Hey guys, it's sasha, elon musk has just offered to buy 100 of twitter in a hostile takeover bid and at the same time, some twitter shareholders are suing elon musk for his failure to submit forms on time to the sec. The best bit is. I don't think that this is what it looks like. I think most of the media completely missing what is happening.

I think this is another very clever. 4D chess move, i'm going to explain it. This is going to get very juicy. I will tell you exactly what just happened, what the lawsuit is about and what the next steps are likely to be in this game of 4d chess for elon playing against twitter's management.

So yesterday, on april 13th, elon musk delivered a letter to the twitter board of directors, with a proposal to buy all of twitter's outstanding shares. Elon is offering 54.20 a share, and if this offer is accepted, elon musk will take twitter private owning a hundred percent of the company. There is a lot to talk about here. So let's get into the details.

54.20 is a relatively attractive price right now, and the proposal highlights that it is 54 higher than the share price was when elon started, buying the shares at the end of january and 38 higher than what the share price was. On april 1st, when elon completed his purchase of that 9.1 percent, bulk of twitter shares, the problem for elon musk is that, although this offer is substantially higher than the share price has recently been trading at, it is still much lower than how much twitter shares were Trading for last year, there was multiple points last year when twitter shares were hitting over 70 a share, and they were on 62 dollars a share before that. Overall growth stock sell-off started in november, and the problem for elon is that there will be a whole lot of shareholders out there who bought at these higher prices, who would have to take a loss on their shares if the bid goes through now. In the personal note, within this offer, elon musk says i invested in twitter, as i believe in its potential to be the platform for free speech around the globe, and i believe free speech is a societal imperative for a functioning democracy.

However, since making my investment, i now realize the company will neither thrive nor serve the societal imperative in his current form. Twitter needs to be transformed. As a private company. You can see why he bought the original 9.1 percent.

Then paused then was offered the seed. Then changed from being a pastor to an active investor. He let twitter board, play their cards and open them to everybody. Now, after making the offer, he says my offer is my best and final offer and if it is not accepted, i would need to reconsider my position as a shareholder.

Twitter has extraordinary potential. I will unlock it, so elon has decided to take control of twitter one day after turning down the ball seat. Who could possibly have predicted that this is exactly why he turned the seat down now, according to the statement, it sort of sounds like elon. Musk might walk away from the negotiating table if the offer is turned down.

It is apparently his best and final offer. The issue is that this sort of offer will have to get both the boards and shareholders approval, and this is where we're going to get into interesting difficulty. The twitter board is clearly at war with elon musk and they know that their day's numbered, because if this takeover happens, however, it happens, they will all be immediately fired, so they aren't going to be recommending this action when the vote does take place. That is pretty certain, but aside from paragraph and his cronies, there is a whole big issue where shareholders may well choose not to sell their shares too.

The share price has already climbed substantially in trading today. Due to today's announcement and in recent days following elon musk's initial purchases, as the company will be taken, private, the shareholders don't exactly have much of an incentive to approve the offer, especially as many of the shareholders will be selling at a loss as a shareholder. If you reject the offer, then two things can happen: elon musk walks away, maybe sells his shares, maybe goes and tries to start a whole new alternative platform, and i would place a pretty low likelihood on that, because a huge amount of work will be required. It will take a lot of time and even with elon musk, the new platform will take years to grow from zero or elon.

Musk goes and keeps buying up shares anyway, eventually getting to over 50, and then you as a shareholder, get to keep your shares. That would probably worth be worth by that point a whole lot more than the 54.20. That elon has offered uh as part of this deal now. Here is the thing, though i think elon musk knows that this is what the shareholders would be thinking.

He ain't stupid right. If you look at twitter's ownership, a big chunk of the shares are held by funds and institutionals vanguard owns eight percent. Morgan stanley owns another eight percent, blackrock blah blah blah blah. Now some of these are just going to be holding twitter in the etfs, the likes of vanguard, for example.

Those etfs do not take an active role in managing the investments, and that is important, because that means that those passive funds will vote with the board's recommendations. When the board recommends against accepting elon's offer, they will hoover up those passive votes, and you can see that, for example, van gaal's, total stock market index and their s p 500 index owned five percent of twitter just between them and most of the other big positions. In here are passive as well, so twitter's board is going to collect a giant chunk of those passive votes and, although twitter is relatively small, stock, twitter does have 77 institutional ownership, which is very high. So, alongside the passive funds, there will be a whole lot of actively managed funds in there as well the likes of kathy woods arc.

So if you are an actively managed fund, the manager of one of those funds trying to get the maximum return on your money. For your investors, do you accept this offer or not? If you accept it, you get a guaranteed exit at a higher price than the stock market has recently traded at, but that price is probably a lot lower than what those active fund managers have. Their target prices sat at it's lower than my own target price from before this elon musk story broke because i had a target price of 67 and although i sold a chunk of their twitter share somewhat recently, i still think their target price is going to be Above that 54 mark as well, so a lot of the active investors will probably feel that the shares are being bought at a discount versus what they feel fair value for those shares is if they choose to turn down the offer. There is a risk that elon musk goes and starts up his own social media platform to rival twitter.

The problem for me is that elon musk has more than enough on his hands with spacex and tesla that he really does not need the hassle of starting up a brand new company when there is a much easier option to just acquire twitter and skip several years In the growth and development stages he could do it, but i'd say it is far from the optimal solution and elon musk tends to do the optimal thing every time. So if elon musk goes and loses the vote, will he throw his toys out of the pram? Will he sell his twitter shares and will those twitter shares go then back down in value and is there a risk that a new social media platform will then quickly catch up with and overtake twitter? Well, the schedule 13d filing with the sec that comes with that letter that i just read out that elon musk wrote to the board has a few interesting sentences towards the end of it. The reporting person i.e, elon musk intends to review his investment in the issuer on a continuing basis, depending on the factors discussed herein. The reporting person may from time to time, acquire additional shares of common stock and or retain and or sell all or a portion of the shares of issuer common stock held by the reporting person in the open market or in privately negotiated transactions and or may distribute.

The common stock held by the reporting person to other entities, any actions the reporting person might undertake will be dependent upon the reporting person's evaluation of numerous factors, including, among other things, the outcome of any discussions referenced in this schedule. 13D. The price levels of the common stock, general market and economic conditions, ongoing evaluation of the issue is business, financial condition, operations and prospects. The relative attractants of alternative business and investment opportunities, investors need for liquidity and other future developments.

So elon musk is saying that, although his offer is on the table, there is absolutely nothing stopping him going and buying more shares on the open market. While all of this is happening, he can use literally any reason to go and do that and in the video that i made three days ago, where i explained that this is exactly what elon musk is going to be doing. I highlighted the fact that it would probably take him about four months to go and collect 50 percent of twitter shares at the normal rate if he was going shopping for those twitter shares every day through his broker. But here is the beautiful chess move that elon musk has just played.

There is now a fixed price of 54.20 that is hanging in the air. The media is going to make a huge amount of noise about it. It's going to be all over social media. Every shareholder is going to know that this is the price the company could be immediately selling for, and there is going to be some time for negotiations to take place for then the shareholder vote to be scheduled, arranged and for the shareholder vote to actually take place.

During this time, the share price will sit somewhere close to that 54 mark, probably a bit lower, because there is that risk that the deal was turned down and elon musk sells it. Stock and twitter share prices collapse on the back of it, but this also fixes the price, while people feel that the sell is likely, why would you go and buy twitter shares at a price significantly above 54, if there is a risk that pretty soon you'll be Forced to sell all of your twitter shares for 54 because remember the two potential outcomes that people are going to be discussing are either you have to sell at 54 or elon musk walks away and the share price collapses to even lower. So, while this uncertainty ensues, elon musk can go and start hoovering up the shares on the stock market, while the price is artificially fixed in this way and won't skyrocket despite heavy buying. This means that instead of buying a sixth or maybe a fifth of the total daily trading volume, he can probably buy up much bigger chunks, maybe half or more of the shares being traded every day without the share price exploding, big shareholders that are against elon musk.

Taking over, maybe some of the employees of twitter as well may begin aggressively selling their shares at this point as well to get out and elon will be sitting there buying them up. The trading volume was sitting around 19 million shares a day on average. Before you know, just after the some of these news broke, but now that volume is likely to go off significantly, so it was about two percent of the total number of shares a day. But it may well go up now to hitting three or four percent a day or more.

So if elon is collecting half of those shares, he could be buying up two percent of twitter a day now, elon musk broke the sec rules in declaring his initial buy. Of that 9.1 percent of twitter's stock, he filed that late and some shareholders have now sued elon musk because they sold their shares in that window before he declared, and they say that they lost out on money. As a result, the media is making this into a huge gigantic thing, but the fact is: elon musk will easily go and settle that case out of court by paying, above the odds for the damages. This will probably all happen after this whole story is completed anyway.

So if he pays just above where the share price was maybe above where it went after, he declared maybe around that same 54 mark the shareholders that are suing him will simply settle, because that is more than what they're going to get in court anyway. But here is the really cool bit of this chess move. Today is april 14th and the sec rules say that if you acquire over 10 of the company's shares, you have to declare them within 10 days of the month end after which you buy them. So for 5 you have to declare within 10 days of the day on which you broke the 5 mark, but you have a much longer window for going over 10.

You have until the end of the month and then 10 days after that, so he reported up to the first day of the month and he was just under the 10 threshold because if he broke the 10 threshold before the end of the previous month, he would Have had to report it at the beginning of this month, so i'm guessing, he has been buying a whole lot more shares since that first of april, and is continuing to buy them every day. Right now there are 19 trading days in april, excluding the first because the market's closing good friday. So if you can ramp up that volume like i just described and collect a big chunk of the volume every day, while the share price is artificially fixed, he can go and collect about 19 days worth of maybe somewhere approaching two percent a day to add to His total, which will bring him pretty close right up to that 50 mark, and he then has seven more trading days at the beginning of may. Before we get to the 10 days notice requirements to buy what he needs to break that 50 mark before he has to declare that he even broke the 10 level, and the beauty of it is that, even if the shareholders agree in that interim period by magic To sell at 54 it's just going to make the whole process even easier for elon and he gets to buy a hundred percent of twitter instead of leaving it as a public company and having to deal with all of that every quarter.

But he doesn't need the approval of the shareholders, because the timing here is perfect. So i'm going to be loading up on a whole lot more popcorn and watch this one play out, because elon has just outplayed the twitter board again and they still don't see how he is playing 4d chess 10 moves ahead of them and completely screwing them over. If you found this video useful, please don't forget to smash the like button for the youtube algorithm. Thank you so much for watching.

I really appreciate it and, as always i'll see you guys later, you.