AB Bernstein Senior Analyst Mark Shmulik joins Yahoo Finance Live to discuss Twitter’s outlook amid Tesla CEO Elon Musk offering to buy the platform, what shareholders should be aware of, and the social media space.
Video Transcript
– Setting the stage here for our next conversation, as our next guest says in his most recent note, Twitter bulls always claimed that the company is not living up to its potential, hence Elliott and Silver Lake. And clearly Musk feels the same. Let’s bring in Mark Shmulik, who is the AB Bernstein Senior Analyst. And he joins us now.
Mark, good to have you here with us today. I guess the question is simple. Do you believe the offer will be accepted by Twitter?
MARK SHMULIK: No, I don’t. I don’t think it’ll be accepted. You know, I think there’s already been some rumblings coming out of the board meetings. Now, do I think it should be accepted is a different question. I think the answer is Yes. You know, but we’ve already had a few prominent investors come out in tweets suggesting that the intrinsic value of Twitter is significantly higher.
You know, but if we step back and take a look at how the stock has performed from its IPO price, it was trading, before Musk started buying up shares, below its IPO price. And so this is a significant premium to that. You know, and I know folks will look back and say, yes, it was above $70 last year. But most of the sector was inflated last year. And so, you know, I don’t think that’s the right comparison point to take a look at.
– And as you were saying there, you were saying that even though you don’t see the deal going through, you think that it should. Why do you think it should? And perhaps what are some of the shareholder clauses or the biggest challenges that would make that difficult for Musk or perhaps other contenders who really want to perhaps take over?
MARK SHMULIK: Yeah, it’s certainly created an interesting environment. And I don’t really have all the answers as it relates to poison pills and kind of what the board could do if they wanted to to stop this. You know, they certainly do have a fiduciary responsibility to evaluate it. I imagine they’re seeking counsel and taking a look at other options of who else might be out there that could be interested in buying it with, you know, theories and thinking behind where they want the platform to go, that actually aligns closer to where the platform’s been going.
You know, I think one of the things that was apparent in Elon Musk’s filing this morning was he doesn’t have confidence in the direction that the management team is taking it, you know, which already kind of claims or effectively points to a difference of opinion on what to do with the platform, how to monetize the platform, and frankly, how to moderate the platform. And so I think, you know, that there certainly may be some inclination or some activity within the board to potentially find somebody that, you know, does align with the direction that the company is already moving in.
– Mark Cuban tweeted that every major tech company, Google, Facebook, et cetera, is on the phone with their antitrust lawyers asking if they can buy Twitter. Who could? Who do you expect to make an offer, and lastly, Elon also said if his offer is not accepted, he’s going to have to reposition his thoughts on being a shareholder. What does that mean to them, if he no longer wants to own those shares?
MARK SHMULIK: Yeah, good questions, I think, on the first one, I don’t think any of the other social platforms could buy it. I don’t think that’s going to pass any even like initial antitrust investigation. So, you know, I think they’re kind of off the table. So they might be calling their lawyers, but their lawyers are saying no chance.
You know, so who else could be out there? There’s certainly plenty other kind of tech names, other, you know, wealthy individuals that certainly want to own a media property. That’s not rare, to be a billionaire and want to own a media asset. So there’s certainly plenty of other folks out there that could be interested. But I don’t know who those folks or those companies might be.
To the second question of, well, if he doesn’t get his way, if they don’t accept his offer, you know, he kind of said it’s kind of final. And if not, he may have to sell his position, which would obviously drive probably the stock downward. You know, but then today at that TED conference he said there is a plan B. He’s just not revealing what it is. So, you know, unclear exactly what would happen if the board decides to come back with a polite decline to his offer.
– Yeah, Elon Musk also saying that he’s going to endeavor to keep as many shareholders in privatized Twitter as allowed by law. And so, you know, it begs this larger question, because there have been plays to try and acquire Twitter or at least think about acquiring Twitter in the past. Bob Iger said he got cold feet previously. We know Marc Benioff and Salesforce, they were pushing for it at one point.
But if rejected, all in. How does Twitter recover from the public scrutiny that it’s faced over the past two weeks?
– Yeah, I don’t know. You know, certainly somebody will need to step up. Maybe it’s Parag, you know, that takes control and the reins over the company and the direction they want the company to go in. You know, if Elon, if the deal doesn’t go through and Elon does step back into the background or, you know, liquidates his shares, is there a white knight out there, or is this just going to be everybody internally kind of figuring out that here’s our north star, here’s our leader, and here’s where we’re going?
Twitter’s certainly a company that hasn’t been short of its fair share of scrutiny pretty much throughout its entire history. And so you know this is almost classic Twitter in a lot of ways.
– So then as we heard from Elon Musk there, for him it really isn’t about the money, but really democratizing this platform, this town square. If you’re a shareholder listening to this, what does that mean for you then in terms of where Twitter goes from here?
MARK SHMULIK: Well, if you’re a shareholder and, you know, you bought it at a price below $54, you may think that, you know, it’s irrelevant what he wants to do with it once he buys it, if you can sell your shares. You know, now having said all that, certainly Elon says commercial success isn’t the primary reason why he’s interested in this asset. You know, and I think he’s been very clear on his viewpoints on free speech, moderation, open sourcing of the software. But he’s also been tweeting quite regularly about how you can monetize the platform.
And there’s certainly some intriguing ideas in there. You know, I think one thing about Twitter investors, whether activist or otherwise, there’s always been interesting ideas, for whether it be subscription products on the platform or new ways to drive advertising revenue or elsewhere. So you know, there’s always been ideas about how to monetize. I don’t think that just goes away, you know, just because it won’t be Musk’s primary or first priority order of what he wants to go do.
You know, so there’s certainly opportunity. There’s always been this optionality and ideation for, you know, how can you maximize the value of a platform like Twitter? You know, and I don’t think that changes, regardless of which direction the company goes in from here.
– We’ve certainly got all eyes on Twitter today. We do thank you for your insights. Mark Shmulik, there, the AB Bernstein’s Senior Analyst. Thank you so much.
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