Elon's Twitter Play: Valuation Question or Political Rorschach Test?

On April 4, 2022, Elon Musk announced that he had taken a 9.2% stake in Twitter, setting off a hectic chain of events, where he joined and unjoined the board, announced a bid to take company private, was thwarted by a poison pill and threatened a tender offer (by tweet). In this session, I argue that to understand and analyze this bid, you have to understand Twitter's history, from inception through its much-heralded IPO in 2013, and the disappointments that investors in the company have felt since. Along the way, the company has also cycled through five CEOs, with Jack serving multiple times, and faced corporate governance challenges, while at the same time, becoming a ubiquitous part of entertainment, news, sports and politics. I assess Twitter management's argument that Musk's offer is a lowball estimated, and Musk's counter that the company has untapped potential that existing management will be unable to exploit. I close by looking at the four possible endings to the story, ranked from most to least likely, and why the way you feel about this acquisition will be colored by your political leanings than by financial analysis.
Slides: www.stern.nyu.edu/~adamodar/p...
Blog Post: aswathdamodaran.blogspot.com/...
Valuation of Twitter in 2022: www.stern.nyu.edu/~adamodar/p...
My IPO valuation of Twitter in October 2013: www.stern.nyu.edu/~adamodar/p...

[@David.Marquez]

This is by far the most reasonable take I've heard on the whole twitter takeover saga. As always, It's great to shine the light on the nuance and complexity of it all. Thank you Professor!

[@vik914]

Agreed,

[@kovid.rathee]

Couldn't have agreed more!

[@NickRandall26]

Best analysis I’ve heard, concise and understandable as always professor.

[@vik914]

Thanks Professor, this was very informative- especially appreciated the scenario analysis

[@alekc6998]

I was waiting for this video Professor! Thank you!

[@MrXbox36097]

Thank you Professor, your perspectives are always enlightening.

[@drumsmith215]

Great session! Thank you Professor! 🙏

[@silviorojas7756]

Amazing, thank you very much for the analysis

[@salali2965]

I love how do calmly make arguments. I am quite sure that your 4 kids are well behaved 😂. Thank you very much

Brilliant. Btw, alternative ending number 4 looks probable, possible and very pragmatic.

[@illfunk1967]

This is a brilliant summary of Twitter & Musk's move. Thank you..and i love the comment that twitter is a place for "deranged conversations"..ha ha!

[@PERJENSTER]

Excellent. Your videos are much appreciated - great contribution to the public discourse.

[@andrea.urbani]

Thank you very much Professor

[@raymundolopez9165]

When I first clicked I didn’t expect such a great break down

[@Siyamthanda123]

Thank you Professor!

[@simonroese2596]

Very hard worker Thank you!

[@arjuniyer5610]

Amazing details and insights. Thank you for your video. Please continue uploading similar content

[@Amit-xd5mt]

Good Analysis, very clear eyed and neutral!

[@19pend]

Insightful and straightforward as usual, thank you Professor!

[@JamesBarth23]

Thank you

[@adamosemeraro1538]

Love your neutral point of view, just an objective valuation of what is happening

[@MB-bk1ip]

Could you please do an update video about the developments of the last few months?

[@yashjainchd]

Thanks for sharing 🙏

[@TheHonestBroker]

Very rational comments, particularly on politics and Twitter.

[@erikcolon8691]

Best analysis on Musk and Twitter.

[@infavorofdemocracy5770]

Damn enlightening as always!

[@magdalenawawrzecka2676]

u got sub in a first min of that film

[@jagatdave]

So.. With 430k subscribers...Damodaran gets 55k views...only he knows...how many of them went through full view...hope...one day..he shows his viewership data...it will help so many finance youtubers...damodaran being benchmark

[@vik914]

Twitters intrinsic value is qualitative - not only quantitative. Twitter is where news worthy events breaks - and where it happens. It is thus valuable in that it is able to direct public discourse but also promote particular narratives and "official stories" which the public sees. It is also able to limit the voice of powerful people and organisation's but conversely promote others. The removal of "influencers", the plarform on which the cancel phenomena originated and the drama around the previous US President is evidence of the power the latform has on discourse

[@JesusARieraSanchezJesusRiera]

The Dean of Valuation does it again. Fantastic analysis!

[@deepakbisht6492]

Sir, how the operating margin is calculated? @time 14:43, because for FY2021 twitter reported negative numbers.

[@FireEverLiving]

I haven't double-checked this, but I assume it's because the Professor capitalizes R&D expenses. So if a company spends $5 million in a year, they will report it in their financials as a $5 million operating expense in that year, while the Professor will split it into 5 $1 million expenses spread out over the next 5 years (or similar).

[@antonomaseapophasis5142]

That was 25 minutes and 24 seconds of time well spent.

[@julianbeatty2909]

Do you write on seeking alpha?

[@patrickeriksson7973]

I kind of expected that the proposed share price 54,20 would be discussed. The bid would sound a bit less serious if it was highlighted that the stoner-meme 420 (which Musk loves) was part of the share price. Also Musk has done so called Pumps-and-dumps in the past and might do so again, although he doesnt really need the money anymore tbh (except maybe for the billionare tax). Another argument could be that he is just bored and are doing it all for attention, and will run away when he has gotten what he wants. Either way, this video is still the best that i have seen on the subject and im happy that this gold is posted for free. Thank you!

[@ManOfSteel1]

what is a good source where laymans can find good dividend paying stocks? ? or buy good stocks during this recession what to look out for ?

[@CM_Burns]

Did Musk really say Twitter HQ should be turned into a homeless shelter? 😂😂😂 Makes sense since they are based in San Francisco.

[@Viper4ever05]

lol that actually a good idea

[@CM_Burns]

@@Viper4ever05 he's poking fun at the city's homeless problem

[@Viper4ever05]

@@CM_Burns yea they’re homeless problem is well known

[@fabianstoll]

I would sell my shares, but I didn't buy any at first.

[@GENIUSA1A]

In Musk We Trust

[@SMoore-vj7bt]

21:19 a social media platform run entirely peer-to-peer with a decentralized storage and ledger could be entirely unbiased and outside the jurisdiction of any regulation. I am thinking about creating it. I admire your presentation style as you’re strikingly articulate, precise, concise and you speak quickly enough (with speed set to 1.5 to 1.75) so I do not get too bored. As for onboarding, truth is not a popularity contest.

[@byduhlusional]

Except there are many things that need to be censored. I have thought about this too, but how would you handle pedophilia for example on those decentralized sites? I and most others would agree that stuff should be censored and those people should be punished for their crimes, yet if they remain anonymous and without anyone to control them, what exactly is the solution to stop those people? I think you are underestimating the amount of problems that a censor-free social media platform brings.

[@unlimited1652]

@@byduhlusional you can ban that using people to report and ban those posts, decentralized tribunals, etc

[@SMoore-vj7bt]

@@unlimited1652 well put. I am about to launch this. I have a site name.

[@DoobyDoobyDo]

@@unlimited1652 but, that brings the opportunity of mass reporting, target harassment & cancel culture for doing censorship.

[@mailmeabhilash]

Sir, Tamil le kooda podunga unga videos. Many people will learn. Thanks for the presentation.

[@budlabitan1574]

Perhaps this Twitter circus is simply an intentional distraction away from Tesla's real value or valuation.

[@srimugunthandhandapani3178]

14:34 to 16:11 can someone point to materials to learn how to do this kind of financial analysis of a company ?

[@rexiioper6920]

look at his channel, his entire nyu course on corp fin and valuation is on there

[@srimugunthandhandapani3178]

Thanks. From video :- "built in a simulation where i allowed my margins my growth and my cost of capital to come from distributions and in the results of the simulation value for a company " Trying to do this for another company

[@OmarHashbrown]

@@srimugunthandhandapani3178 lmk if you figure out an easy way to set this up!

[@facundomarino10]

wise

[@Eliamma08]

Sir, what is the benefit of buying a negative profit making business?

[@jouleSansLoi]

Bragging rights..

[@FireEverLiving]

If they will *eventually* make money, then the investment can make sense even if they're losing money now. Amazon was losing money for many years before it became wildly profitable. Of course, if you have a crystal ball and you know that the business will never make money, then you know that the business will eventually be worth zero. Though even then, you could make money between now and when the business goes bust by hoping that some greater fool will buy it for more than you paid for it.

[@jwilson6679]

he's only gone and done it!

[@apothe6]

Elon did it

[@gnir81]

Hubris kills

[@os1513]

At last the least probable things in happening xD

[@rajroy816]

The guy who said Paytm stocks will do great :/

[@slovokia]

Elon Musk depends on Twitter to communicate with his followers as much as Donald Trump did. I am sure the possibility of being deplatformed / censored / truth checked by Twitter was a factor in Elons motivation.

[@Gnosim]

Exactly, I think about Musk buying Twitter permanently buying Tesla PR. Him being banned on twitter is much worse for Tesla than him buying Tesla. On top of securing a platform to voice his Tesla ads, it will also be converting Republicans/Conservatives towards a more Tesla friendly base, then its absolutely a game changer benefit that people aren't looking into. The environmentalist will still buy Teslas because they believe in climate change, the right will now also buy Tesla because they are being eased into/familiarized with Tesla. Its a net win for Tesla imo. Volkswagon spends ~$4 billion dollar a year on advertisement. Musk buying out for $40 billion is 10 years of Tesla's PR or more. And ofcourse this extends towards all his other companies as well. Ofcourse free speech is probably a thing, but Musk is never a one dimensional character, he's always trying to take advantage of multiple benefits at same time for the least possible cost. Instead of Tesla having a PR department, they will now have a PR machine that prints out PR for all other news sites. So if you look at it that way, Twitter is a fair price, if not cheap.

[@oflavia2910]

A view not covered - what if Elon musk is interested in a free marketing app for Tesla and Elon brand. after all Twitter is todays free marketing.

[@oflavia2910]

@Spoiled Hu dikkat hai???? maybe then the Elon brand, as it unfolds, politically, economically socially. The mainstay is power.

[@vik914]

It's not free if you're paying >50 USD per share. I'm confused by this commentary

[@rexiioper6920]

There’s a broader discussion to be had on why billionaires buy media properties.

[@PeterXian]

buy twtr short snap? lol

[@PeterXian]

Would give up FB before TWTR. Long TWTR

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[@ArunKumar-yb2jn]

I know this is a 'hurtful' comment, but I have to say this. These slide decks are so poorly done that if I were to use this I would be out of my job on day one.

[@AswathDamodaranonValuation]

Luckily, my job is not dependent on how good my slides look. I am sorry that yours is.

[@akaalkripal5724]

Professor all your theory is useless in this regard.

[@tardx]

Your analogy (at 21:00) with billionaire ownership of the Washington Post, and a putative George Soros purchase of Fox is bad. Musk has indicated a wish to allow ANY kind of speech on Twitter (which is already full of bile, trash, and disinformation), whereas WaPo content is fact-checked and professional. The editorial tone may lean left, but Jeff Bezos has no obvious hand in it. And if Soros bought Fox News, a minimal insistence on factual accuracy would be a good outcome...

[@rexiioper6920]

Why would you trust any billionaire to be the guardian of truth?

[@rexiioper6920]

I think where the analogy falls down is in the content creation side. If Soros buys Fox and its top talent departs to another platform, its viewers will follow and revenues will tank. The only winner would be Murdoch. No such threat faces someone acquiring twitter.

[@howsyamotha7252]

You must be joking right?