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Twitter’s Board of Directors has just agreed to sell the social media service to Elon Musk for a whopping $44 billion — an amount that would make it one of the largest corporate buyouts in history. However, there are still several more hurdles to be cleared before Musk officially takes ownership of Twitter. With today’s unanimous Board approval, he’s just cleared the first, and one of the biggest, obstacles.
The decision concludes the drama that began earlier this month when Musk announced that he had acquired 9.2 percent of Twitter stock, worth about $2.89 billion. This made him Twitter’s largest shareholder for a brief period.
However, Musk’s holdings were surpassed when Vanguard Group, an asset-management company, upped its stake in the platform to reach 10.3 percent.
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Following his announcement on April 4, Musk was also offered a seat on Twitter’s Board of Directors, but only on the condition that he agreed to acquire no more than 14.9 percent of the company’s stock.
A few days later, on April 10, Twitter CEO Parag Agrawal announced that Musk had declined the offer. While no specific reasons were given at the time, they became pretty obvious when Musk offered to buy 100 percent of Twitter a few days later, on April 14.
The SEC filing included a copy of the offer from Musk to Bret Taylor, Twitter’s Chairman of the Board, noting that he invested in Twitter due to its “potential to be the platform for free speech around the globe.”
I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.Elon Musk
However, Musk also says that in the two weeks following his investment, he came to “realize the company will neither thrive nor serve this societal imperative in its current form.” Musk believes that the only way to “fix” Twitter is for it to be “transformed as a private company.”
Twitter has extraordinary potential. I will unlock it.Elon Musk
In the aftermath of Musk’s offer, Twitter’s Board adopted a Shareholder Rights Plan, sometimes known as a “poison pill,” to attempt to block a hostile takeover. The implication of that decision was that the Board intended to fight Musk’s bid, but Twitter declined to comment on its reasons.
In light of today’s news, it’s possible that the Board just wanted to block the possibility of Musk doing an end-run around it, thereby allowing the Board of Directors to remain in control of the negotiations.
According to Bloomberg, which first reported on the deal this morning, the Board wasn’t sold on the idea of Musk’s offer, but they also hadn’t summarily rejected it. As talks continued and Musk outlined his debt financing plan and large investment banking partners, the Board reportedly warmed up to the idea, and talks began in earnest.
Twitter was cool on the proposal at first, adopting a so-called poison pill defense that would effectively dilute Musk’s stake, but warmed to the notion after Musk outlined a $25.5 billion debt financing plan from Morgan Stanley and a who’s who of other global investment banks. Talks accelerated over the weekend.Bloomberg
The final agreement approved by Twitter’s Board of Directors would see shareholders receiving $54.20 in cash for each share of Twitter common stock. That works out to a 38% premium over Twitter’s closing stock price on April 1, 2022 — the last trading day before Musk announced his 9.2% investment.
The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing. The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.Bret Taylor, Twitter’s Chairman of the Board
To put the deal together, Musk has already secured $25.5 billion in financing from various global investment banks, to which he’ll be adding $21 billion out of his own personal equity. Since the money is already in place, there are no financing conditions on the deal.
What’s Next for Elon Musk and Twitter?
The unanimous approval by Twitter’s Board of Directors is only the first step — albeit a big one. Twitter’s shareholders still need to approve the sale. Musk will also have to clear the usual government regulatory approvals. The deal is expected to close sometime this year, but it may still be a few weeks or even months before Musk takes the helm.
Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated. I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.Elon Musk