Elon Musk offered to buy Twitter for $43 billion, according to a regulatory filing Thursday. The unexpected move has been called a whim by some pundits to get attention, while others believe it’s a watershed moment that will end with him taking over the entire company.
Tesla CEO, who owns 9.2% of the social networking site and is its largest shareholder, has offered to buy the remaining percentage of the company at $54.20 per share, a 38 percent premium to the price before his investment in the company was announced April 5.
In a letter to Bret Taylor, chairman of Twitter, Musk said he invested in Twitter because “I believe in its potential to be a platform for free speech around the world, and I believe free speech is a public imperative for a functioning democracy.” “. However, Musk wrote, “I now understand that the company will neither prosper nor serve this public imperative as it stands.” His answer to this is to take the company private.
If his offer, which was presented as final, was rejected, Musk threatened to reconsider his position as a shareholder. “It’s not a threat, it’s just a bad investment without the necessary changes,” he said. Musk did not respond to email and tweet requests for comment.
Twitter’s response was swift. Press Secretary Brenden Lee reached out to WIRED. statement stating that the company will “carefully review the proposal to determine a course of action that it believes is in the best interest of the company and all Twitter shareholders.” Twitter share price rose to $48.70 before the opening of trading on April 14, up more than 6% from the day before. Shares opened higher, trading at $48.36.
“Ultimately, we believe this soap opera will end with Musk owning Twitter following this aggressive hostile takeover,” Dan Ives, technical analyst at investment firm Wedbush Securities, wrote in a note published following the announcement. “It will be difficult for other members/consortia to show up and the Twitter board will be forced to accept this offer and/or launch an active Twitter sale process.” However, this unsolicited offer, which is not a formal hostile takeover, is no guarantee that Musk will take over the company. “Anyone can turn down this offer,” says Timothy Galpin, senior lecturer in strategy and innovation at Saeed’s Oxford Business School. “Perhaps he decided to refuse, or Twitter shareholders do not approve of this. A deal will never close until it’s closed.”
And the deal can be stopped before it even starts. Given the proposal and the apparent intentions behind it, Twitter’s board of directors could introduce a shareholder rights plan, informally referred to as a “poison pill,” that would prevent any individual shareholder from buying more than, say, 10 percent of the company’s shares. This would dilute the value of Twitter’s stock, allowing other shareholders to increase their investment at a discount.
Other responses to the takeover attempt focused on what Musk would do if it went through. Musk’s explicit mention of free speech in the letter accompanying his bid has people worried that if he does lead the platform, he could lift some of the platform’s anti-hate speech measures.
“I would argue that if someone like Elon Musk owns Twitter, it will have a negative impact on democracies around the world,” says Christopher Busi, founder of BotSentinel, a service that monitors inauthentic behavior on Twitter. Musk’s absolutist approach to free speech will open the door to people like Donald Trump, who was banned from Twitter in January 2021 for inciting an uprising in the US Capitol through social networks, return to the site.
“Twitter would become a cesspool of misinformation with real consequences,” says Busi.
One reason Musk might want to buy this business – if he’s serious – because it acts as a mouthpiece for his own views. “He’s a social platform communicator,” says Carey Cooper, professor of business at the Manchester Business School. “He is a business individualist in every sense. He is quite successful in his business endeavors and I can understand that he needs a communication platform. This allows him to express his views in a way that suits his personality.”
But the big question remains: How likely is Musk’s proposal to be accepted? While the offer is $54.20 per share, higher than the stock before Musk bought it, it is still below the February 2021 high of $77.06 per share. This is also well below the 52-week average the company traded. And intraday trading on April 14, which fell below the opening price, indicates that the market does not believe that Musk can pull it off. Musk’s 38 percent premium is “roughly in the range of the average premium paid to companies,” which is typically 30 to 40 percent above current value, Galpin says. “There is no guarantee that a sufficient number of shareholders will approve a proposal at this level,” he says.
While Musk, the company’s largest shareholder, obviously wants the sale to go through, other major shareholders, including The Vanguard Group, Morgan Stanley, BlackRock and State Street Corp, may not. WIRED asked all four firms if they would accept Musk’s takeover. At the time of publication, Morgan Stanley has not responded. Ed Patterson, global head of communications at State Street Corp, Barbara Williams, director of corporate communications at BlackRock, and Vanguard spokeswoman Alyssa Thornton said they would not comment on specific companies.
Common business sense dictates that they are likely to turn down the offer. “Some shareholders may own shares more for personal reasons than for financial reasons,” Galpin says. “It will be a mixed package of shareholders. Is their consideration a financial game, or is their consideration a good public decision based on personal values? Only individual shareholders would know about it.”
The price of a potential buyout is impressive, but it will be relatively small for Musk, whose net worth is valued at $273 billion. “For him, it’s a small thing,” says Cooper. Anil Dash, CEO of software startup Glitch, agrees: “He could afford to outbid just about anyone. In fact, it all comes down to his whims.”
Even if the offer is rejected and Musk doesn’t see how well he can run Twitter alongside Tesla and SpaceX as the firm’s majority shareholder, he’ll probably still win by making the stock price soar.
However, the way that money is being held may give an idea of how serious Musk’s Twitter claim really is. “He can’t have more than $40 billion in cash to settle this deal over a serious period of time,” says Siva Vaidhyanathan, Robertson professor of media studies at the University of Virginia. “His wealth is locked up in Tesla stock, not bitcoin.”
Turning this into real money will take time and will also have a negative impact on the company he already runs. “The idea of getting rid of $40 billion in Tesla stock would be a value shock for Tesla,” Vaidhyanathan says. “He can’t seriously expect to take control of one company by inflating its value while simultaneously devaluing the company he actually runs.”
So much is recognized advertisement filed The Securities and Exchange Commission (SEC) announced Musk’s intention to take over. The offer to purchase the company’s outstanding shares is non-binding and is subject, among other things, to the “completion of the proposed financing”.
In short, Musk doesn’t have the money to buy Twitter yet. “I don’t think Elon Musk is a serious person,” says Vaidyanathan. He believes that Musk lacks the appetite to comply with the regulatory requirements of a large social network that acts as a public forum, and this obligation falls on him as the sole owner.
“In no way does he want to take responsibility for interacting with regulators in London, Brussels, New Delhi and Canberra, not to mention the United States,” Vaidhyanathan says. “This is not a very well run company. This is not a profitable company. There are dangers ahead. He needs to know that running Twitter is not fun.”
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Credit: www.wired.com /