Flipping the Bird: Elon vs Twitter | I Am Supposed to Believe This Man is a Genius? | 2

0:10Brett Taylor's day was already going sideways. The chair of the Twitter board had just gotten off the phone with Twitter CEO Parag Agrawal. Just minutes earlier, Elon Musk had sent Parag a series of panic-inducing texts. Elon was rejecting a seat on the board. Instead, he was going to make an offer to buy the company outright and take it private. Not even two weeks earlier, Brett and Parag had sat down with Elon for dinner, and it seemed like everything was going smoothly. Now, Brett needed to talk to Elon. He sent off a text. Parag just called me and mentioned your text conversation. Can you talk?

0:54Elon's reply did not leave much room for discussion. Please expect to take private offer. I saw the text thread. Do you have five minutes so I can understand the context? Fixing Twitter by chatting with Parag won't work. Drastic action is needed. This is Jack's opinion, too. Can you take ten minutes to talk this through with me? But Elon blew him off. I'm about to take off, but can talk tomorrow.

1:29The next time Brett heard from Elon was four days later. And it wasn't a text or a phone call. It was a filing with the SEC, doing exactly what he'd promised to. I'm offering to buy 100 % of Twitter for$54.20 per share in cash. My offer is my best and final offer. He was offering to buy Twitter for more than$43 billion. That was considerably more than it had been worth when he started buying up shares in January. At that time, it had only been trading at around$40 a share. If this offer was real, shareholders stood to make out far better than they could have hoped for. But this sweet offer came with a threat.

2:16If it is not accepted, I would need to reconsider my position as a shareholder. In other words, if the board didn't say yes, he could sell off his shares, all 9.2 % of his stock, flooding the market and sending Twitter stock into freefall. Shareholders would be enraged at the board, and the board members themselves would see millions of dollars in wealth disappear overnight. Brett Taylor knew that Elon was backing the board into a corner with this offer. The board is in receipt of your letter and is evaluating your proposal to determine the course of action that it believes is in the best interest of Twitter and all of its stockholders.

2:58We will be back in touch with you when we have completed that work. Brett. He gathered his forces to respond. He arranged for the Twitter board to meet and brought in high-powered lawyers from two major law firms as well as Goldman Sachs advisors. An appeasement strategy of giving Elon a board seat hadn't worked to slow him down. Now, both sides had to prepare for war.

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5:38From Wondery, I'm David Brown, the host of Business Wars. And this is Flipping the Bird, Elon vs. Twitter. This is Episode 2. I am supposed to believe this man is a genius? of what should be a small success, but I digress, at least I've tried my very best, I guess. Pull me on a pedestal and I'll only disappoint you. Tell me I'm exceptional, I promise to exploit you.

6:17New York City was just waking up early on the morning of April 14th, But New York Times business reporter Lauren Hirsch was already hard at work. Lauren likes to get up before the sun even rises. She's a business reporter who deals in deals. She had worked for CNBC and Reuters before joining the Times. And until recently, she hadn't paid much attention to Elon Musk. And then all of a sudden, he kind of crashed into my life, to be honest. You know, I wasn't even following him on Twitter before this all happened. Four days earlier, news broke that Elon Musk was no longer joining the Twitter board, and everyone in the media was waiting to see what happened next.

7:00So we were all kind of going down this rabbit hole, like, did they find something? Was there some kind of big surprise lurking? Now, the other shoe dropped, in the form of a tweet from Elon Musk. I made an offer. He included a link to the SEC filing. Lauren clicked on it right away and couldn't believe what she was reading. Elon Musk was going to buy Twitter? Everything about the offer was surprising. The fact that it came from nowhere, the fact that it had zero financing, and there was no plan. We didn't know why he wanted to buy Twitter. We didn't know what he wanted to do with it, how he was going to do it.

7:45Lauren texted three letters to her editor. O-M-G. At first, Lauren wondered if Musk's offer was even serious. You know, Elon Musk has founded a lot of companies. He has never bought a public company. It left her and a lot of other business reporters dumbfounded. Soon, Elon would provide some answers. Sort of. Hours after news of his offer went public, the head of TED, Chris Anderson, welcomed Elon to the TED Theatre stage in Vancouver, British Columbia. And now, arguably, the biggest visionary of them all, Elon Musk. Elon strode onto the stage dressed in dark pants, a white button-down shirt and a mid-length black jacket that was giving off both tech entrepreneur chic and mad scientist vibes.

8:41Elon, welcome. He shook hands with Chris and took a seat in one of the armchairs at the front of the stage. So, Elon, a few hours ago, you made an offer to buy Twitter.

8:57Why? Elon grinned like the Cheshire cat. How'd you know? A little bird tweeted in my ear or something, I don't know. Why make that offer? Well, I think it's very important for there to be an inclusive arena for free speech. So, yeah. This coming from a guy who announced he was joining Twitter's board with a meme. Twitter's next board meeting is going to be lit, featuring Elon as Joe Rogan sitting behind a microphone exhaling a whole lot of smoke. A tweet he sent out at 4.22 in the morning. From a guy who just days earlier had tweeted, 69.420 % of statistics are false. Which is, of course, a 420 joke and a 69 joke rolled into one.

9:48But now, Elon was getting existentially serious. But it's just that my strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization. So there it was. Nothing more nor less than the future of civilization was on the line. And all it cost was$44 billion. Last week when we spoke, Elon, you said, no way. I do not want to own Twitter. It is a recipe for misery. Everyone will blame me for everything. What on earth changed? I think everyone will still blame me for everything. But Elon goes on to explain why he is willing to take that blame.

10:38and that risk. You know, I love humanity, and I think that we should fight for a good future for humanity, and I think we should be optimistic about the future and fight to make that optimistic future happen.

10:56It might be Elon Musk, it might be kooky, but it's real. Lauren Hirsch was following every twist and turn of the deal. And for the Twitter board, They couldn't say what was driving Elon Musk, whether he was making this offer to save humanity or boost his own ego. But they knew they had a fiduciary responsibility to take the offer seriously. So what the board did was they hired bankers and they asked those bankers, what are we worth? Elon Musk wants to buy us for$44 billion. Can we truly say no to that offer and tell our shareholders we will be worth more than$44 billion in the future and therefore it's okay if we say no?

11:43But the board also had every reason to be wary of Elon and this too-good-to-be-true offer. The man had amassed almost 10 % of their stock in secret. He then accepted and promptly rejected a seat on their board. Elon had clearly proven that he could, and would, do wild, unexpected things. The board needed to slow him down to try and take back control of the process. So, they adopted what they formerly called a shareholder rights plan, more commonly known as a poison pill. A poison pill is kind of a tried and true tactic in corporate America. The way it works, you put something in place whereby after a certain number of shares are bought, all of a sudden tons more shares are created.

12:37And basically that dilutes the person that just bought those shares. The poison pill could buy the board a little time to weigh their options. But their impulsive prospective buyer wasn't about to sit around and twiddle his thumbs. Back home in Texas, Elon decided to rattle the cages of the Twitter leadership. Where else? But on Twitter. When a Silicon Valley personality tweeted the ownership percentage of each board member, Elon responded with a cutting observation. Wow, with Jack departing, the Twitter board collectively owns almost no shares. Objectively, their economic interests are simply not aligned with shareholders.

13:21By tweeting this out about the board, Elon was basically trying to get the average Twitter shareholder on his site. He followed that up with another subversive tweet. Love Me Tender. The words were surrounded by musical note emojis. Love Me Tender is, of course, a famous Elvis Presley song, but it's also what is very likely a reference to a tender offer, which is effectively a hostile deal. And it means going to shareholders with your offer. So instead of trying to get the board to agree with you, you go to shareholders at the company and say, hey, I'm offering you 50 for 20. Don't you think this is a good deal?

14:04And you try to get enough shareholders on board to effectively overrule whatever decision the board might say. A tender offer wouldn't solve all of Elon's problems because of the poison pill the board had enacted. But he could still use the threat of it to apply pressure to the board. If he's getting support from other shareholders who are all saying to him, I'm voting in favor of this deal, it's hard for a board to justify keeping that poison pill in place. The next day, on April 17th, Board Chair Brett Taylor sent Elon a text. I'm just checking in to reiterate that the board is seriously reviewing the proposal in your letter.

14:50We're working on a formal response as quickly as we can consistent with our fiduciary duties. Feel free to reach out any time. Elon acknowledged Brett's text by liking it, but he didn't slow down. He knew he had the upper hand, that the high value he had offered for the company effectively forced the board to sell to him. He knew the bankers Twitter was talking to would eventually come back and tell them just that. And so he kept moving ahead as though he was going to get his way. Which led to the next challenge for Elon. Where was he going to get$44 billion? Yes, he was the world's richest man worth about$200 billion, but most of that was tied up in Tesla stock and other assets.

15:38He didn't have$44 billion on hand. And he had made his offer so quickly that he hadn't gotten banks or any other investors lined up yet to finance his offer either. He needed to pull$44 billion together. Fast. So there were a couple of things that were going on all at the same time. So one, there was Elon Musk trying to cobble together the cash. And if you look at a lot of the texts that came out in Discovery, they're pretty hilarious. He reached out to Larry Ellison, the founder of the software company Oracle and the fourth wealthiest man in the world. Any interest in participating in the Twitter deal?

16:19Yes, of course. He added a thumbs up emoji at the end. Cool. Roughly what dollar size? A billion or whatever you recommend. You have Larry Ellison just kind of casually agreeing to put in$2 billion. Elon also started reaching out to people he might want to run Twitter with him, including venture capitalist Jason Calacanis. Want to be a strategic advisor to Twitter if this works out? Board member, advisor, whatever. You have my sword. Friends started suggesting new CEOs. people already seemed certain that Parag was not going to be the CEO of an Elon-owned Twitter. Elon was growing impatient. He wanted this deal done.

17:06So, as good as his offer already was, he now offered them something the board truly could not refuse. Elon Musk said, I want this deal by tomorrow, and in order to make that happen, I won't do any due diligence. Due diligence, the business equivalent of doing a home inspection before you buy a house. A$44 billion house. You look into the company, you look kind of, you know, underneath the carpet, in the cracks to find out how does this business really work. And Elon was just going to go without that. That's effectively never done. Certainly not for a$44 billion deal. The board had already come to the conclusion that Elon was overvaluing the company, and they were unlikely to get a better offer.

17:59And now there would be no due diligence? The board, which was already kind of planning to hand it over to Elon for$44 billion, said, sure, I guess we can do that if we really want. Four days later, the deal was done. Elon Musk would buy Twitter for nearly$44 billion. Twitter would officially change hands in six months, at the end of October. Brett tweeted out the news. The Twitter board has reached an agreement with Elon Musk. Elon had won. Twitter was his.

18:42There was one Twitter user in particular who weighed in to applaud the deal. The man who sent the first tweet ever. The man who founded the company and not long ago was its CEO. Starting a thread with a link to Radiohead's song Everything in Its Right Place, Jack Dorsey wrote, Elon is the singular solution I trust. I trust his mission to extend the light of consciousness. But Jack's former employees weren't so sure. Twitter's internal chat lit up with the news that Elon would soon be the new owner of Twitter. Sasha Solomon, a software engineer for Twitter, was working from home in Portland, Oregon when the news came through.

19:28Her stomach sank. Sasha loved her job, in no small part, because she loved Twitter's culture. There were very few assholes. It was like we had an asshole filter at Twitter. So there weren't any. And that was like pretty special compared to like other companies I'd worked at. Based on how Elon Musk tweeted, at least, he didn't seem like someone who would fit in with a company culture. It just seems like he really wants to be liked by people. And so he'll kind of tweet anything. And some of that anything, the derogatory, transphobic, using his platform to punch down, well, it made Sasha worry. Was Twitter about to be run by an asshole?

20:15Sasha and other Twitter employees had been in the dark the whole time, getting details about the sale the same way as everyone else, from the news. They wanted answers. Twitter scheduled an emergency all-hands meeting for the same day that the deal was announced. A meeting where Twitter employees would get to ask CEO Parag Agrawal and board chair Brett Taylor questions. And the Twitter employees? They had questions, all right. Parag, can you clarify if there will be layoffs or not? There are no plans for any layoffs at this time. Right, another question for you. Are any projections for a possible merger with Elon's other companies, Starlink and Tesco Phone PI and Twitter apps?

21:03Not sure I can speak on Elon's behalf on that front. There is general sentiment just looking at the Slack questions around uncertainty about what happens after the deal closes. Yeah, I think that is a fair question. And there is indeed uncertainty about what happens after the deal closes. But there are ways where we will learn more as time goes on. We will directly hear from Elon. I and the management team and the board, members of the board, will continue to spend time with Elon and learn more. And as we learn more, we'll share with you. So while there is a lot of uncertainty about what happens after the deal closes today, over time, that will decrease.

21:47But Brett and Parag were pretty short on answers. Turns out they didn't know a whole lot more about Musk's plans than anyone else. Parag promised that employees would get the chance to ask Elon their questions. He was arranging for Elon to come and speak to them soon. But not yet. The Dow has tumbled over 1 ,000 points. The S &P and the Nasdaq are off about 4 % or more. It seems the markets are still looking for the bottom. Tesla down 12 % during Tuesday's session. That's the biggest drop since September 2020. You can't even imagine. It's horrific, this witness says. Russia intensifying its assaults on eastern Ukraine.

22:30Less than two weeks after he'd victoriously signed the deal to buy Twitter, Elon discovered he might have a problem. The war in Ukraine had blown up, contributing to a tumbling stock market. Elon was worth over$200 billion on paper, but that was mostly from Tesla stock. The more the stock value shrank, the less Elon would have in his war chest to buy Twitter. And now, it looked like Russian President Vladimir Putin might send the whole world and its economy into further chaos. Putin was set to deliver a speech on May 9th that pundits everywhere said would indicate if he was ready to turn the invasion of Ukraine into the next world war.

23:16There was no clever tweet to get out of this one. Elon texted Morgan Stanley banker Michael Grimes with his concerns. Let's slow down just a few days. Putin's speech tomorrow is extremely important. It won't make sense to buy Twitter if we're headed into World War III. Just saying. Michael agreed. Understood. We'll pause for May 9, Vladimir, and hope for the best there. We can take stock of where things look after that. Elon was trapped. He'd legally signed a contract to purchase Twitter. He couldn't just change his mind. He'd fought ruthlessly to buy Twitter, but he'd given himself no way to back out or find a loophole.

24:03Originally, it had been Twitter's board backed into a corner until they had to accept his deal. But now, with the stock market tumbling and war looming, the tables were turned. Elon was the one in the corner, looking for a way out.

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27:13Elon was wrapped tightly in a spider's web, only this was one that he had spun himself. He personally crafted a deal that waived due diligence, meaning that even if he found something objectionable with Twitter, he couldn't just walk away. Of course, he knew this, But he probably figured with enough bluster and a credible complaint, he just might wiggle out of this trap. So he accused Twitter of harboring too many spam accounts and bots, and then went public with this possible deal breaker. Twitter deal temporarily on hold, pending details supporting calculation that spam fake accounts do indeed represent less than 5 % of users.