Peter Coy
OPINION
Elon Musk Is Making a Giant Mistake … Unless?
Dec. 1,
2023
https://www.nytimes.com/2023/12/01/opinion/elon-musk-twitter-x.html?searchResultPosition=4
Peter Coy
By Peter
Coy
Opinion
Writer
Elon Musk
is so smart that you have to wonder if trashing X, formerly Twitter, is somehow
in his best interest. This couldn’t possibly be one giant mistake, could it?
Actually I
think it is a giant mistake. There is, however, an unlikely scenario where
damaging X in the short run might benefit Musk in the long run. Just for kicks,
and because everyone is fascinated by the world’s richest person, I’ll take you
through it.
First,
though, a refresher on why people are talking about Musk and X this week. It’s
because he once again did something seemingly inexplicable. On Wednesday at The
New York Times DealBook Summit, he charged that companies that had pulled ads
from X after he endorsed an antisemitic conspiracy theory were trying to
“blackmail” him. Using profane language repeatedly, he told them, “Don’t
advertise.”
This is not
the way to lure advertisers back. And it was far from the only thing Musk has
done to damage X. He cut more than three-quarters of the staff, including most
of those involved in keeping hate speech off the platform, which predictably
resulted in more hate speech and fewer advertisers. Dropping the Twitter name
and getting rid of the cute blue bird logo didn’t help, either.
Again, it’s
plausible and even probable that Musk has simply made a series of bad choices.
As smart as he is, he does have an impulsive streak and a lot of anger inside
of him. At the DealBook Summit, he admitted that endorsing the antisemitic
tweet was a mistake. He told the interviewer, Andrew Ross Sorkin, that he had
“demons” in his mind stemming from an unhappy childhood.
But let’s
get to the weird theory that Musk is doing all of this deliberately in a way
that benefits him in the long run. It starts with the fact that he realized
soon after he bid for the company that it was a mistake and tried to back out
of the deal, but wasn’t able to extricate himself. So he was uncomfortable with
owning X to start with. Then he made management mistakes, such as firing
essential employees. And, crucially, interest rates rose sharply, raising the
cost of servicing the bank loans he took on to finance the deal.
At this
point, the shares he owns in X are worth far less than he paid for them. They
aren’t traded, so there’s no public valuation. But the big money manager
Fidelity estimates their value for customers of its mutual funds, and as of
Sept. 30 it had marked them down by nearly two-thirds from what they were worth
when Musk took majority control.
There’s
something in finance called gambling for resurrection. It’s when you’re down so
far that you don’t have much more to lose, so you’re willing to take big risks
in the hope of recouping your losses. The theory is that Musk is gambling for
resurrection with a triple bank shot that probably won’t work — but just might.
The main
proponent of the crazy-like-a-fox theory, as far as I can tell, is Eric Talley,
a professor at Columbia Law School who specializes in corporate law, governance
and finance. I interviewed him on Thursday. He admitted, “I am still uncertain
myself” whether Musk is engaged in “a diabolical strategy embedded in a
four-dimensional chess move” or just being erratic.
If it is
4-D chess, he said, it’s that Musk is trying to harm X in the short run to get
the banks that have lent him money to accept that they will have to
“restructure” what he owes them — that is, lower the interest rates, extend the
payment periods or write off some of the debt altogether. Once that dirty deed
is done, he could then focus on getting the less indebted company back on a
growth path.
The risk in
such a strategy, of course, is that Musk would succeed in talking the company
down, but not in talking it back up, leaving his stake in the company worth
little to nothing. As Talley put it to me: “To hit the right window on this you
need to create a temporary degree of acid indigestion on the part of your
creditors, take advantage of that, and hope that the pyrotechnics that you set
off don’t ignite the whole company and cause it to lose all its value.”
Talley
speculated that Musk might even go a step further and buy some of the loans
from the issuing banks, so that X would owe money to him. Then he could put the
company into bankruptcy and negotiate to convert his debt into equity, giving
him an even bigger share of the ownership. The equity would be worth something
if he could then turn the company around.
There are a
couple of legal problems with this scenario, aside from the tricky business of
how to resurrect a company once it has fallen. One legal problem is that making
inaccurate statements about a company to affect its value (up or down) violates
securities law and common law. To be sure, Talley wasn’t accusing Musk of doing
this, nor am I. Another legal problem is that there could be terms in the
agreement with the lenders to block him from acquiring a lot of the bank debt.
Sometimes there are even agreements to prohibit revisions of the credit
agreement, Talley said.
Again,
there’s no evidence that Musk has any such plan. The company didn’t immediately
respond to a request for comment. But as long as he keeps doing things that
damage X’s value, the speculation that he has some kind of ulterior motive will
continue.
Peter Coy
has covered business for more than 40 years. Email him at
coy-newsletter@nytimes.com or follow him on Twitter. @petercoy
.jpeg)
Sem comentários:
Enviar um comentário