
then you can arguably create value.
You create the value by putting Elon Musk in charge, letting him do whatever he wants, and hoping that it will work.
So far it often has! You transform a regular public company into an Elon Musk passion project, and maybe everyone gets rich.
An alternative approach here would be activism
when Musk first bought his stake in Twitter a month ago, that’s kind of what people expected.
He was given a board seat almost immediately.
But he seems to have decided, I think reasonably,
that this sort of activism would be slower and more restrictive and give him less control
than just buying the company and redistributing it to more loyal shareholders.
There is already something awkward about Twitter’s biggest shareholders (and a board member!) being pitched on keeping their stock and voting to cash out the regular shareholders.
One way to address this would have been for Twitter’s board to insist on some sort of majority-of-the-minority vote,
where the merger could only happen if a majority of the shareholders who are not part of Musk’s buying group voted to approve it.
Intriguingly, one shareholder is demanding it:
Elon Musk’s $44 billion buyout of Twitter Inc. was challenged in a lawsuit
by a Florida pension fund that argues the deal can’t close before 2025
because Musk was an “interested shareholder” in the social-networking platform.
There is no indication that Musk has any sort of voting agreement with Dorsey (though Dorsey seems enthusiastic about the deal),
and it misunderstands the role of Morgan Stanley as Musk’s investment banker and also as an investment adviser to funds that own Twitter
Bomb cyclone: A blast from the past
"bomb cyclone" isn't new.
Since 1980, scientists have used "bomb" as a meteorological term for a large, rapidly growing cyclone storm system.
The related terms "bomb cyclone" and "weather bomb" emerged in the mid-1980s, but only recently made their way into popular journalism.
Two MIT scientists, Frederick Sanders and John R. Gyakum In their paper "Synoptic-Dynamic Climatology of the 'Bomb,' "
define a "bomb" as a cyclone storm in which the barometric pressure at the center falls by at least 1 millibar per hour for 24 hours--a very steep and sudden drop.
a "predominantly maritime, cold-season event," and said the "more explosive bombs" develop over the Atlantic
A phrase meaning the same thing, "weather bomb," appeared in 1986
the terms "bomb" and "Nor'easter" are not interchangeable.
Not all Nor'easters become "bombs," and not all "bombs" are Nor'easters
A "bomb" is not a hurricane either
why "bomb" was used
Given their explosive development, it was an easy path to take to just call these systems 'bombs.'
The name isn't an exaggeration--these storms develop explosively and quickly
even before large intense cyclone systems were called "bombs," scientists had been using terms likening them to explosions.
"explosive cyclogenesis" (early '50s) refers to the kind in which pressure drops so steeply and rapidly
24 millibars in 24 hours, by definition--that the storm becomes what's now called a "bomb."
the term "bombogenesis," another name for "explosive cyclogenesis,"
was known to science in the late '80s but didn't show up in popular journalism until around 2015.
As first used, in 1848, "cyclone" was "a general term for all storms or atmospheric disturbances in which the wind has a circular or whirling course."
Beginning in 1856 "cyclone" was also used in a more specific sense, for "a hurricane or tornado of limited diameter and destructive violence."