According to SEC documentation, Musk has offered to acquire all shares on Twitter that he does not own, for $ 54.20 per share, valuing the company at $ 41.4 billion. This represents a 38% mark-up over the closing price on April 1, the last trading day before Musk revealed it has become Twitter’s largest shareholder, and an 18% premium over Wednesday’s closing price.
Musk said the cash offer was his “best and last offer”, according to SEC documentation, adding that if it was not accepted, he would have to reconsider his position as a shareholder.
Tesla’s CEO sent a letter of offer to the company on Wednesday night, according to the documentation.
“I have invested in Twitter because I believe in its potential to be a platform for freedom of speech around the world and I believe that freedom of speech is a public imperative for a functioning democracy,” he said in a letter to Twitter. “However, since I made my investment, I now realize that the company will neither thrive nor serve this social imperative in its current form. Twitter needs to be transformed as a private company. “
The letter was addressed to Brett Taylor, chairman of the Twitter board, and not to CEO Parag Agraval, who took over the title last fall. He concludes: “Twitter has tremendous potential. I will unlock it.”
Twitter posted a statement Thursday confirming it had received the offer. The company said its board would carefully consider the proposal, “to determine the course of action it believes is in the best interests of the company and all Twitter shareholders.”
Shares of Twitter (TWTR) rose as much as 13% in pre-market trading on Thursday, but soon withdrew. The shares traded at about 6% after the market opened, suggesting that investors had doubts that the offer would be accepted.
But it will be difficult for Twitter to turn down Musk’s offer at the price it offers, said Dan Ives, a technical analyst at Wedbush Securities.
“Musk is pressing the back of the Twitter board against the wall,” Ives said. “The prize is at a level where it will be difficult to see other offers.”
But to get a return on such a high bid, Twitter will need to do more to attract subscriber revenue and cut costs, Ives said. Musk’s commitment to using the company to promote greater freedom of speech does not do much to increase its profitability.
“Musk is doing this for free speech, the exact opposite of what any other corporate raider would do to monetize the company’s value,” Ives said. “It’s historic and weird at the same time.”
Musk has far more Twitter followers than any other CEO at 81.6 million and is a much more prolific Twitter user than a handful of celebrities who have more followers.
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 what users can tweet. He said last month that he was “seriously” considering a new social media platform. “Given that Twitter serves as a de facto public city square, non-compliance with the principles of freedom of speech fundamentally undermines democracy,” Musk tweeted last month. . – What must be done?
Last week, Musk revealed that he had been buying shares on Twitter since late January and had spent $ 2.6 billion on 73.1 million shares, which accounted for 9.1 percent at the time, according to what the company revealed. at this point for the number of shares held by investors.
But in February, Twitter announced plans to buy back $ 2 billion worth of shares in a bid to raise its share price. And on Thursday, the company revealed that it has 37 million fewer shares outstanding than previously stated.
This reduction in total shares increased Musk’s stake to 9.6% without him having to buy any additional shares. And that reduced the company’s total value by $ 2 billion, based on Musk’s bid price of $ 54.20.
Following the announcement of the purchase of shares from Musk, he initially accepted a proposal for a seat on the board, an agreement that included a ceiling on his total investment in the company of 14.9%.
On Sunday, Twitter CEO Parag Agraval revealed that Musk had decided not to join the board, thus removing the restriction.
Musk has been unusually silent about his plans for Twitter in the days since.
Musk did not reveal how he intends to finance his purchase. He said he had hired Wall Street giant Morgan Stanley (MS) as his financial adviser for the deal. Although Musk is the richest man on Earth, most of his net worth of $ 274 billion is tied up in his shares in publicly traded Tesla and private SpaceX, and he is reluctant to sell shares of Tesla beyond what he necessary to pay taxes. Tesla shares (TSLA) fell 3% at the beginning of trading on Thursday, perhaps due to fears that Musk will sell shares to raise money, or that he may be distracted from his obligations to Tesla by his recent interest in Twitter.
It is very possible that Musk will not need to sell shares in Tesla and instead be able to use them as collateral to borrow the money he needs to buy Twitter, Ives said. Musk’s Tesla shares are worth about $ 177 billion, even with a modest drop in pre-market trade on Thursday.
“Banks will line up to become part of the consortium of creditors of the richest man in the world,” Ives said.
Musk is not a fan of his companies trading publicly. While other private space exploration companies such as Virgin Galactic (SPCE) went public, SpaceX remained privately owned, despite speculation that it was ripe for public offering. And in August 2018, he announced – on Twitter – that he planned to take Tesla privately, saying he thought it was his best way forward.
Musk’s tweet about Tesla being private, in which he said he “provided funding” for the offer when he failed to do so, led him to problems with the SEC. Eventually, he had to step down as Tesla’s chairman and agree to have his Tesla tweets reviewed by other company executives.
Accepting a private company or keeping it private reduces the oversight of the monitoring agency’s operations.
The price he offered Tesla at the time, $ 420 a share, was seen highlighting April 20, the unofficial holiday for marijuana enthusiasts. The $ 54.20 offer per share for Twitter also includes “4.20.”
– Brian Fung and Brian Stelter contributed to this article.
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