In my April 28th Real Money column, I wrote a heartfelt letter to Elon Musk imploring him to walk away from Twitter (TWTR) . I awoke this morning to news that Musk had tweeted that he had "temporarily paused" his Twitter bid. Musk followed that with a tweet two hours later stating that he "was still committed to the transaction."
He has left the door open to, as I advised him, "walk away." Why? The threads of Elon's Twitter bid have been laid bare for the past two weeks. The causes are as follows:
- The Nasdaq pullback. Markets are green this morning, but, as of yesterday's close, the (QQQ) s had declined 27.52% year-to-date.
- Tesla Shanghai shutdowns caused by the CCP's Covid-Zero policy, which, combined with point one, have lowered the value of Elon's main "currency," which are his Tesla (TSLA) shares.
- Twitter employee freakouts over the potential of Musk's leadership. God forbid Elon disrupt their cesspool of hate speech, lies, and selective censorship. How dare he!
- TWTR's abysmal 1Q results, which included negative Adjusted EBITDA.
- The very telling lack of other bidders for TWTR.
Last night's letter from "angel investor" Jason Calacanis - as reported, skillfully, by CNBC reporter Lora Kolodny - pleading for cash from accredited investors to back Elon's bid had to have been the last straw. As Lora reported Calacanis' email began thusly:
"We are now collecting interest to invest in Twitter with Elon Musk's plan to take it private," Calacanis wrote in a message soliciting funds from his network of high net worth individuals.
It was pathetic. Sad, really. Let's pass the hat for Poor Little Elon?
Yes, Elon is asset-rich and cash-poor. Who didn't know that? Is there someone who missed his TSLA share sales (the stock market certainly didn't) tweets about selling all his homes, and the million other hints that he is not particularly liquid?
As I have covered extensively in my research reports for OHM Research in Sao Paulo, by my calculations, TWTR is worth $10/share. Remember, though, that as recently as July 23rd, 2021, before the recent Tech Wreck, Twitter carried a market value of $57.4 billion. By the genius thinking of TWTR's Board, Elon was going to be allowed the "pleasure" of controlling TWTR for $44 billion, 25% less than the stock market had valued it nine months before Elon's offer.
When insiders are selling - and selling the company as a whole is much more impactful than converting a few low-priced stock options, as Musk did with TSLA - they are telling you there is something wrong with their business
The problem at Twitter? The company bleeds cash because its core business is just not monetizable. Full stop. My fervent hope is that Elon, an inarguably brilliant man, finally realized that after a month of due diligence.
But who are the real villains here? Elon's advisors, Morgan Stanley (MS) . The fees that Elon will pay them - advisory-only, assuming the TSLA-margin loan is never effected - will go straight to their bottom line. Also, in that scenario, they would not be on the hook for funding Elon's bid for a company that is a financial Black Hole.
But unlike Morgan Stanley, I don't have an inflated self-worth. I don't pretend to have any influence over billion-dollar transactions. I just want my clients to make money. HOAX is beating its benchmark, (ARKK) , by 94% - HOAX +34%, ARKK -60% - since inception on 12/23/21. Most importantly, I do not want my clients to lose money by practicing idol-worship instead of equity analysis.
Elon Musk has left the door open to do just what I advised him to do in my column of April 28th: Walk Away From Twitter!
I hope he does.