The Fate of Twitter

[Kdogg]

If Musk truly believes that he didn’t make a huge mistake buying Twitter, he should use whatever liquid assets he has to buy the debt at a big discount. The banks are bidding it at 60 which is a huge discount. If you believe in the long term prospects that’s a huge amount of debt costs that could be avoided at an attractive return.

Albeit, the IF is doing a lot of work there.

That’s an interesting out of the box idea. The courts made him buy Twitter at full price so he couldn’t trim the cost. This would do the same. The big question is “If.” Still, he might be able to take a tax loss to offset the capital gains on the stock he did sell.

[Jeffrey]

That’s an interesting out of the box idea. The courts made him buy Twitter at full price so he couldn’t trim the cost. This would do the same. The big question is “If.” Still, he might be able to take a tax loss to offset the capital gains on the stock he did sell.

I’d be very concerned about the legal and tax ramifications of the idea.

[Kdogg]

I’d be very concerned about the legal and tax ramifications of the idea.

I would too but haven’t you heard?

“Alex Spiro (current head of Legal) say that Elon is willing to take on a huge amount of risk in relation to this company and its users, because ‘Elon puts rockets into space, he’s not afraid of the FTC.’”

Why worry about the IRS?

[Jeffrey]

I would too but haven’t you heard?

“Alex Spiro (current head of Legal) say that Elon is willing to take on a huge amount of risk in relation to this company and its users, because ‘Elon puts rockets into space, he’s not afraid of the FTC.’”

Why worry about the IRS?

Good point, fearless is fearless.

However, the banks would also face major issues (shareholders class actions, possible SEC investigations, etc.).

[acdevil]

Good point, fearless is fearless.

However, the banks would also face major issues (shareholders class actions, possible SEC investigations, etc.).

Companies buy back their own debt all the time. There are rules to be followed to be sure, but the debt buyback wouldn’t run afoul of the government in and of itself.

[Jeffrey]

Companies buy back their own debt all the time. There are rules to be followed to be sure, but the debt buyback wouldn’t run afoul of the government in and of itself.

The large bank shareholders would likely push such issue with lawsuits, the SEC, and other bank regulators. Bankers make an overly generous loan deal with Musk and, weeks after closing, sell it back to him at a 40% loss! It might be worse than being incompetent.

[acdevil]

The large bank shareholders would likely push such issue with lawsuits, the SEC, and other bank regulators. Bankers make an overly generous loan deal with Musk and, weeks after closing, sell it back to him at a 40% loss! It might be worse than being incompetent.

They are trying to sell it at those prices now - doesn’t matter who the buyer is. Any lawsuit would be against the bank, not Twitter for this type of transaction.

They made a deal to finance the transaction a while ago, but didn’t seem to build in the ability to flex the price I’d the markets changed - which they did big time. Poor work by the bankers, but that was probably the price of getting the deal which they thought was worth it. Those bankers are probably getting screwed on their bonuses this year because of it (maybe fired). They were greedy, but I don’t think there is anything nefarious with that part of the deal.

[burnspbesq]

Elon doesn’t own the debt. He owns the stock. In order to generate long-term capital losses that could potentially be used to offset long-term capital gain from the disposition of Tesla stock, he needs (a) a one-year holding period and (b) a sale or other disposition. It’s unlikely he can hold on for a year.

[Jeffrey]

They are trying to sell it at those prices now - doesn’t matter who the buyer is. Any lawsuit would be against the bank, not Twitter for this type of transaction.

They made a deal to finance the transaction a while ago, but didn’t seem to build in the ability to flex the price I’d the markets changed - which they did big time. Poor work by the bankers, but that was probably the price of getting the deal which they thought was worth it. Those bankers are probably getting screwed on their bonuses this year because of it (maybe fired). They were greedy, but I don’t think there is anything nefarious with that part of the deal.

We’re basically saying the same thing.

The lost 40% is at bank shareholders expense and I expect shareholders to file class action suits against the banks. They might also file complaints with the SEC and other bank regulators.

Where we disagree is I think the optics, on the banks, are worse if Elon buys the loans, weeks later, at a 40% loss. It doesn’t appear to me the bankers put their shareholders interest before Elon’s. Loan pricing at an agreed benchmark spread is elementary and would have nullified the massive 2022 rate changes.

[Jeffrey]

Elon doesn’t own the debt. He owns the stock. In order to generate long-term capital losses that could potentially be used to offset long-term capital gain from the disposition of Tesla stock, he needs (a) a one-year holding period and (b) a sale or other disposition. It’s unlikely he can hold on for a year.

Is it considered a wash sale if owned less than a year? That’s the tax concern I envisioned.

[acdevil]

We’re basically saying the same thing.

The lost 40% is at bank shareholders expense and I expect shareholders to file class action suits against the banks. They might also file complaints with the SEC and other bank regulators.

Where we disagree is I think the optics, on the banks, are worse if Elon buys the loans, weeks later, at a 40% loss. It doesn’t appear to me the bankers put their shareholders interest before Elon’s. Loan pricing at an agreed benchmark spread is elementary and would have nullified the massive 2022 rate changes.

Yeah, we aren’t far off.

I’m just saying that the bankers were greedy and did what they thought they had to do to get the deal - offering a fixed rate. It was stupid, but not illegal and not necessarily enough to lose a lawsuit.

Optics would be bad if Elon was the buyer, but they have a decent fact pattern that they are trying to sell it to anyone at that price. If I bought it, the banks are in the same place, but Elon doesn’t get anything.

So in summation, bankers were incredibly stupid (they also should have figured out that the $44 billion was way too much and they would probably default) but not criminal or unethical.

[Jeffrey]

Optics would be bad if Elon was the buyer, but they have a decent fact pattern that they are trying to sell it to anyone at that price. If I bought it, the banks are in the same place, but Elon doesn’t get anything.

So in summation, bankers were incredibly stupid (they also should have figured out that the $44 billion was way too much and they would probably default) but not criminal or unethical.

Elon possesses a lot of insider information and control the other potential buyers do not have and never will. Elon has a lot of power to determine the ultimate fate of the loans.

[CrazyNotCrazie]

Yeah, we aren’t far off.

I’m just saying that the bankers were greedy and did what they thought they had to do to get the deal - offering a fixed rate. It was stupid, but not illegal and not necessarily enough to lose a lawsuit.

Optics would be bad if Elon was the buyer, but they have a decent fact pattern that they are trying to sell it to anyone at that price. If I bought it, the banks are in the same place, but Elon doesn’t get anything.

So in summation, bankers were incredibly stupid (they also should have figured out that the $44 billion was way too much and they would probably default) but not criminal or unethical.

Was it sold at a fixed rate? Or just too low of a spread and/or with a cap? I thought it was spread to SOFR, possibly with some sort of a cap.

[Jeffrey]

Was it sold at a fixed rate? Or just too low of a spread and/or with a cap? I thought it was spread to SOFR, possibly with some sort of a cap.

My understanding was insufficient flex with caps.

[acdevil]

Elon possesses a lot of insider information and control the other potential buyers do not have and never will. Elon has a lot of power to determine the ultimate fate of the loans.

It doesn’t matter for a sale from the banks to a buyer. It could be done pursuant to a big boy letter or the banks getting all the financial info (which they may have already)

Trust me, I despise Elon. But there would be nothing wrong with the type of transaction I laid out.

[Jeffrey]

It doesn’t matter for a sale from the banks to a buyer. It could be done pursuant to a big boy letter or the banks getting all the financial info (which they may have already)

I doubt a big boy letter would help with the SEC. Is the letter legally enforceable in US Courts?

[acdevil]

The letter would protect them from insider trading allegations. If there are any colorable shareholder actions, probably not.

But I don’t think there are. Just dumb bankers - I’ve worked with them before and they are more common than they should be.

[Jeffrey]

The letter would protect them from insider trading allegations. If there are any colorable shareholder actions, probably not.

But I don’t think there are. Just dumb bankers - I’ve worked with them before and they are more common than they should be.

If you think the bankers are dumb, have you met their regulators?

Enjoyed the conversation… thanks!

[acdevil]

If you think the bankers are dumb, have you met their regulators?

Enjoyed the conversation… thanks!

I have. And you are correct there.

[YmoBeThere]

Supposedly all physical access to corporate locations has been closed until Monday.