This Tech Twitter thread is by Will Slaughter aka BamaBonds (source). His bio reads “Southern fried fixed income. The cynic formerly known as MilwaukeeBonds.”
“Just to be clear, Twitter senior secured bank loans- the top of the capital stack- at $0.60 implies that Twitter- for which @elonmusk paid $44 billion- is now worth less than $8 billion.
OMG, the preceding tweet has brought out the corporate finance nerds! OK fine (aside from looking at recovery values), let’s do the contingent claims analysis. Senior creditors are short an EV put struck at $13B (the face value of their loan)
The market values this put at $5B right now (actually more including the spread premium). Let’s assume Elon has got 2 years to turn this around, and throw on a 50% annual asset value volatility. Plug it all in to Black Scholes and you get an implied spot price (EV) of ~$8B
Now a bunch of Elon stans want argue with me about Twitter’s value. Don’t argue with me, argue with the hedge funds who were 60 bid on this paper when the banks tried to sell it this week!
Reminds me of the old ‘87 crash story: “60 bid” “My machine says it’s worth 100!” “Well son, sell it to your machine then!” (source).
Featured image generated via HackerNoon Stable Diffusion prompt of ‘twitter wall street valuation. money and gold burning. ‘