Elon Musk offers to buy Twitter

Musk said the cash offer was his “best and final offer,” according to the SEC filing, adding that if it’s not accepted he would have to reconsider his position as a shareholder.

The Tesla CEO sent an offer letter to the company on Wednesday evening, according to the filing.

“I invested in Twitter because I believe in its potential to be the platform for free speech around the world, and I believe that free speech is a societal imperative for a functioning democracy” , he said in the letter to Twitter. “However, since making my investment, I now realize that the business will not thrive or serve this societal imperative in its current form. Twitter needs to be transformed into a private enterprise.”

The letter was addressed to Bret Taylor, Twitter’s chairman of the board, not CEO Parag Agrawal, who assumed the role last fall. He concludes: “Twitter has extraordinary potential. I will unlock it.”

Twitter issued a statement on Thursday confirming that it had received the offer. The company said its board of directors would carefully consider the proposal “to determine the course of action that it believes is in the best interests of the company and all Twitter shareholders.” Twitter declined to say when its board would meet to discuss the offer.

Shares of Twitter (TWTR) on Thursday, but quickly pulled back and was trading down around 5% when the market opened. They were little changed at midday and slipped into negative territory, suggesting investors doubted the offer would be accepted.

But it will be difficult for Twitter to reject Musk’s offer at the price he is offering, said Dan Ives, technology analyst at Wedbush Securities.

“Musk puts the back of the Twitter board against the wall,” Ives said. “The bounty is at such a high level that it will be difficult to see any more deals happening.”

But to get a return on such a high bid, Twitter would have to do more to generate subscriber revenue and cut costs, Ives said. Musk’s commitment to using the company to promote greater free speech does little, if anything, to increase its bottom line, Ives said.

“Musk talks about freedom of speech, it’s the exact opposite of what any other corporate thief would do to monetize company value,” he added. “It’s historic and bizarre at the same time.”

Musk has 81.6 million Twitter followers, far more than any other CEO, and is a far more prolific tweeter than the handful of celebrities who still have more followers than him.

Musk frequently criticizes Twitter

While other Twitter critics complain that the social media platform hasn’t done enough to control the dissemination of false information, Musk said he was more concerned about efforts to limit what users are allowed to tweet. Last month he said he was giving “serious thoughtto the creation of a new social media platform.
“Given that Twitter serves as the city’s de facto public square, failure to uphold the principles of free speech fundamentally undermines democracy,” Musk said. tweeted last month. “What should be done?”

Last week, Musk revealed that he had been buying shares of Twitter since late January and had spent $2.6 billion to rack up 73.1 million shares, which at the time represented a stake of 9.1%, according to what the company disclosed at the time. the number of shares held by investors.

In February, Twitter announced a $2 billion share buyback plan in an effort to boost its share price. It has since repurchased 37 million shares, according to a disclosure filing Thursday, reducing the number of shares outstanding by that amount.

This reduction in the total number of shares brought Musk’s stake to 9.6% without him having to buy even a single additional share. And that reduced the company’s total value by $2 billion based on Musk’s $54.20 offer price.

After Musk’s stock purchase was disclosed, he initially accepted an offer of a seat on the board, a deal that capped his total investment in the company at 14.9%.

But a few days later, on Sunday, Agrawal revealed that Musk had decided not to join the boardthus removing this limit to its property.
Musk’s investment in Twitter and the initial announcement that he would take a position on its board of directors, raised concerns among some employees who did not want to be associated with the often controversial executive.

Agrawal sent a note to employees on Thursday announcing that there would be a company-wide meeting on Thursday afternoon to “discuss today’s news and what’s next.”

“It’s important that we all come together today as #OneTeam,” he said in the brief notice of meeting.

Musk has been uncharacteristically quiet about his plans for Twitter since turning down a spot on Twitter’s board. He has yet to spell out the details of the changes he wants at the company.

“Right now, there are more questions than answers as to where it’s going next,” Ives said.

How Musk could pay for his purchase

Musk did not reveal how he plans to finance his purchase. He said he hired the Wall Street giant Morgan Stanley (MRS)as its financial advisor for the transaction.

Although Musk is the richest person on the planet, most of his $274 billion net worth is tied to his holdings in publicly traded shares of Tesla and privately held SpaceX, and he has been reluctant to sell Tesla shares beyond what he needed. to pay taxes.

Shares of You’re here (TSLA) slid 3% in early trading Thursday, perhaps over fears that Musk would sell stocks to raise cash, or that he might be distracted from his duties at Tesla by his latest interest in Twitter.

It’s very possible that Musk doesn’t need to sell Tesla shares and could instead use them as collateral to borrow the money he needs to buy Twitter, Ives said. Musk’s Tesla shares are worth around $177 billion, even with the slight drop in premarket trading on Thursday.

“Banks will be lining up to be part of the world’s richest person lender consortium,” Ives said.

And even if he sold the number of Tesla shares he would need to buy all of Twitter’s outstanding shares, Musk would still have a majority stake in the company.

It’s unclear if he would also try to be CEO of Twitter, especially since he’s already CEO of Tesla and SpaceX. But Agrawal is unlikely to continue as CEO, a role he took on last November when Twitter co-founder Jack Dorsey suddenly resigned as CEO.

“I don’t see Musk and Agarwal sharing candlelight dinners,” Ives said.

Musk prefers private companies

Musk doesn’t like his companies to be publicly traded. While other private space exploration companies such as Galactic Virgo (SPCE) to have released, SpaceX had remained a private company, despite speculation that it is ripe for a public offering. And in August 2018, he announced – on Twitter – that he was thinking of take private Teslasaying he thought it was his best way to go.

Musk’s tweet about the Tesla privatization, in which he said he had “secured funding” for the bid when he hadn’t, got him in trouble with the SEC. He eventually had to give up his position as president of Tesla and allow his tweets containing important information about Tesla to be scrutinized by other company executives.

Making a company private, or keeping it private, reduces the monitoring agency’s oversight of its operations.

The price he suggested for Tesla at the time, $420 per share, was seen to mark April 20, the unofficial marijuana lovers’ holiday. This time, Musk’s $54.20 per share offer for Twitter also includes “4.20.”

— Donie O’Sullivan, Brian Fung and Brian Stelter contributed to this article.

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