You may have heard about the moves Elon Musk has been making to buy Twitter. It has been in the news for quite a bit. How far has he gone? Read on for details on Elon Musk Buys Twitter: What you should know.
How it began
Elon Musk made an announcement on April 4th, 2022 that he has bought 9.1% of Twitter. Of course, such news of the world’s richest man doing this sent the stock price soaring. Thereafter, Musk tweeted a poll seeking suggestions on ways to improve Twitter.
In turn, Twitter offered him a board seat. Now this move would have restricted his ownership to just 15 percent of the company. Although, Musk initially said yes, he later changed his mind.
Rather, he updated his Securities and Exchange Commission filings. Surely, this was a clear indication he was going beyond just buying stocks to serve as a board member.
He offered to buy Twitter for $54.20 a share. He made this offer on Thursday, April 14th, 2022. Subsequently, on April 25th, Twitter accepted the offer. The board of directors gave up total control of the company in exchange for the $44 billion named in Musk’s initial offer. Ultimately, when the deal is done, Twitter will be a private company.
How Elon Musk is funding the takeover
Findings from SEC filings show that Musk sold around $8.4 billion worth of Tesla shares. Specifically, this summed up to 9.6 million shares in Tesla. This was a way to finance his takeover bid of Twitter. Although; Tesla’s share price initially fell about 12 percent, it later edged up about 3.5 percent.
Elon Musk laid out his plan to finance the buyout with the Securities and Exchange Commission thus:
- A series of loans worth $25.5 billion through two debt commitment letters issued from Morgan Stanley Senior Funding.
- Musk intends to cover the remaining $21 billion himself.
- Musk already owns a 9% stake in Twitter which is valued at roughly $2.9 billion
- He received $1 billion from Larry Ellison.
- Also, several investors have given Musk up to $7.1 billion. These investors include Andreessen Horowitz and Sequoia Capital.
- Other potential investors are Saudi Arabia and Qatar (which is giving $375,000,000).
Is it a fair deal?
Considering that Twitter has a market cap of $37 billion, Musk’s offer of $43 billion to Twitter’s shareholders seems a pretty fair premium.
Twitter’s Board response
The poison pill and previous provisions in Twitter’s company bylaws can possibly make Musk’s bid to assume control really difficult. The poison bill includes a new “shareholder’s rights plan”. Essentially, certain shareholders will have the right to purchase more stock if another buyer (like Musk) attempts to seize control.
Therefore, such adoption of the poison pill is a signal that the Board may wish to fight Musk’s bid for sole ownership of the company.
Elon Musk’s motivations
Here are a few points to hint at Musk’s motivations in this takeover bid.
- Musk feels that Twitter has to go private to make needed changes.
- Such changes include an open-source algorithm, an edit feature, a higher bar for removing offensive tweets, and less moderation.
- In other words, as he commented in a Vancouver interview, he is working towards protecting free speech and democracy.
Wrapping it up
Twitter may be in the final stretch of negotiations with Elon Musk. Musk may also have his motivations. However, contending with speech laws globally is not going to be so easy. Also, there is still some time yet as the company may possibly go private before the end of October. Nonetheless, all things are still possible. Meanwhile, you can hold on to the tidbits from this piece on Elon Musk Buys Twitter: What you should know.
