Billionaire entrepreneur Elon Musk has recently made an offer to purchase Twitter. The CEO of SpaceX and Tesla revealed this via tweet on Thursday April 14, 2022 with the statement “I made an offer”. The world’s richest man wants to make the social media platform private to promote free speech.
Elon Musk recently disclosed that he had quietly acquired a 9.1% stake (about $3 billion worth) in Twitter over the last few months. This acquisition made him the largest shareholder of the platform and led to Twitter’s CEO Parag Agrawal offering him a seat on the board of directors. But, there was a caveat of this particular position. In order to join the board, Elon would have to agree to acquire no more than 14.9% of the company, to protect the platform from a hostile takeover. After five days of this, Musk declined the offer and then on Thursday he made an offer to purchase Twitter instead. The offer was made public on Thursday in a regulatory filing.
“Best and Final Offer”
$43 billion is the amount Elon Musk offered. According to him, it is 54% premium over the platform’s value the day before he started investing in it. The billionaire adds that his offer of $54.20 per share is his “best and final offer”. The offer is non-binding and subject to various financing conditions. He stated that if the offer is not accepted then he will need to “reconsider” his position as the largest shareholder of the company.
Can Elon Musk Actually Buy Twitter?
According to Forbes, Elon Musk is the world’s wealthiest man with a fortune of $265 billion. However, it is important to note that he doesn’t have that much in his bank account. Majority of his wealth is tied up in SpaceX and Tesla stock so it is unclear how much cash Mr. Musk has. During his interview at the TED 2022 conference, he stated that he had “sufficient assets” to finalize the Twitter deal but he didn’t provide much details. He said, “I could technically afford it”. This isn’t surprising to know because even if Musk doesn’t have $43 billion on hand, he likely could raise that amount by borrowing billions using his stakes in SpaceX and Tesla as collateral.
Why Does Musk Want to Buy Twitter?
According to Musk, his intention to purchase Twitter is not about making money from the social media platform. Instead he envisions making it a private company because currently it is not living up to its potential as a “platform for free speech”.
Based on this comment, one prediction is that Musk would scale back content moderation on the social media platform. Apart from this, he has also proposed removing ads from Twitter. Ads are the platform’s primary way of making money so it’s unclear if Mr. Musk would actually do that. The billionaire entrepreneur has also suggested turning the San Francisco headquarters of Twitter into a homeless shelter. Last but not least, he apparently wants a button to edit tweets as well.
Could the Purchase Offer Actually Go Through?
Maybe. When Elon Musk made his offer public, Twitter said it received it and will decide whether it is in the best interest of shareholders to accept or decline the offer. Parag Agrawal called a meeting after Musk’s offer went public and told staff that the board of directors was continuing to review the offer. On Thursday, Twitter stock traded lower as compared to the offer price of $54.20 a share. In light of this information, many analysts stated that it is doubtful the deal would go through.
What Happens Next?
John Coffee from Columbia University law school predicted that the social media platform would probably try to negotiate a higher price per share. This will likely want provisions to make sure that the board of directors remains independent of Elon Musk. He predicted that the board may adopt the so-called “Poison Pill” defense to dilute the value of Musk’s holdings if his stake grows to 10-15%. But even then, the CEO of SpaceX could still vote out the current directors and take over the company with a proxy fight. And if his offer doesn’t go through, Elon Musk may get rid of his own Twitter shares.
According to latest news, it seems Coffee’s predictions were correct because Twitter is adopting the “Poison Pill” defense to protect the company from Elon Musk acquiring more shares and give them more time to find alternative options. This plan was approved on Friday April 15, 2022. According to experts, if Twitter wants to get rid of Mr. Musk’s meddling, the “Poison Pill” could be the way to do it. Musk, who has 82 million Twitter followers, hasn’t responded to this yet.