Margins - 9.2% and the Master of Twitter
I woke up yesterday to the headlines: Elon Musk buys 9.2% stake in Twitter, making him the largest shareholder. It’s 2022 and the Fed has hiked, but we have a long way to go before the absurdity ends. Before I get into a theory on why I think he did it (because, c’mon, we all need a theory) it’s important to understand the context of Elon’s battle with the SEC over the past few years and, more importantly, how he’s spent the last six weeks escalating things. The BackgroundOkay, this is a years-long thing I’ll try to walk you through quickly:
Nathan says that she has "serious concerns" that her ruling won't resolve the controversy.
"My call to action is for everyone to take a deep breath, put your reasonableness pants on and work this out."
Over the next couple of years, Elon kept tweeting but things were publicly pretty quiet. We’ve since found out that the SEC had quietly corresponded with Tesla over two tweets:
@DMC_Ryan Spooling up production line rapidly. Hoping to manufacture ~1000 solar roofs/week by end of this year. Tesla’s response to that violation just captures everything about how absurd this entire arrangement was:
That last one is truly the piece de resistance. Just imagine the SEC sitting there. Elon has already gone on national TV and said he doesn’t respect you and that is AFTER the first settlement. He tweets a joke to the entire world about you sucking his cock (I felt the need to spell it out), but, of course, can maintain plausible deniability: Judge Alison Nathan had insisted both parties act in good faith and just to be mature about the whole thing, yet.... The Twitter PollWe all know there has been endless Elon tweeting of material things since the settlement. All the Doge and Bitcoin stuff. Humanoid robots. Stuff about competition. My favorite one was where he said an entire Hertz corporate partnership announcement had no contract associated with it. I mean, that was just so wild, yet we all just forgot about it. I still wonder how Hertz corporate folks reacted. But the latest chapter is centered around this doozy: Much is made lately of unrealized gains being a means of tax avoidance, so I propose selling 10% of my Tesla stock.
Do you support this? There were endless theories about ‘why’ Musk was doing this, but whatever it was, saying you’ll sell 10% of your stock when you’re the largest shareholder of a company again...seems material. Elon Nation voted “Yes, sell your shares!”, and Elon obliged and started selling on November 8th, selling $16 billion over the next six seeks. So that seems pretty crazy in itself, and Musk was apparently subpoenaed by the SEC about the tweet just 10 days later. But it gets so much better. The day before Elon tweeted the poll, it turns out his brother Kimbal made his biggest ever share sale (15% of his total holdings) at $1,229 a share. The SEC is reportedly investigating whether this sale could constitute insider trading, because, well, timing. Musk told the FT that “Kimbal had no idea I was going to do a Twitter poll” and this was “simply more evidence of Stevie grinding his very tiny axe yet again” referring to the SEC’s Steven Buchholz. Why escalate?It was in February that things started really escalating. February 7th, 2022: Tesla disclosed they had received the subpoena about the November poll. February 17th, 2022: Musk and his lawyer sent a letter to the ‘reasonableness pants’ judge saying the SEC was subjecting them to endless harassment and leaking of investigative information. February 22nd, 2022: Elon tweets about the SEC being corrupt. March 8th, 2022: Musk went even further, filing a motion asking to have the original 2018 settlement thrown out because he was ‘forced’ into it, it was chilling his freedom of expression and other bad things. Okay, that was a lot of info above, and I’m sure most of you have followed Elon vs. the SEC in some capacity. But I think the timeline context is important to understand where we are today. The most important question for me - Why did Musk start escalating in February? The SEC had treated the 2018 settlement with kid gloves so why force their hand? Yes, there was a new insider trading investigation and some subpoenas, but why push this fight? Since the 2018 settlement, amidst that status quo detente, TSLA is up nearly 1750% and Tesla, the business, feels like it’s at its most stable operating performance ever. Why choose this moment to mess with the very circumstances that drove some of the greatest wealth creation in human history? I had the chance to speak about this entire drama on March 10th on TechCheck - around the 3:05 mark in the video I laid three potential ways this could play out.
I know, it sounds ridiculous that the SEC could try to stop Musk from tweeting at all. But if someone uses their personal Twitter account to repeatedly break securities laws, it doesn’t seem too crazy that the SEC could force that person to stop tweeting. If someone specifically created a legally binding arrangement with the SEC, and then repeatedly violated that arrangement in order to break securities laws, it doesn’t seem like a 1st amendment issue if they lose their privilege to tweet. If someone’s personal account is inextricably linked to the company they run and are the face of, and they use that personal account to market their own company to the point they do not spend on marketing or have a PR department, it seems like that personal account is a significant asset and extension of the company. But this is Elon and it’s 2022. Something has been up since mid-February, and Elon was very methodically escalating things. The title of the above segment was “If anyone could steamroll the SEC, it would be Elon Musk, the master of Twitter” as those words did come out of my mouth because I’d never discount Musk’s ability to play this game. That’s why I’ve been even more intrigued why he’s escalated things. He is the Master of Twitter. D’s and G’s...and voila! It’s now official! He’s the biggest shareholder. This is what he does, and he does it so well. Okay, first a few things about the purchase itself. Every level of it feels like a S Elon’s C to the SEC. I’ll guarantee you in the coming weeks the average, non-financial market participant will be able to explain the distinction between a 13D and 13G filing. Musk filed a 13G, which is used when the investor owns more than 5% of a company’s total stock but intends to remain fully passive. If they intend to take any active interest in the management of the company, they’re supposed to file a 13D. Rveryone imagining the different ways Musk is going to shake up Twitter should throw out those takes because the legal filing choice indicates he has no intention of engaging in shaping the future of the platform or company [that was sarcasm]. As I write this, Musk is tweeting about whether there should be an Edit Button there are articles all just reciting that tweet the CEO of Twitter is quote-tweeting this The consequences of this poll will be important. Please vote carefully. Elon Musk @elonmusk Do you want an edit button?Like 90% of my feed is now people talking about Edit buttons. It’s like Trumpian jiu-jitsu. The more egregious and brazen the bad behavior is, the more confusing and difficult it is to parse. …and as I’m editing this Elon has been named to the Board of Twitter. It’s utterly wild. I’m excited to share that we’re appointing @elonmusk to our board! Through conversations with Elon in recent weeks, it became clear to us that he would bring great value to our Board. He filed the form (and he filed it late) of a passive investor, and now has been named to the board. Nothing, absolutely nothing, matters. Why buy?One more time, quickly, let’s review the timeline: Sept 2018 - Feb 2022: Musk periodically and quietly spars with the SEC while Tesla becomes one of the most valuable companies in the world. Elon is named Greatest Person to Ever Live in the Universe by TIME, the FT, and every other publication. Feb 7th - March 8th, 2022: Musk goes public. Letters, court filings, court filings that include Eminem lyrics, and a full-on assault. He’s forcing the SEC’s hand. March 14th, 2022: Musk had accumulated at least half his position in TWTR by mid-March meaning, at the exact time he escalated his battle with the SEC over.....his ability to tweet…..he had already decided to become the largest shareholder in Twitter. April 4th, 2022: We find out Musk, who has never held big equity position in a company he doesn’t own, has accumulated a 9.2% position in Twitter. I get it - this entire thing could be as simple as Matt Levine put it:
Given how much Elon loves and is the master of tweeting, this is not implausible. But maybe it’s both about the lulz and legal jiujitsu. Imagine in mid-February, as Musk decides he wants to bring the fight head-on about his right to tweet, someone tosses out the idea “why don’t you just buy Twitter?” Everyone laughs and then he does it. It is the shitpost to end all shitposts. No one will ever outdo this. And for a thought experiment, imagine there is a video of Elon telling Kimbal on Nov 5th “you should sell your shares because we are going to commit securities fraud and I am going to push the value down of this company over the next month” and the SEC finally gets real about going after him. Now picture you’re in the room with Twitter’s Safety and Security team. They’ve just received instructions from the SEC about restricting the account of the guy who is the biggest shareholder in their company and is on their board (and has no qualms about going after those who financially cross him). It kind of feels like Elon Musk might’ve just solved his entire SEC problem for $2.9 billion. How does the SEC go after his ability to tweet when he....owns Twitter? Why this matters?Nothing matters anymore, but this kind of does. It’s like a real-time view into the shit-postification of our financial markets. For the first time forever I was interested in TWTR the stock. It finally felt like they got their shit together. They nailed it with Spaces, they’re pushing hard on newsletters, communities, even their shopping product might be something. How quickly they reversed the reverse chrono debacle showed they’re finally responsive. It’s almost like they’re a real company! Now the CEO of Twitter is shitposting alongside Elon. Did Parag know about the 13D vs 13G thing when appointing Musk to the board and is also yelling “S Elon’s C”? Will there really be an edit button or is this a joke? This was a good company with a straightforward business that looked like it might execute on a turnaround. Now the stock is up 30% since Musk’s filing was disclosed and it lives beyond the realm of any kind of rational analysis. Now we just speculate on what Elon and Parag might do next and laugh. It’s wild to think about. The U.S. government regulator has been in a fight with the world’s richest man over his ability to use a communications platform that’s vital to his business interests - and he just went and effectively bought the platform. Both Can and I have repeatedly written about the emerging market-ification of the U.S., and this really feels like another one of those moments where we look back on and remember how we all posted memes as it happened. If you liked this post from Margins by Ranjan Roy and Can Duruk, why not share it? |
Older messages
Robinhood and Promoting Democracy
Friday, January 21, 2022
Opening up the IPO club
Margins takes on Web3
Monday, January 10, 2022
Math is hard, let's go shopping
Peloton, Valuations, and Innovation
Thursday, December 16, 2021
Stock prices and strategies
The Teenager Economy
Saturday, October 16, 2021
"I hate you! You don't understand me!"
Memestocks and Reddit redesigns
Monday, September 20, 2021
"You may be interested in...."
You Might Also Like
Little Stream Software digest for the week of 2024-12-25
Wednesday, December 25, 2024
Hey there, Here's articles I published over the last week. - Eric Davis Merry Christmas Merry Christmas to you and your family. Hopefully you're able to take some well-deserved time off today
Use AI and protect your data
Wednesday, December 25, 2024
Today's Guide to the Marketing Jungle from Social Media Examiner... Presented by social-media-marketing-world-logo Next month is Artichoke and Asparagus Month, Reader! Are you a mayonnaise or
A reason to celebrate
Wednesday, December 25, 2024
Whichever way you celebrate the end of the year, my team and I would like to wish you Happy Holidays. Thank you for trusting us to be part of your marketing journey. Let's keep the momentum going
Don’t Write Another Newsletter Until You Read This
Wednesday, December 25, 2024
Why 1/5/10 Changes Everything
How they flipped a domain for $90k (in just 22 days!) 😱
Wednesday, December 25, 2024
You're invited to join in on all the fun! View in browser ClickBank Happy Holidays! TODAY, two of ClickBank's top vendors, Steven Clayton and Aidan Booth, have officially kicked off their 13th
The Gift of Leadership
Wednesday, December 25, 2024
From all of us at The Daily Coach, Happy Holidays!
Hack to define your key activation event
Wednesday, December 25, 2024
Inro, Qolaba, MySEOAuditor, ContentRadar, and SEO Pilot are still available til end of this week. Then, they're gone!! Get these lifetime deals now! (https://www.rockethub.com/) Today's hack
Polymarket, Sora, and The Hallmark Killer
Tuesday, December 24, 2024
What's on the top of my mind today?
ET: December 24th 2024
Tuesday, December 24, 2024
Exploding Topics Logo Presented by: Exploding Topics Pro Logo Here's this week's list of rapidly trending topics, insights and analysis. Topic #1 Perfume Layering (trends) Chart Perfume
10 Steps to Improve The Odds You Get Funded
Tuesday, December 24, 2024
And happy holidays from SaaStr! To view this email as a web page, click here saastr daily newsletter This edition of the SaaStr Daily is sponsored in part by Prismatic 10 Simple Steps to Improve The