According to CNN, Elon Musk has made an offer to buy Twitter and intends to take it private. He said he believes the company needs to "transform."
According to a filing with the U.S. Securities and Exchange Commission (SEC), Musk offered to buy all of his yet-held Twitter shares at $54.20 per share, valuing the company at $41.4 billion.
That's 38 percent higher than the closing price on April 1, the last trading day before Musk announced he became Twitter's largest shareholder, and 18 percent higher than Wednesday's closing price.
According to the SEC filing, Musk said the cash offer was his "best and last offer," adding that if (Twitter) doesn't accept it, he will have to reconsider his position as a shareholder. The filing shows that Tesla's CEO sent a letter of offer to the company Wednesday night.
In his letter to Twitter, he said: "I invested in Twitter because I believe it has the potential to become a platform for free speech on a global scale, and I believe that freedom of speech is the social responsibility of a functioning democracy." However, since I made the investment, I now realize that in the current situation, this company will neither thrive nor meet the needs of society. Twitter needs to transform into a private company. ”
The letter was received by Bret Taylor, chairman of Twitter's board of directors, not CEO Parag Agrawal. The letter concludes: "Twitter has extraordinary potential. I'll unlock it. ”
Twitter issued a statement on Thursday confirming receipt of the takeover offer. The company said the board would carefully review the proposal "to determine a course of action that it believes is in the best interests of the company and all Twitter shareholders." Twitter declined to comment on when the board will meet to discuss the offer.
Twitter's shares surged 13 percent at one point in pre-market trading on Thursday, but quickly retreated, rising about 5 percent at the opening. At midday, the share price barely changed and fell into negative territory, indicating that investors were skeptical about whether the offer could be accepted.
But Dan Ives, a tech analyst at Wedbush Securities, said Twitter would have a hard time rejecting musk's offer.
Ives said: "Musk has pushed Twitter's board into a desperate situation. The premium is at a level where it is difficult to see where other offers appear. But to reap the rewards of such high bids, Twitter needs to do more to generate user revenue and cut costs. ”
Ives said Musk promised to use the company to promote greater freedom of speech, but that didn't do much to boost profitability.
He added: "Musk treats this as a matter of free speech, in the exact opposite of what other corporate acquirers have done to monetize the value of the company." This is historical and at the same time grotesque. ”
Musk has 81.6 million followers on Twitter, far more than any other CEO, and he produces far more tweets than celebrities who have more fans than he does.
Musk is often critical of Twitter
While other critics of Twitter have complained that the social media platform has not done enough to control the spread of misinformation, Musk has expressed more concern about efforts to limit users' tweet content. Last month, he said he was "seriously considering" creating a new social media platform.
Musk tweeted last month: "Twitter is actually a public city square that, if it doesn't abide by the principles of free speech, fundamentally undermines democracy." So what should we do?"
Last week, Musk revealed that he had been buying Twitter stock since late January and spent $2.6 billion to accumulate 73.1 million shares, which was equivalent to 9.1 percent at the time, based on the number of shares held by investors the company disclosed at the time.
In February, Twitter announced plans to buy back $2 billion worth of shares to boost the stock price. Since then, the company has bought back 37 million shares, reducing the number of shares outstanding, according to a disclosure filing on Thursday.
The reduction increased Musk's stake to 9.6 percent, and he didn't even need to buy any additional shares. Based on Musk's $54.20 bid, the company's total value was reduced by $2 billion.
After Musk's stock purchase disclosure, he initially accepted a seat offered by the board, which included a cap of 14.9 percent on his total investment in the company.
But just a few days later, on Sunday, Twitter CEO Agrawal revealed that Musk's decision not to join the board lifted restrictions on his ownership.
Musk's investment in Twitter, along with the initial announcement that he would serve on Twitter's board, sparked concerns among some employees who did not want any connection to the often controversial executive.
On Thursday, Agrawal sent a memo to employees announcing that a company-wide meeting would be held Thursday afternoon to "discuss the news of the day and what comes next." In a brief notice of the meeting, he said: "It is important that we come together today as a team. ”
Since Musk refused to sit on Twitter's board, he has remained unusually silent about his own plans on Twitter. He hasn't elaborated on what changes he wants Twitter to make. Ives said: "Now there are more questions than answers about his next plan. ”
How can Musk afford to pay for it
Musk did not say how he intends to raise funds for the acquisition. He said he had hired Wall Street giant Morgan Stanley as financial advisor to the deal.
Although Musk is the richest man on the planet, with most of his $274 billion net worth tied to his holdings of listed shares of Tesla and private space company SpaceX, he has been reluctant to sell those stocks that exceed the taxes he needs to pay.
Tesla shares fell 3 percent in early trading on Thursday, possibly because of fears that Musk would sell the company's stock to raise cash to buy Twitter shares, or that he might be distracted by his recent interest in Twitter.
Ives said there's a good chance Musk won't need to sell Tesla stock, but can use those shares as collateral to borrow money to buy Twitter. Musk's Tesla stock is worth about $177 billion, though trading fell slightly ahead of Thursday's opening.
"Banks will line up to be part of the share of loans to the world's richest man," Ives said. And, even if he sells enough Tesla shares to buy all of Twitter's issued shares, Musk will still have a controlling stake in the company.
It's unclear if he'll still try to become Twitter's CEO, especially since he's already CEO of Tesla and SpaceX. But once Musk wins over Twitter, Agrawall is unlikely to continue as CEO.
Last November, Twitter co-founder Jack Dorsey abruptly resigned as CEO, and Agrawal took over as CEO. Ives said, "I don't think Musk and Agarwal will share a candlelight dinner. ”
Musk prefers privately held companies
Musk doesn't like to let his company go public. While other private space exploration companies such as Virgin Galactic have gone public, SpaceX has been privately held, despite speculation that the time is ripe for it to go public. In August 2018, he announced on Twitter that he was considering taking Tesla private, saying he thought it was the best way forward.
Musk's tweet about taking Tesla private has brought him to the attention and governance of the U.S. Securities and Exchange Commission (SEC). He tweeted that he had secured "funding guarantees" for the acquisition, but he didn't.
He eventually had to relinquish his position as Tesla chairman and agreed to let other company executives review the substantive information he posted about Tesla.