Twitter Inc. TWTR.N began talks on a deal with Elon Musk on Sunday after he courted many of the social media company’s shareholders with details of funding his $ 43 billion takeover bid, insiders said.
The company’s decision to engage with Musk earlier Sunday did not mean it would accept his $ 54.20 share offer, sources said. However, this means that Twitter is now investigating whether the sale of Musk’s company is possible under attractive conditions, the sources added.
0:39 Elon Musk offers to buy Twitter for $ 41 billion Elon Musk offers to buy Twitter for $ 41 billion – April 14, 2022
Musk, CEO of electric car giant Tesla Inc. TSLA.O, has been meeting with Twitter shareholders for the past few days to seek support for his offer. He said Twitter must be private to grow and become a real platform for free speech.
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Many Twitter shareholders turned to the company after Musk outlined a detailed financing plan for his offer on Thursday and urged it not to miss the deal, Reuters reported earlier Sunday.
Musk’s insistence that his Twitter offer is his “best and last” is emerging as an obstacle to negotiations on the deal, sources said. However, the Twitter board decided to engage with Musk to gather more information about his ability to complete the deal and potentially get better terms, the sources added.
Twitter has not yet decided whether to investigate the sale to put pressure on Musk to raise his bid, according to sources. People familiar with the matter declined to be identified because discussions of the deal are confidential.
Read more: Elon Musk promises $ 0 salary for Twitter board after taking “poison pill”
Twitter wants to know more about all of Musk’s active investigations by regulators, including the US Securities and Exchange Commission (SEC), which could pose a risk of closing the deal, one source said.
Securities attorneys say Musk, who settled allegations of misleading investors by hinting four years ago that he provided funding to become a private Tesla, may have violated the SEC’s disclosure rules because had amassed a share on Twitter earlier this year.
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Twitter is also investigating whether regulators in one of the major markets it operates would object to Musk owning the company, the source added. If Twitter finds that selling Musk would be risky, it could demand a significant disintegration fee, according to sources.
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Read more: Elon Musk provides $ 46.5 billion for a takeover bid on Twitter
The social media company took a poison pill after Musk made a proposal to prevent him from increasing his stake of more than 9% in the company by more than 15% without negotiating a deal with its board. In response, Musk threatened to launch a tender that he could use to register shareholder support on Twitter for his offer.
The Twitter board’s concern was that unless it sought to negotiate a deal with Musk, many shareholders could support it in a tender offer, sources said.
While the poison pill would prevent Twitter shareholders from offering their shares, the company worries that its negotiating arm will weaken significantly if it proves to be against the will of many of its investors, sources added.
Representatives of Twitter and Musk did not immediately respond to requests for comment.
The Wall Street Journal reported earlier Sunday that Musk and Twitter will meet to discuss the acquisition.
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Shareholders’ expectations for the deal on Twitter for the deal differ widely based on their investment strategy, sources said.
Active long-term shareholders, who, along with index funds, hold the majority of Twitter’s shares, have higher price expectations, some of $ 60 a share, sources said. They are also more inclined to give Parag Agraval, who became CEO of Twitter in November, more time to increase the value of the company’s shares, the sources added.
“I do not believe that the offer offered by Elon Musk ($ 54.20 per share) is close to the intrinsic value of Twitter, given its growth prospects,” tweeted Prince Alwaleed bin Talal of Saudi Arabia, a Twitter shareholder. April 14.
Read more: US judge rejects Elon Musk’s closure order over 2018 Tesla tweets
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Short-term investors such as hedge funds want Twitter to accept Musk’s offer or want only a small increase, sources said. Some are concerned that the recent decline in the value of technology stocks amid fears of inflation and economic slowdown makes it unlikely that Twitter will be able to provide more value for itself any time soon, sources added.
“I’d say take $ 54.20 a share and that’s it,” said Sahm Adrangi, a portfolio manager at Kerrisdale Capital Management, a hedge fund that owns 1.13 million shares on Twitter, or 0.15% of the company. has been an investor since the beginning of 2020.
2:05 #HostileTakeover: Billionaire Elon Musk Wants to Buy and Change Twitter #HostileTakeover: Billionaire Elon Musk Wants to Buy and Change Twitter – April 14, 2022
One silver point for the Twitter board is that Musk’s proposal does not appear to have turned much of his army of 83 million Twitter followers into new shareholders in the San Francisco-based company who could support his offer, sources said.
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The retail investor base on Twitter increased from about 20% before Musk revealed its stake on April 4 to about 22%, according to sources. (Report by Svea Herbst-Baileys in Boston and Greg Rumeliotis in New York; Editing by Will Dunham and Kenneth Maxwell)
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