Twitter Is within the Flawed, and Musk Will have to Make That Case. Giant Time.

OK, another open letter to Tesla (TSLA) honcho Elon Musk.

After my Real Money column of April 28, Elon decided to pull his offer for Twitter  (TWTR) on July 8. I am not arrogant enough to believe it was my column that ignited his decision. But breaking up is hard to do, and in the big-money world of big-time lawyers like Elon’s at Quinn Emanuel and Skadden Arps and Twitter’s at Wachtell Lipton, this was never going to be an easy exit. As the hearing in Delaware Chancery Court looms on Oct. 17, the game changed Thursday with an excellent scoop on Twitter from Reuters.

I am now linking to the exclusive Reuters article here. It is horrifying.

While what I view as Twitter’s selective censorship, overt left-wing bias and general atmosphere of stupidity offend my aesthetic sensibilities, allegations related to tweets associated with child pornography are beyond expression. It is sickening beyond words. As the Reuters article notes, 40 companies have decided to pull ads on Twitter, and there will be more to come.

That said, Elon, TWTR stock still remains more than 20% below your offer price reflecting the market’s skepticism on your deal. On the day you offered for TWTR, Meta (META) shares closed at $210.18. Today the shares are quoted at $138.61, a 34% decline in that period. Without your offer, TWTR shares would be in the $20s, if not below. You are paying at least double what a normal, non risk-arbitrageur tech investor would be paying for TWTR now. The Valley is a small place. Ask around. And why haven’t any other bids for Twitter materialized? I think everyone knows you’re right about the smapbots.

What to do now? Go big at the trial. Get “Mudge” Zatko, get parents of kids impacted by this, hell, even get Donald Trump to testify. I think it is a fair statement to say he likes attention, as do you. Get them all in the court in Delaware. 

As I mentioned in my last open letter, what hangs in the balance here is not Twitter, which has less than zero redeeming societal value in my book, but, in fact, Tesla. As of your last Form 4 sale filing, your holding of Tesla was (pre-split) 155,039,044 million shares. With over a billion outstanding of Tesla (3.1 billion post-split) your ownership percentage is approaching 15%.

As Jack Dorsey bemoaned to you in the pre-offer text messages that were reported this week, Tesla, like Twitter, has no dual-class share structure. So, unlike Zuckerberg, you are not unassailable. If you continue to push your holding of TSLA below 15% to fund your TWTR purchase and the Nasdaq continues to plummet with rising interest rates, it is not inconceivable that you could be pushed out from the company you love. Even geniuses cannot withstand too many 30% nine-month share price plunges, as we have seen from TSLA in 2022. They kicked out Steve Jobs from Apple (AAPL) (although he eventually returned triumphantly.) It can happen to anyone.

So, that’s where my advice is. As I wrote in my last open letter, Twitter is not the hill to die on. As a father of so many kids, you must know that this is a line that can never be crossed, yet appears to have been a problem for Twitter for a long while. Management has not only failed to solve that problem, from the outside it doesn’t even appear that they have tried as hard as they should to do so — although an advertising boycott could change what seems to me like a lack of urgency.

We all make mistakes. Obviously the vast majority of us can never comprehend what it is like to make a $44 billion mistake, like you did with your TWTR offer, but there is still time. It’s time to drop the big one. Now make the case in Chancery Court in Wilmington.

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