Tesla CEO Elon Musk, Twitter's largest shareholder, proposed a hostile takeover to Twitter after refusing to accept Twitter's board seat over the weekend and prepared to take it private to introduce reforms to its operations.
Priced at $54.2 per share, it is proposed to be reformed after privatization
According to a filing filed by Twitter with the U.S. Securities and Exchange Commission yesterday (April 14), Musk has filed a non-binding privatization proposal with Twitter on April 13, 2022, to acquire all of twitter's outstanding common stock for $54.20 per share in cash. Based on this calculation, Twitter's overall price is as high as $43 billion. Musk's bid is 38 percent higher than twitter's closing price on April 1, before his first disclosure of his stake. Based on the closing price on January 28 before Musk began collecting Twitter shares, the premium is 54%.
https://www.sec.gov/Archives/edgar/data/1418091/000110465922045641/tm2212748d1_sc13da.htm#ex-b_001
Musk described it as his "best and final offer." He said that if the offer is not accepted, "I need to reconsider my position as a shareholder and I don't play the bargaining game".
Musk wrote to Twitter Chairman Bret Taylor saying that since investing in Twitter, realizing that it will neither flourish nor meet the need for free speech in its current form, Twitter needs to transform into a private company.
Musk said he wants to create an "inclusive free speech stage" where Twitter is vital to democracy and should open-source its algorithms and be transparent about whether tweets are changed, promoted or not promoted.
If the acquisition is not accepted, or the shares are sold
Musk said he would consider selling his stake if the acquisition was not accepted because he had no confidence in management and was not confident in being able to push for necessary reforms in the open markets.
Musk first disclosed to the SEC on April 4 that he held more than 9 percent of Twitter and was invited to join the board the next day. At that time, he supplemented the SEC from a passive investor to an active investor on Twitter.
According to the filing, Musk bought Twitter stock almost every day from January 31 to April 1, with a purchase price of between $32.8 and $40.3 per share, spending a total of $2.64 billion to buy 73,115,038 shares, equivalent to 9.1% of Twitter shares.
He gave up joining Twitter's board over the weekend to avoid his requirement that twitter not exceed 14.9 percent. If he becomes a director, it will eliminate the possibility of him acquiring the company.
Because Musk's disclosure of Twitter's stakes was not filed in the SEC in a timely manner, there are investors (former Twitter shareholders) who have sued him for securities fraud.
The Saudi prince pointed out that the price was too low, and Musk said there was a plan B
Musk considers a bid of $54.20 per share, which is the "best and final" offer given.
Still, that price is a far cry from Twitter's high of $73.34 per share last year.
Saudi Arabia's Prince Al Waleed bin Talal, another major shareholder who has held a 5.2 percent stake in Twitter since 2015, said he bid too low and flatly refused. In a tweet, it said, "Based on Twitter's prospects, I don't believe Musk's bid is close to the fundamental value of Twitter."
It is reported that the board also does not like Musk's privatization plan and intends to join forces to boycott.
Musk also talked about Twitter's privatization plan in an interview on the same day, admitting that he had enough financial resources but was "not sure" whether he would eventually be able to buy Twitter. When asked if there is a plan B if the current offer is rejected, he replied "yes".
Musk admitted to being unsure whether he could buy Twitter, and analysis also said he may have difficulty raising enough money
Musk said he might be able to afford Twitter from a technical standpoint, but added that he wasn't sure if he could actually buy Twitter in the future. He didn't care at all about the economic effectiveness of the acquisition.
Agency Vital Knowledge commented that given twitter's stock price of $70 less than a year ago, it's hard to imagine Twitter's board accepting an offer of $54.2 per share.
Acquisition funding, may be a problem, Musk's large wealth is related to Tesla and Space X, if the offer is to rise to much more than $54.2, he may have difficulty raising enough money.
Twitter's CEO told employees that the board was still evaluating Musk's takeover offer
According to The Wall Street News, Twitter will hold a plenary meeting at 5 p.m. Eastern Time on Thursday to discuss Musk's acquisition. Twitter will evaluate his acquisition proposal based on recommendations from Goldman Sachs and law firm Wilson Sonsini Goodrich & Rosati.
Bloomberg reported that Twitter's CEO told employees that the board was evaluating Musk's bid. Twitter CEO Parag Agrawal told employees that the board is still evaluating Musk's offer to buy and take the company private, people familiar with the matter said.
At a plenary session Thursday afternoon, employees asked questions about various potential possibilities, and Agrawal's tone was neutral, the sources said. The people familiar with the matter also said that he did not hint at the intention of the board, but only said that it was a strict procedure to determine what was most in the interests of shareholders.
Chief marketing officer Leslie Berland read out questions submitted by Twitter employees through Slack at the meeting, people familiar with the matter said. Other board members, such as former CEO Jack Dorsey, did not address them.
People familiar with the matter said the meeting lasted about 30 minutes. Twitter declined to comment.
Twitter's board held an emergency meeting Thursday morning to discuss a potential response to Musk's proposal — including poison pill measures commonly used to prevent hostile takers, others familiar with the matter said earlier.
Hostile acquisitions, Morgan Stanley, Goldman Sachs as their masters
Musk offered $43 billion to buy Twitter, a move that left wall street's two major investment banks in charge.
According to a filing filed Thursday, Morgan Stanley is advising Musk; Twitter said it would review Musk's offer on the advice of Goldman Sachs and Wilson Sonsini Goodrich & Rosati.
When Tesla IPO in 2010, Goldman Sachs was the lead underwriter and Morgan Stanley was the co-underwriter.
Musk also looked for these two investment banks when he was preparing to take Tesla private in 2018. According to a Tweet at the time, he worked with Goldman Sachs and later hired Morgan Stanley to advise on plans to take Tesla private.
Goldman Sachs, on the other hand, has long served as an advisor to Twitter.
As of yesterday's (April 14) close, Twitter closed at $45.08 per share, 17.5% below Musk's bid of $54.20, and its total market capitalization is currently $344.22.
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