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Instant Value

Earlier this week, we learned that Elon Musk is now Twitter's largest shareholder.

It's certainly interesting that Musk, a self-proclaimed free speech absolutist who has criticized Twitter in the past for censoring speech on its platforms (most notably by banning former US President Donald Trump) decided to take such a large stake in the social media company.

And it's worth noting that, according to The Wall Street Journal, Musk didn't provide the Security and Exchange Commission (SEC) with "a standard certification that underscores an investor’s passive status"... perhaps indicating he has no intention of being a passive investor?*

But there's something else I found even more interesting than Musk's investment...

... which is what happened immediately after we learned that he made it.

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On March 14th, Musk purchased 73.5 million shares of Twitter, when the company's shares were trading at $33.03 USD. At that price, it would have cost him $2.43 billion, which is a heck of a lot of money for you and me... but less than 1% of Musk's $273 billion net worth. (One percent of my net worth wouldn't buy me a used Tesla, but I digress.)

Now, the SEC has rules that say when an investor purchases 5% or more of a publicly-traded company, they need to disclose that stake within 10 days. Musk has had several run-ins with the SEC and has publicly expressed his (very, very low) opinion of the organization on numerous occasions, so it's likely the fact he missed the filing deadline was not an accident. Nevertheless, we didn't learn about the share purchase until April 4th... after which shares skyrocketed. Twitter closed the day at $49.97 USD.

Let's do some quick math: the difference between the $33.03 that Musk paid for his shares of Twitter and the $49.97 they were worth once we learned about his investment is $16.94.

For Musk's 73.5 million shares, that $16.94 difference resulted in a $1.245 billion profit... which is just shy of half of the total he invested in the first place. Essentially, Elon Musk got a 50% discount on the Twitter shares he purchased simply because he's Elon Musk.

When I learned about this situation, the first thing I remembered was what happened on June 16th, 2017, when Amazon announced it was buying Whole Foods for $13.4 billion. On the news, Amazon shares skyrocketed and its market capitalization increased by $15.6 billion. This means that by making the deal and then announcing the news, Amazon essentially got all of Whole Foods for free... and added $1.9 billion to its bottom line as a bonus!

How do these things happen?

Because the general public believes people like Elon Musk (and companies like Amazon) add instant value.

Whether or not you personally believe that's true, it's undeniable this positive sentiment is reflected in the markets: Twitter's stock price increased because a significant portion of the general public has extreme confidence in Musk's abilities and believes his direct involvement with the company is a good thing, and that drove demand for Twitter's shares.

But you don't have to be worth $273 billion to have a reputation for adding instant value.

Be the person who doesn't accept the status quo when the status quo isn't working and finds a way to succeed in situations where failure is much more likely.

Be the person who brings energy, excitement, and expertise to every initiative.

Be the person who adds instant value by simply becoming involved with a project.

Whether you like him or not, that's something we can all learn from Elon Musk.


* This would surprise... exactly nobody, especially since on March 25 -- 11 days after the purchase but 10 days before the transaction became public -- Musk tweeted a poll, saying, “Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” In a follow-up tweet, he added: “The consequences of this poll will be important. Please vote carefully.” And if you're wondering, more than 70% of the roughly two million people who responded voted no.)

Also, a day after we learned of his investment, Musk was added to Twitter's Board of Directors... so "passive investor" or not, the man is undoubtedly going to have a significant influence on the company.


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