It was a classic Elon Musk move: announce a new proposal that will radically change the tech landscape, slam it on stage and in social media posts only to find that the proposal in question is far from market ready.
Only this time it wasn’t a self-driving taxi, a home robot, or an electric truck advertised by the world’s richest man. It was a plan to buy Twitter, Musk’s favorite megaphone and time waster, and, he says, a public square vital to democracy.
Early Thursday morning, the chief executive of Tesla and SpaceX notified the Securities and Exchange Commission of an offer to buy all of Twitter for $54.20 per share, or $43 billion. “Twitter needs to be privately held,” he wrote in a letter to Bret Taylor, chairman of the board.
For hours, the social media board was reportedly mulling over strategies to keep him, Wall Street acted like the bid was another one of Musk’s jokes, and Musk himself admitted that it might not happen, even relying on governing body. put his proposal directly to the vote of shareholders.
Musk began negotiations by stating that his offer was non-negotiable; this will bring shareholders a decent premium of 18% over the current price. But with Twitter shares trading at a 52-week high of $73, it was far from an offer the company’s board would have found it hard to refuse, analysts said.
“I don’t believe this advice will come back… yes,” said Brent Till, a technical analyst at financial and investment banking firm Jefferies. “We think the offer should be at or above $60,” he said.
Till suggested that Musk’s inclusion of the marijuana-related number 420 in the offer price per share may have sent the wrong signal, suggesting he was playing with a crowd of meme-humor enthusiasts.
While Twitter has a fiduciary duty to consider any offer, Twitter’s board can’t afford to take its offer any more seriously than it does, said Tero Kuittinen, senior analyst at asset management firm Afalon Investment Management.
“What is the risk that Musk handles this process in a way that could hurt the share price? What is the risk that the deal will never close? he said in a direct message on Twitter. “I am deeply skeptical that the board of directors would agree, given that the share price has been much higher recently and the risk associated with Mr. Musk’s whimsical public comments is high.”
The traders seem to agree. After a quick jump in share price, Twitter closed up 1.7% to $45.08. Typically, when a buyer makes such an offer, the stock price immediately rises to near the offer price if traders believe the deal will go through.
In the news release Twitter said that its board of directors “will carefully consider the proposal to determine a course of action that it believes is in the best interest of the company and all of Twitter’s shareholders.” Musk was himself must join Board earlier this month, but ultimately rejected the offerwhich would force him to keep his stake in the company below 15%.
Musk admitted he may have overdone it during an interview on stage at the TED conference in Vancouver, Canada on Thursday morning, saying, “I’m not sure I can actually get it.” He said he had a plan B but refused to discuss it.
The Wall Street Journal reported that Twitter’s board is discussing the possibility of a so-called poison pill provision that would prevent Musk from increasing his current stake in the company from 9.2% to more than 15%, making it harder for him to attempt hostile action. adopt.
If the board rejects his proposal, Till said, “it really depends on [Musk] where he wants to take it. I think there are really only two doors that I can see can happen. First door – he says “OK, I don’t want to have anything to do with this team” and sells his position that he built, or he revisits the “final” offer and says “Well, it’s really not final”.
Ali Mogarabi, senior equity analyst at Morningstar, fixed There is less than a 50% chance that Twitter will agree to Musk’s terms. Gary Black, Managing Partner of Future Fund, expressed such doubts. And famous billionaire investor Mark Cuban. tweeted that Twitter “will do its best not to sell.”
Whether Musk has the means to close the deal is another matter. Musk settled allegations of fraud with federal financial regulators in 2018 after the Securities and Exchange Commission said he used Twitter to announce that he had “funding secured” to privatize his electric vehicle company, even though he didn’t. Musk was also late in filing SEC filings for his Twitter stake and is now facing threats shareholder action over time, although the SEC has said nothing about it.
He did not elaborate on how he would fund the Twitter purchase. Musk’s personal fortune is estimated at about $265 billion, but most of it comes from Tesla shares. To take advantage of this wealth, he would have to borrow against his shares, which could hurt the share price.
While Musk has said that Twitter’s privacy will help it serve a “social imperative,” Jennifer Edwards, executive director of the Texas Social Media Research Institute at Tarleton State University, said having one person in control of one of the largest social networks in the world is exhilarating.
“When one person takes a majority stake in a company like Twitter, the checks and balances” that incentivize platforms to spread accurate information online “may become less effective” than it would be under a board of directors of a public company, Edwards. wrote in an email. (Of course, this applies to Meta Platforms Inc., Facebook’s parent company, where Mark Zuckerberg’s voting shares give him full control of the much larger platform.)
“Musk has made decisions over and over again about what is good for him,” said Jessica Gonzalez, one of the executive directors media advocacy group Free press. “He used Twitter to influence the markets in his favor. It’s just disgusting. He is an irresponsible billionaire and privatizing this company will make it even less accountable.”
At the TED event, Musk said he wants to allow users to edit posts and that the company needs to be more transparent about who it bans or “times out” and why. “Tweets are promoted and demoted without knowing what’s going on,” he said.
But under pressure from host Chris Anderson on how it would work in detail, Musk said, “I’m not saying I have all the answers here.”
Musk’s interest in Twitter predominantly ideological not a profitable business decision, said Greg Autry, clinical professor of space leadership, politics, and business at Arizona State University’s Thunderbird School of Global Management and a leader in the space industry.
“He is a strong supporter of free speech, and he does not like the censorship model ever present on social media and Twitter in particular,” he said. “He could use his money better if he wanted to just make money.”
The Associated Press was used in compiling this report.