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you got like moisturizer all over your face are you moisturizing i am i'm my skin is so dry i just got over having food poisoning and i'm like dehydrated okay hold on let me get this off camera look at this guy you got makeup on it's
Search this video
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not makeup it's moisturizer [ __ ] this is bad the reason you look like the [ __ ] [ __ ] keeper and i look spy and young and she felt because i do a little skincare routine okay give me a [ __ ] break look at him you turn off his
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camera because he's embarrassed about whatever he's not embarrassed i just don't need you telling that sax is in a [ __ ] good mood just a lot of 15 cents why are you so [ __ ] happy dummy well the markets are closed today it's good friday so my
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stock portfolio can't be down because the markets are closed thank jesus praise jesus yeah it's a good friday if the markets are closed my portfolio can't go down anymore it's truly a good friday your portfolio will rise again it needs to be
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resurrected [Music] [Music] nowadays he works in dna but in the 90s all he cared about was the mdma the duke of dna the titan of tempeh the shepherd of the soy boys he turns water into wine and dollars into dimes he's a fulio for coolio
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consultant of science himself david friedberg welcome i have never done drugs just for the record but go on no of course not of course none of your behavioral problems in high school had to do yeah neither is jason no absolutely not
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not this morning he's the vc who loves bree i'll sell you the sleeves off your vesti he's enthralled with green wall he eats uppers for supper the rain man himself david sacks all right thank you you're welcome dad all right coming around the
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bend that timepiece what does it do it reminds him of how much more money he has than you the sweater is worth six times laura piana is above his line your super villain with that 1985 sassakaya he be chillin there it is he loves
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spacks just like junkies love crack he's your dictator jamal poly habitat that works i'm like becoming the eminem of intros i mean i'm i'm rhyming [ __ ] it's really solid bro i gotta say i'm i'm workshopping it uh shout out to nick
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and one person on twitter of a hundred gave anything i'm moving into my spring sweater season my swings federal collection oh wait hold on a second i just got a call oh yeah confirmed we nobody gives a [ __ ] [ __ ] christmas he's the king of the
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inane i don't think it's an analogy this matters to exactly one person no the person selling you the sweaters no that's not that i i think if you took a poll on twitter there's a lot of people who silently hate it but love it
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i think there's a lot more who hate it uh let's get to all the news so much news going on all the news where should we start jason you know i'm trying to think about it was there any news topic this week because obviously the war in ukraine has
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obviously got everybody in america oh wait no i'm sorry that that's not important anymore we're on to the next thing there's only one issue elon put into bid to buy twitter outright on thursday and take the company private in a deal worth
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43 billion dollars uh the most breaking news when we're taping this on fridays at 11 a.m when we typically tape this is that the board of directors you know the professional board of directors has decided they would like to get personally sued
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you know i mean this is the most insane thing i woke up and read this and i was like okay they're creating a poison pin i'm sorry a poison pill that's going to give twitter's existing shareholders the ability to buy more shares if elon hits 15 percent of
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the company at a discount champ explain the concept of a poison pill just generally speaking and then give a because everybody knows what's going on but like here we are on this whatever i don't know if this is the seventh or
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eighth inning of this saga or it's the second but where do you think we are in this saga and then what happens on monday and it's describe a poison pill a poison pill is basically a defensive maneuver that a board of directors uses to prevent a hostile takeover and basically the simple way it works is it allows the board to create enormous amounts of new shares and effectively dilute the potential hostile acquirer so that it becomes economically
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unfeasible for them to get enough shares to get controlled the way that they do that is that they basically give everybody except a person that crosses a certain ownership threshold so let's use twitter as an example so the twitter's
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poison pill basically says that if you get to 15 you're essentially locked out from a right that then everybody else has that effectively allows them to buy another share of stock at i think it's a 50 discount and so what it does is it creates an
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incentive to essentially almost double the fully diluted shares outstanding of the business and what that does is it makes it almost impossible for the person with 15 percent to then go and acquire what's necessary to get to 50 yeah there are
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different kinds of poison pills there's things that you can do with debt there's things that you can do with equity but that's the thing that that twitter did i think the if anybody's interested in it nick maybe you can just bring it up but you can
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google on wikipedia there's a phenomenal article um called revlon versus mcandrew and forbes and mcandrew and forbes was the holding company of this very prolific deal maker in the 70s 80s and 90s named ronald perlman and
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what happened was he was the ceo of a company called pantry pride and pantry pride made an unsolicited hostile takeover bid for revlon which made makeup and basically you know there was like 40 to 45 bucks a share the board instituted all these poison
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pills the price kept escalating then a private equity firm stepped in also tried to compete for the asset all along the way there was um enough shenanigans that essentially what um what what uh ronald paroman did was uh sue revlon
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which went to delaware court and from it basically came the current framework of law that we use in this situation and basically what it means is that board directors have these fiduciary obligations to their shareholders and in some cases these are very broad
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fiduciary obligations meaning do the right thing but in some really narrow circumstances all of that collapses and their sole focus is to get the best price and what a director and a board of directors typically wants to do in a situation
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like this is not end up in that second bucket they want to keep all their options available they don't necessarily want to sell to one person you know they're probably going to assume they're going to get fired from the board they want to
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stay on for different reasons etc etc and so right now what twitter and their advisors are trying to do is basically stay in that first bucket have all of the options available to them and not be forced to run an auction
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and i think what elon will try to do is essentially use the public pressure that's going to build and the existing shareholders who own stock at 40 some odd dollars a chance to basically get you know a 20 payday by selling it to elon for 54
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bucks or 53 whatever the price was and the twitter board now will have to justify how whatever they come up with is better than this because then if they don't and they're still exercising these broad fiduciary obligations
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you know one thing i'll tell you as a public company director it is a horrendous process when you get sued and these guys will be in court for years and the the incremental pressure that this twitter board has is that they can be held personally
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liable here so i think it's getting very complicated very quickly on that note of personal liability you have directors insurance so how can that appear it doesn't cover it have there been examples of this happening yeah dno
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insurance is it's kind of like dno insurance is their directorate in office or is is a layer of protection that we all have as public company directors we actually also have it as private companies yeah but the the amount of coverage changes
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but what i'll tell you is dno coverage tends to be relatively nominal because the risk profile doesn't really ex you know include these kinds of tail events and now what you're talking about is 10 to 15 billion dollars of equity value that's going to either
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get created for existing shareholders or get taken away and typically what courts will do is that they will look at the amount of money and they will start to think about you know compensatory and punitive damages as a function of how much money
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was was made or lost and so you're talking about a realm of of of risk now for these directors that's well beyond what dno insurance will cover so when if a lawsuit did happen chamoth you have to find damages so if the board
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found a better offer great but if this thing goes down on monday elon sells the shares and it goes down to 30. now you have the opposite effect go ahead freebird so i'll say two things one is all in all these cases by the way the
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board is indemnified by the company so the individual board members i don't know if there's ever been a point in history when an individual board members had to pay out of pocket for liability associated with their actions as a board
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member and as a fiduciary except when they've done something to benefit themselves outside of the company now in this case the the job of the board is to use their best judgment to do what they believe to be in the best interest of creating the
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most value possible for the shareholders it's very simple when the stock price is at 30 and someone says i'll give you 50 bucks to say oh well obviously getting 50 bucks is in the best interest of the shareholders let's assume though
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that you're on that board and you know about some super secret plan that you believe in the next 30 days is going to get the stock price to 60. and your belief in that plan and your understanding of that plan gives you a good rationale for having a
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debate as a board that this deal doesn't make sense at 50 we should hold out until we finish our plan over the next 30 days get the stock up to 60 and then we'll see if someone comes in and says hey i'll give you even more than than
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60. could be something on the product roadmap right this is the complicated point it's not just about the current share price and there was a history in the 80s and 90s early 90s when stocks would drop tremendously for market volatility
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reasons or very some bad news event or someone quits the board macro and all of a sudden the stock price drops and you have a hostile buyer that says oh my gosh this company looks super cheap i'm going to come in and buy it while it's
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cheap and i'll offer them a premium to the current share price and the share price recently may have been much higher than the price that's being offered and the board says you know what we're going to get back to that share price because
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the market will pick up again the things we're working on are going to grow us out of this hole and so it's very hard for us to sit here as and i know that i want everyone here on this the zoom to suspend your alliance to elon and belief that elon
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will do a better job just for one second and just think about the board members they've all been working on quarterly plans strategic plans etc with the current ceo and as a board for twitter that gives them a point of view that
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says may give them a point of view that says hey you know what we can get back to 70 bucks a share so remember it was only a few months ago twitter stock was trading at 70. the stock price dropped with market compression we've all experienced
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and then elon's come along and said i'll offer you guys 54 bucks and the board's like wait a few months ago we were at 70. we have all these great things we're working on and so i'm just trying to paint the other side for everyone that
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this is not just like a clear-cut obvious deal it's their judgment at this point that they should get more for the stock given where they think the company's headed and where the stock price will will eventually get to all
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right going to you sacks you heard from friedberg to suspend his belief that the greatest entrepreneur on the planet running two of the most important companies is not more qualified to run twitter than the currency yeah i'm not i'm not
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going to suspend my disciples let me make the case for the clear cut for the clear-cut case here sorry let me just say something he could be better at running this company this year okay he will be better jason but the shareholders don't benefit from that
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because he buys the whole company they do well hold on yeah they're getting 54 of cash they do not have any ownership in twitter after elon takes over that's the deal that's on the table so if i as a shareholder get 54 of cash
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i don't care if elon does a better job running twitter down the road because i have no interest suddenly one fact check on that one fact check on that he said he wants to bring along the deal that's the thing he said that's not
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actually in the proposal right so as a board member i have to look at the proposal on the table which is i got to take 54 dollars of cash okay for my shares and give up all the upside sax looks like he's gonna explode fair enough look
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here's the reason why fiduciary duties exist let's explain where this concept comes from there is fundamentally a principal agent problem this is what it's known as between stock holders and the people running the company so in
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other words the owners of the company are the stockholders okay they appoint agents managers to run the company for them but those managers can be conflicted they have an incentive not just to get the highest share price for the stockholders but to pocket
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personally as many benefits as they can and the whole reason why fiduciary duty was invented is to prevent that agency problem so if the board members or the ceo of the company are just looking out for themselves and trying to pocket personal
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benefits excessive compensation or turning down an offer to sell the company for a much higher price that would be a breach their future duty because they're looking out for themselves perag knows that if elon buys
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this company he is out of a job his head is on the chopping block he is fired right away elon has made that clear he said in this letter on this sec filing on thursday i have no confidence in the comp in the management of the company if
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i'm unable to buy the whole thing and take it private i will dump all my shares it's all or nothing for him so perag is interested in preserving his job if elon wins this battle peraga is going to have the shortest executive career since that pope who got poisoned
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okay to borrow a line from wall street so he is incentivized to fight this thing whether it's in the interest of shareholders or not now what is the incentives of the border i think they're the same these are guys who love the
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power they derive from being on this board we know twitter has enormous cultural power these guys they enjoy all the benefits they get they probably do get some compensation being on the board but they enjoy being in this very exclusive club that wields
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enormous power over our culture and they have no incentive to give that up and by the way how much the company do they really own you know not that much if you look at the wealth of the people on twitter's board and we know all the
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people on twitter's board their wealth is significantly greater than whether twitter stock sells for 60 or 70. so and and i think that we all know that these are all sophisticated actors they are all high integrity people we all
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personally know many of the people on twitter's board i don't think that you know look maybe there's a variety of good they're conflicted it's got nothing to do with integrity the fact of the matter but you could say the same about
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any board sex that it's no because it's different listen when we're on a board okay because i'm on plenty of boards we own a huge percentage of the company so when somebody makes a takeover offer to buy one of our companies we are thinking like stockholders we're
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fundamentally aligned you have massive skin in the game yeah we have massive skin in the game these people on the board what skin in the game do they have most of them are these directors who are disappointed and it is it's like a club
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these guys it's all big back scratching club these guys are all on you think they're motivated by the influence of being a twitter businessman of course the nexus of power why do they not as what this is shaping up to be is the
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nexus of power and who controls the people i don't even own much of twitter none of them own much of twitter i do 100 agree with sacks i've always believed what i think carl icahn said or whoever it was that the board should be represented by
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the biggest shareholders the the folks who actually have skin in the game the folks who actually care about the share price you know having some nominal number of shares issued to you as a board member of a public company showing
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up you know patting each other in the back and certainly generally speaking leads to non-founder-led companies ultimately dying um because there is no motivation and incentive and drive from anyone let me take the other side partially um i
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think you're mostly right um i would never join a public company board that i did not own a significant piece of right and i have never right now the reason to be on a public company board is that unlike a private company the single
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biggest advantage there are many disadvantages of being public but the single biggest advantage of being public is that you have a lower cost of capital so if you have an ambitious company an ambitious leader and an ambitious
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plan to build and compound value you cannot do it privately forever you must do it in the public markets because there's just an infinite amount of capital that's available and an infinite amount of ways in which you can raise capital
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relative to you being private so with that being said when you are public i think the best boards are the ones that are sort of 50 50 split between the biggest shareholders and people who are very much experts in
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a handful of things and i just want to be specific in a help but company board you have to have a lot of focus these days on things like governance audit because you have to attest to these financial statements right cyber security becomes a huge one
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because you have to disclose these risks and so i think that it really behooves boards to have a few experts who can chair those committees compensation tends to be another one as david mentioned that can be a real hot button but there are experts you can
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find they're not going to own a large piece of the company but they're going to do a really good job of managing those things that minimizes risk for the business so that then the rest of all of the board which are the large shareholders
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can really use their influence and strategic understanding of the business to build a huge equity value when those things come together you have great outcomes but i i really agree with you if you stack the board and you know we've we've had this issue
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public boards in america got perverted over the last sort of last few decades to being these little badges of status that people would collect and now you know we're starting to see a real pushback on what's called overboarding
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right where these distinguished folks will pick up five six seven boards all of a sudden that's the fastest way to make three four five six million dollars a year how can you sit on five or six company public company boards it's impossible in
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adding value exactly and you have a question do you think those people get appointed to boards by standing up to the ceo right now the opposite vote for the ceo so let me ask you guys a question what do you think is the
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right thing to do as companies that go public mature and their ownership base disburses so you know in europe and asia many companies go public families own them for a very long period of time as you guys know they're they remain
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significant owners they don't sell off the shares in the u.s traditionally as companies have gone public the shares the founders the original investors because we have a lot of venture capital in this in this country historically compared to other countries
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so those owners end up selling off their shares and they get dispersed and a long tail of owners end up owning the bulk of the shares how do you think those companies can be best represented on the board given that there isn't
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concentrated ownership in public companies generally mature public companies in the u.s like twitter the largest you know owner is vanguard with five million other investments and then jack dorsey he only owns two percent what do you guys think is the right
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thing to how do you create good alignment with board members that that could be better you know placed and better suited here well i think one of the ways that you do it is that when somebody wants to step up and acquire a
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concentrated position because they have a plan for the company you don't stand in the way and completely thwart that your job isn't to assess their plan because your job is to assess the dollars you're getting paid today for your shareholders and then whatever
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they're going to do with it it's their thing but are you getting a fair price is it elon is willing to put massive skin in the game in order to basically fix this company and get the best value we all agree but that's not about the shareholders sex
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like i agree with you i think elon should own and run twitter let's evaluate right let's let's let's evaluate this poison pill for a second okay so elon comes in he starts buying up the stock the premium he's proposing is something
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like a 50 something percent premium from when he started accumulating and 64 54 is like a 38 but a 40 from the time from the time from the time he basically made the offer and by the way the stock is going right back to that previous level
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if they turned down this proposal okay so he's made them a good offer okay now i think it'd be acceptable for the board to say okay this offer is attractive but we need to shop this we're going to run a process and we're going to see who
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else is out there if there's nobody better then we're you know why wouldn't we take this there's one thing that's left over that you didn't mention the thing that's left over you're right they absolutely have a
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responsibility to shop and find the best price but what's left over is their judgment that the companies no no no no get above that level they have the they have the ability and the right to do that and the responsibility to do that as a board
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this happens all the time the problem the board can look at the deal and they can say you know what we believe that this business in the future is going to be worth a lot more than what we're being offered for cash today the price
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they have some inside information okay the problem with that argument is that this is what activist firms use all the time in reverse the inverse of the argument is more powerful you've been a director with purview into all these confidential
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plans that has effectively caused this company to tread water for five years why should we believe you now and that argument is way more credible than actually you can really trust us this time because if you look at the tenure of all these folks you know the
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last sea change that happened on the twitter board was when elliott pushed to add i think two or three directions yeah but in the absence of that i think david is largely right these are status games and when status games ultimately play
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out over years they either play out in the stock price one one way or the other and in this case what's true is that this is a languishing stock that has largely been going sideways independent of anything that's been happening and
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what about the faction that less than 90 days ago it was trading at seventy dollars oh you mean during the covet bump yeah everybody was betting stocks i mean let's look at the history of friedberg it was 69 guys incidentally on japan
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you have to give some context january 3rd 2014 the stock was trading at 69 the fact that it got a ridiculous bump like the entire market did during the robin hood stonks you know heyday during covent means nothing right that was market beta not zero
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performance exactly that's exactly that's exactly what i was going to say this if you could actually point to some alpha meaning there was a strategic misstep or something that happened that was fixable a better example would be
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let's just say that there was a let's just say that instead that twitter instead was not a technology company but a pharma company because this example would be easier to understand the stock is at 69 and you get some
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interim results from your phase 3 trial people misread it and the stock tanks meanwhile the stock market broadly speaking is at the same level you could say well that negative alpha can actually be fixed because of our strategic plan but what saks just said
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is more true in this case in this case what's irrefutable is that there's been a broad-based drawdown in the markets there is nothing that you can point to that says this is something inside of twitter's control to get the stock back
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to 69 meaning 69 three months ago is actually 38 or 40 dollars today we're we're at an apples to apples even comparison so from there the real question is this 20 or 30 premium to this can you actually show a plan i think the
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right thing for twitter's board to do just to be very precise is the following they have to take elon's offer and they have to create a go shop i will go and try to get a better price they won't be able to and the reason
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they won't be able to is not a single person who is capable of stepping up with 43 billion dollars would ever get it through regulatory muster not going to happen in my opinion and anybody with the 43 billion who could buy it will never take it on
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meaning could comcast show up sure could uh disney show up they'll never even look at it no they're not the people for whom this asset is strategic apple facebook google can bite dance never amazon could never get it done so nina khan no brano i think that's
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probably right your mother but there is a chance so i just want to get 100 finish i just want to finish so from who so hold on just let me finish mafia and then so i think basically it's like elon thank you we're going to create a go shop we'll
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try to find the best offer i don't think any offer comes in but then i think what they can do free berk is if there is this magical plan to shoot rainbows up their ass they should actually put that to a shareholder vote and let people decide
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and i think that's a really fair thing to do that also allows them the credibility in the air cover to say look we actually have been working on a plan we think that that will create an amazing amount of shareholder value
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and we just want shareholders to be able to see that compare it to elon's offer and decide for themselves who's the white knight if anybody i heard comcast we know that big tech can't do it because alina khan and then we'll go on
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to the next topic and the next nuance here sacks do you have anybody a financial player anybody who is a dark horse in your mind somebody you know i think it could be disney jack is on the board of disney there's a lot of relationships sorry go ahead they tried
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to buy it bob iger said he bailed on it listen i think there's a lot of companies that could be interested in twitter and i think you you create the period to shop it to see and by the way listen name one sacks i think this administration does not want
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to see twitter become a free speech company again and so the political winds will blow towards letting i think twitter be acquired by a big tech company even if it means big tech gets bigger so i think that i think they
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will put lena kahn on pause to allow google to buy this company if that's what it comes down to you're kidding me your conspiracy theory is that one again will you take 100 odds against that i'm saying if it comes down to it i
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don't know what i'm saying you're saying biden's going to whisper in lena khan's ear put your thumb on the scale and let google buy this thing i'm just saying that the dems can own it the libs can i'm saying if it was a choice if it was a choice
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between what david's saying is my enemy's enemy is my friend and so instead of having elon's stated goal i guess what david is saying is instead of having elon's stated goal of having a free speech platform at scale exist on
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the internet which they may believe is even the bigger threat to political power they'd rather it go into the hands of companies that will acquiesce to them at least on the margins but no question about it would tell lena khan to put her thumb on the
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scale champion of two evils you believe that conspiracy from their point of view i do not personally but i am not but this i feel like i'm on amazon radio but go on yeah listen yeah where is my team what is this where's my tinfoil like and by the way i
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just want i just just to go back what is this all i just sent you guys hold on one sec i just sent you guys the revenue chart for for twitter it may not be that impressive relative to enterprise software companies and others but i i
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i want to be really clear i am not arguing against this deal i'm trying to give you guys the perspective so we all have a really kind of honest dialogue about this why this board may actually stand on their own two feet and win with
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shareholders by saying you know what look our revenue has been going up we're continuing to grow revenue we're continuing to grow usage on the platform we've got all these products that we're working on there's a real reason that
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we're going to make more than 54 dollars a share over the next 12 to 18 months as we start to deliver this year's numbers and we start to deliver these product features that we've all been sharing and talking about in the progress we've been
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seeing and that's the that's honestly i think the most likely kind of middle ground here is that this board has enough to stand on by looking at the fact that it doesn't matter the stocks gone up and down what matters is that
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they've been in their minds steadily improving the business and continuing to improve the business and it is an iconic asset that the market should own not a single person and yadda yadda and i think that's going to be part of the
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case let me make two points first the problem with freeberg's argument is that there's no limiting principle to this any board at any time could always claim that they've seen the magical plan and therefore they can reject the bid you're
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right by the way that's the problem with it and particularly in this case we have to look at the track record of this management team which barely exists but also this culture at twitter okay this is a company that's language for
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years the culture look this culture a decade this culture has been so inept that in response to elon's takeover offer they gave all the employees a day of rest because no that's a reoccurring monthly thing they haven't yet no they don't did it boys
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were so stressed out the employees were so stressed out they told them to stay at home and take it easy okay this is this is a you don't know the emotional labor it takes to deal with this this team is weak okay and it's soft okay
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and elon would give the whole company an enema and fix this thing and that is why they don't want him taking over yeah you are 100 right but but that's right but this is why this is why you should not let this board and this ceo invokes
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some magical plan that they don't have that they never came up with and they would never come up with because it's just a big excuse so they're not out of a job okay but now let me go wait i never got a chance to make the second
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point let me respond to the tinfoil hat thing so listen what is this story really about it's about free speech it's what it's about for elon he said in this takeover and then at the speech that he gave at ted that listen this is not
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about economics for me twitter needs to be the open town square it is the marketplace for ideas we're going to make it a free speech platform we're going to open source the algorithm so people know when they're being canceled
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they know why they were taken down is that algorithmic was that a human intervention this is what it's about freelancers it's also what it's about hold on it's also what it's about for all the elites for everyone observing this for everyone who's criticizing it
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listen look at the uh look at the reactions we haven't talked at all about the hysterical reactions to all of this news that happened i mean there was a fantastic uh tweet here well business insider said that elon musk's attempt to
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buy twitter represents a chilling new threat billionaire trolls taking over social media this is one problem back in 2013 business insider's headline was billionaire jeff bezos washington post buy marks a fascinating cultural
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transition in america so these guys are completely hypocritical when it's a billionaire that they like they praise it when it's a billionaire supporting free speech they oppose it that's what's going on you had jeff jarvis with this
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insane professor jeff jarvis yes saying today on twitter feels like the last evening in a berlin nightclub at the twilight of wymar germany i mean somehow these people think that the re-institution the restoration of free speech is somehow like the the
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end of weimar germany and then i think probably the best example was this tweet by max boot where he says that for democracy to survive we need more content moderation i.e censorship not less so in the warped mind of all of these elites and the
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media the corporate media they think that for democracy to survive they need more censorship it's the worst thing the democrats ever did is give the republican party free speech that was our issue how we gave it to you guys
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it's just insane by the way this is your bias in evaluating this deal i want to point that out you you talk about the board's bias but you do have a bias on on and that's not really the question at hand the question at hand is fifty four
33:05
dollars the fair price to pay for this company no i know but it is also about free speech there is another motivation at its core that's not that's not that sorry i i agree it's not about the deal but that is why elon's buying the
33:15
company i agree i agree i agree he's not doing just pointing out that we all criticize the board and we all criticize them for not taking the deal we're motivated generally because we want to see the deal happen we want to see elon
33:26
doing i want to be i want to be very clear couple things first of all the stock is basically the same price it was in december of 2013 right right so what happened in the market during that time it went absolutely up and to the right in a violent manner right
33:44
so if you had a strategy to not grow and you deployed it could you actually achieve this performance so i'm just saying that's just an objective fact that we have to keep in mind whatever whatever has happened has collectively
33:56
not worked and it is it is systematic meaning the underperformance is not a quarter it's not in a month but whatever has happened here collectively inside this business has not been working for nearly a decade okay so just getting all the emotion out
34:11
that's a fact right okay and so at some point people will say well the devil i don't know is better than the devil i do know because the devil i do know is destroying money for me at a horrific rate which if you look at how the s p has compounded since 2013
34:27
versus now i mean my gosh if you had done a spread trade of long vsnp and short twitter you would have made a fortune how about long tesla short twitter well i'm just trying to give the just the general market now i'm just trying
34:39
to give you the general market math right forget even any individuals right and look freeberg it's not just ideological here i think we all agree on the correct economic thing to have happen here which is that the twitter
34:49
board should run a process they should see if there's a better bid out there if there is you play for the bigger bid make elon come up on the price okay but if there's not a better bid elon's offer is the best deal on the table i think you take it that's what
35:02
economically should happen but it's not going to happen and the reason it's not going to happen is not because of superior economics or a magical plan it's going to because the the board members on this country club they call aboard
35:14
their interest is to stay on that board perog's interest to stay as ceo and all the elite observers and the media all the people denouncing twitter i'm going to give you guys numbers to want censorship to remain in place that is
35:25
what's going on give me one second i want to ask one question okay fredberg you have a lot of bitcoin you have a decent amount of bitcoin some bitcoin bitcoin's trading like 40 000. if i said i'm gonna buy out all your bitcoin for
35:37
45 000 would you take it well that's a it's a different situation because you can't you can't make an offer for that and by the way here's the difference there's no principal agent problem in that context i know it's a fully decentralized course
35:53
but you have a point of view on on bitcoin i no forget about the structure i'm i'm coming to you and i'm saying hey sax i want to buy all your bitcoin for forty five thousand what's your answer it's trading 40 that's not that's right
36:03
that's not a share that's not a share so then put it put it to a vote yeah i'm trading i then put it to a vote right let every single shareholder decide then put it to a vote and we'll see yeah and by the way freeburg there's no limits on
36:14
your ability to go on the open market and buy bitcoin so if you do want to try and acquire 100 of bitcoin go on the open market and acquire it all sorts of limits people trying to build big positions exactly exactly so go do that but there are huge
36:28
limitations i just wanted hold on there are big limits on the ability of elon to go on the open market and just keep buying up all of twitter now with this poison pill now this poison pill they've stopped it do you agree with the poison
36:39
pill freeberg see jkl hang on i want to explain why that is because this is really important from a corporate governance perspective so people understand what you're saying is right but the job of the board is to look out for the interests of all shareholders particularly minority shareholders people that own a small stake in the company so if someone came along let's say a private equity firm owned 60 of a public company the board can't just act
37:00
in the interest of the private equity firm they have to protect the smaller shareholders and so their job is to say is there upside for the smaller shareholders that their vote should matter more and that's why we have a board to have that judgment debate and
37:12
to decide and i'm not arguing against you as much as i'm explaining what goes on in the lawyers okay meetings with the board this is what they're telling i think they're saying your job is to look out for all shareholders so elon can go
37:23
out and buy a bunch of shares but if he doesn't have thirty percent of the shares the board has to represent the interest for those thirty percent right that's how it works i think i think what that but what also works and what normally
37:35
good boards will do and i don't know whether twitter will or will not do this but i'm assuming these are you know they'll do the right thing here um because we do know most of them um they should probably get a fairness opinion
37:46
i'm sure goldman is doing evaluation as we speak but again when you factor in what's happened to this stock over the last decade and when you factor in the market beta today it's i think you're going to have a very hard case to make
38:05
that there is a path to an outcome that's a lot bigger in an obvious way here and i don't think that that's going to pass a lot of muster and so the the the problem that this board will have is justifying the alternative of not taking
38:19
this i think it's going to be harder than you think yeah and i think it's going to create an enormous amount of backlash where you know there's a probably a lot of shareholders that would probably want to get out you have to understand like why are vanguard and
38:33
all these guys owning twitter they have to own it through these etfs that they've created and that's right that's right they don't necessarily have it they don't have one they don't have a point of view on the company right i
38:43
agree and so you know they're out to just basically so when you really boil it down how many concerned interested shareholders are there well he's elon is clearly the largest there you know and then after that it's probably only 30 or 40 percent of the
38:58
total outstanding equity i bet jack has a really i bet jack is the linchpin and what's going to happen here you know his point of view on this transaction and whether or not elon should be the steward of this business going forward
39:08
and whether this is a fair price for him is going to sway a big part of how this process is going to go jack owns two percent he law owns over nine percent yeah but my point my point is i think jack's going to be a big opinion setter
39:19
in that board discussion and they're i think they're sympatico and they're friendly so just to give you guys a number to react to here uh 2021 revenue is 5 billion they have 8 000 employees back of the envelope 625 000 per employee in revenue
39:33
uh just looking at google which is the greatest business ever created perhaps in terms of efficiency as we've talked about they have 135 000 employees revenue is 257 billion which puts them at uh to close to 2 billion 2 million per employee
39:48
how many people sacks on an operational basis does this business actually need to run efficiently 8 000 yeah you could fire half those people or more that'd be absolutely no impact to the business in fact they probably run
40:01
better because right now they probably got too many meetings happening with too many people we all know this that company so culturally has been broken for a while elon comes to you and says you're my guy you did yammer you're in
40:11
charge would you run it would you take the scene of course you would participate now guys come on nope wrong you take the job for 10 percent you're a liar would you take the job for 10 no i'm done operating companies i'm sick of it what if what if your funds got
40:26
like doing real work wait hold on hold on i think i think i think this is time i think this is time where we where we can share i'm too old i think it was six years ago five years ago i did approach twitter with uh another large investor but it
40:42
was more of a friendly activist thing and david was our nominated ceo breaking news but now after that meeting which which was a little heated their vp of engineering and cto quit the next day i remember yeah that was very funny
40:58
what just that the concept of reporting into sax they quit they raged made this point you know uh startups are like the nba i mean you get to a certain age you're just you know it's you're too old i mean you're the coach you you'd be [ __ ] dark guys
41:13
it's flattering it's flattering but i'm done i'm done operating i'm so sick of all that wow exactly who do you i go on think calls a couple of times a day it's a great life zach elon can't run it he's got a lot going on who do
41:23
you think should be the actual ceo the day to day ceo there well i think elon would figure i think he would go in and figure it out i mean he is obviously an extremely but who would be well he's got a lot of people he can
41:36
probably plug in there you know that my understanding of the way that things work at with tesla and his job now spacex is he's got some terrific young talent who he appoints these sort of project manager or product manager positions yeah and they and he's
41:51
got like 20 of them reporting to him and they run the company doing a whole sequence of projects in parallel right so he has like a bench a deep like elon is the new ge back remember when ge when all the talent used to go there yeah
42:04
elon's got so much incredible talent on his bench he could parachute in some amazing operators there and clean up that place let me tell you it'd be incredible the ai team on that self-driving team which i've met and i've seen their work like you know in
42:15
private and it's so impressive that if he took one of the ai people working on self-driving and dropped them into twitter i'm one they would solve the bot problem the spam problem in 30 days with one and if god forbid he sent three they would
42:31
solve it in the weekend the fact that they can't solve spam and bots and other meshugna going on at that company is uh crazy right he would fix that by the way there would be less um sort of uh there would be less uh
42:46
problematic content on that site with elon running it why yes there would be less harassment there'd be less harassment because he get rid of all the bots he'd impose who's doing the brigading it's all these bot armies the problem is they don't
42:57
want the bots to go because the only sign of life in that business is spammers and you know all these fake accounts being created so they're just scared to take that 20 hit but the site would be cleaner without it but but look jason i really
43:09
think that part of the problem with our conversation today is that we're viewing this whole elon versus twitter thing purely in economic and to some degree operational terms when really i think this is also an ideological and cultural
43:22
battle or struggle all right we'll go to that let's do it and this is why it's really captured the imagination of the public there look what is the if you were to sort of zoom out 30 000 foot view the big struggle of our time
43:35
politically and culturally is populous versus elitist okay that's the big battle that's happening elon is one of the rare billionaires who's sort of anti-elitist he pokes fun at their pieties all the time this is why they call him a troll okay he wants to
43:51
restore free speech somehow the elites are now on the side of censorship like max boots said they believe that in order to protect democracy they need more censorship what they really mean is to protect their control over democracy
44:04
they need censorship why because they're greatly outnumbered there's more populous than elitists so if the more democratic this country becomes the more they are going to lose power and be kicked out that is why they are so
44:16
fiercely resisting the restoration of twitter as a free speech platform it means the end of their culture the the axios headline encapsulates that to a t um i gave you guys the link nick you can show it the world's richest man someone who used to be compared to
44:36
marvel's iron man is increasingly behaving like a movie super villain commanding seemingly unlimited resources with which to finance his mischief making i mean what a like are you really are you serious this is the same guy journalism
44:51
i mean this is the same guy that's that's doing more on climate change and has been doing it two you know 20 years ago when it wasn't popular and satellites but i i said that and space travel i and i said this before but i just want to say it again i
45:05
think if he does get a control of twitter and there is a strong reliable moral force for free speech i think that's actually going to be his biggest contribution to society because independent of all these other things
45:20
you know we want sort of this political philosophy of democracy and capitalism to roughly work together and i think it sits on top of this fundamental idea that you can say what you think without retribution and it's only there you can actually
45:36
seek out different opinions and try different ideas and say things and most importantly make mistakes and right now we we have such a high cost for making mistakes that it just shuts so many people down and out and if he does that that's actually a
45:51
really big deal i think uh globally you know what that axios headline could have stachem they could have said elon musk spends significant portion of his fortune to restore trust in public square by open sourcing but you can open
46:04
source hold on open sourcing the api and allowing transparent um moderation no json that's what he said in his ted talk jason they can't because they lose power if elon wins and gets control of twitter right exactly look the the the corporate corporate
46:21
journalists like axios they don't make a lot of money what they have is some degree of status but more importantly they have influence that's why they do those jobs and the fact of the matter is and their influences and ha enhanced
46:33
when other people don't have the right to speak and the reason why elon is a super villain in their eyes is because he's gonna give the people their right to free speech back that is what this is really about and they are adamantly opposed to that now
46:47
10 years ago 20 years ago every member of the press would have defended the first amendment they saw freedom of speech freedom of the press as synonymous and fundamental to our republic today they don't believe that
46:57
anymore history has been inverted glenn greenwald actually had a great paragraph about this um if i could just i know you just said green wall yeah look i mean i'm a glad you all stand what he said is that somehow these elites they somehow inverted history so
47:15
now they believe that it is not censorship that is the favorite tool of fascist tyrants and authoritarians even though every fascist and death despot in history use censorship as a key means for maintaining power but they instead
47:27
believe that it is free speech free discourse and free thought that are the instruments of oppression so that is what it is about but but the the irony is that these elites now believe in the use of authoritarian
47:39
tactics to preserve their cultural power that's that's the battle i think they're conflating harassment on a platform or hearing opinions they don't like with with you know like actual censorship there's going to be harassment sadly in the world and you
47:54
can build tools to mitigate that i mean one of the things i don't understand you know i don't know if you know this feature they added last year or so where you can say only your followers can reply uh you know all these people who are
48:05
complaining about harassment i never see any of them say my followers can reply if they did they would never have anybody reply who they didn't want to reply the problem would be solved okay lots more to come on this topic i want to just get [ __ ] up
48:19
topic for us wow well i mean it it it's it is the perfect topic for us because you have freedom of speech you have markets you have governance i mean it's just everything entrepreneurship i just want to end with you know we're here 30 days from now
48:34
what is your majority case what is your majority probability here of what happens give it a second what is the stock trading at and who's running the company in 30 days sax your first here's what's going to happen this
48:49
goes back to my tinfoil theory i think one of two things is going to happen okay first of all elon is going to be thwarted by these folks he's not going to get control of this company they're the vested interest in stopping him by the
49:02
board by the new ceo and by the corporate media and and the political elites is too great they will find a way to stop him okay and one of two things is going to happen either the poison pill will win and twitter's stock will be down in the
49:17
dumps 30 days from now it'll be the same price it was when 35 around that price it's going to be back in the dumps and to jamaa's point all these board members are going to be sued justifiably so because they did not
49:30
pursue the best deal of the company or there's one other possibility that they will find a buyer for twitter and that the way they will defeat elon will be to find another buyer at you know the same or greater price and they will place twitter in the hands
49:46
of another company who they regard as culturally safer because that company buys into the regime of censorship and it might be disney it might even be google i i'm telling you i think that if google were the company to step up the
50:03
administration would ultimately support that deal rather than elon getting the company and i think they would number one to stand down in that instance and let it go through okay lena kahn you have that we will find out and i'm telling
50:15
you in 30 days we will find out how rigged this game is and how deep the corruption goes because they will do anything to stop elon from acquiring this company even if it means violating their fiduciary duty or violating
50:27
antitrust law okay there you got it alex jones position let's go freebird i mean i am not what is the majority case in 30 days i'm not as conspiratorial as sacks i don't think that this is your first part yeah i think that i think that we have a
50:43
board of rational actors i really do i think that they're going to do what they think is in the best interest of shareholders in terms of price per share i think that's how they're going to operate they're all super smart super
50:52
ethical high integrity people on that board i now would i like to see elon own and operate twitter personally yes i would why well i think he's gonna be a better operator and he's gonna make that product better i think he's gonna make the business
51:04
better i think it's gonna be better he's gonna he's gonna have a much more rational view on uh moderation uh that i i think has been lost over the last couple of years and i think he'll innovate in ways that we haven't seen in that business in many
51:15
years so i i'd be excited for him to own that business as a user of twitter that's awesome but i don't think that i think the board's gonna act rationally they're going to try and find the best price they're going to reject his offer
51:23
i don't think he's going to up the offer significantly to the point to get it done they're going to go out and run a long strategic process three months from now we're still going to be running that process that process is not going to be
51:33
done no one's going to have a real answer elon's going to trail off and do something else and this whole thing will kind of fade into stock will be trading where in three months 35 okay bucks a share of 30 yeah what is the majority case here
51:46
30 days 90 days from now i think the the 30 days is we're going to kind of still be here um i don't think much is going to get figured out in the next 30 days yeah in the next 90 days i don't think you're going to see a better offer
52:02
i don't think anybody wants to buy this dumpster fire because you have to understand this dumpster fire is twofold right on the one hand you have a whole user usage bot spam harassment problem and then you have an internal you know
52:17
issue around culture and monetization and all of this other stuff and so you know you have to be really prepared to step in and deal with both of these two issues in a really definitive way i think that that i'm not sure that
52:27
corporate boards and companies and ceos have the stomach for all of that so i don't think there's a better bidder but i think within 90 days they're gonna probably first try to reject it i'm not sure that that's in the best fiduciary interests of shareholders
52:47
in fact i don't think it is and i think to reject it would be more a sign of ego than a sign of logic and then i think they are going to get sued and they're going to be embroiled in lawsuits for years so no sell happens
53:01
the stock languishes again stalemate disaster well i think by saying it look i mean if you look at the stock like a simple stock market analyst would say whenever there's a merger announced right at like x price right like look at microsoft and
53:15
activision that's a better example you know microsoft announced that the stock was at like you know 57 58 a share microsoft says we're going to buy activision i think it was for 95 a share right and if you notice the stock hasn't gone
53:27
to 95. now typically merger arb merger arbitrage what happens is that the stock goes to one or two dollars of the acquisition price right away almost immediately or it goes to within five or ten dollars or five or ten percent and
53:40
then it bleeds towards the m a price as the deal gets closer to certainty so when there's a big gap what the market is voting is that the deal is not going to happen and so when you look at the gap microsoft activision it kind of says
53:54
it's going to take a long time and there's a risk that it doesn't happen similarly if you look at this twitter thing why didn't it go to 53 bucks a share it's because a lot of people think that the board's not going to do the right thing agreed the fix is in
54:08
it's so conspiratorial saxophone obviously do you listen to alex jones the fix is happening in plain sight freeburg jamaat just said it why is the price listen when a deal is going to go through the price goes right up to like below that
54:22
price the price is well below the reason the price isn't going up is there is no buyer who wants this asset it's going to be years to come out no no no no jason jason i don't think there's you should hire who wants it even if you thought
54:33
that there was another buyer that was going to come at a higher price the the the money good thing to do is for people to basically buy that equity to basically bleed into the acquisition process i get all that yeah yeah wow
54:46
the fact that that it didn't move at all in my opinion is a concerted belief that the board is going to reject the offer god even if there was another offer and and what they didn't want to do is buy the stock at 50 have the thing all of a sudden get
55:01
announced as you know we're not going to take it elon dumps his shares all the people that bought the stock at 50 hoping it'll go to 54 would all of a sudden lose a lot of money because the stock would instead be at 34. so the fact that the stock
55:13
basically didn't move is essentially the market's way of voting this is a head fake we you should take the offer the board's not going to and the stock's going to tank back to its other its original price my prediction is the
55:28
board uh tries to fight it stock collapses nobody thinks it's going to get done elon lowers his offer and he wins it by the end of the year and gives him a lower offer you didn't like check out always with the opportunity now we're going 49. that's
55:41
very michael corleone yeah now the offer is 49. and it goes down two dollars every quarter until you guys acquiesce the end it's trading at 30. i lower my offer jason if you want to if you want to just finish with this little code of
55:55
the the the revlon story it was actually kind of cool forsman little comes in to try to basically give like a white night bid and what ronald perlman did was basically say i'm just gonna you know top tick every bid he he was pretty
56:09
baller he's like i'm gonna top kick every bit so horstman would be at 51 and then you know peroma would be at 51.50 they would go to 54. 55 you know and and so he was always and he exhausted forestman little and eventually they just threw their hands
56:24
up they said we can't we can't do this anymore yeah i want to i want to make a couple of movie recommendations real quick because i i tweeted a couple of things there the gate there's barbarians at the gate and wall street and you know i tweet these things and they get no likes so i think people just don't watch old movies came out they came out in the 1980s movie club is one of the all-time great movies probably the best movie a business has
56:45
ever been made all of our stuff you're saying wall street is yes wall street is marginal is pretty good i really like margin call but yeah i agree barbarians at the gate was better booked was it was a tv movie with james gardner
56:56
it was good yeah it's worth watching the book is excellent the book is focused next level i gotta go eat lunch everybody love you besties love you guys back at you hey everybody we decided to split this epic episode into two parts one two
57:12
parts so we get you all the elon twitter discussion out as soon as possible for your friday night viewing pleasure stay tuned for episode 76.5 this part two coming out in just a few hours we're going to talk about the global food crisis
57:27
china's plan for food storage geopolitics including the french election and we got a bunch of all in summit talk everything is heating up so stick with us [Music] and they've just gone crazy [Music] besties [Music] your feet need to get back [Music]