Elon Musk offers to buy Twitter
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Elon Musk has offered to acquire Twitter (TWTR) and take it private, claiming that the firm must be “changed.”
According to a SEC filing, Musk has offered $54.20 per share for all of the Twitter shares he does not hold, valuing the firm at $41.4 billion. That’s a 38 percent premium over the stock’s closing price on April 1, the final trading day before Musk revealed he was Twitter’s largest shareholder, and an 18 percent premium over its closing price on Wednesday. Also, in the SEC filing, Musk stated that the cash offer was his “best and last offer,” and that if it was not accepted, he would have to reevaluate his status as a shareholder. Regarding to the filing, Tesla CEO Elon Musk issued the business an offer letter on Wednesday night.
“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” he said in the letter to Twitter. “However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”
Twitter said it will consider if accepting the offer is in its shareholders’ best interests. If Musk decides to go forward with his takeover bid, he will very certainly be able to obtain the $43 billion he needs, maybe by borrowing billions and using his Tesla and SpaceX interests as collateral. The majority of Musk’s fortune, which Forbes estimates to be about $265 billion, is invested in Tesla stock. The corporation permits its executives to borrow money using their shares as collateral, but only up to 25% of the value of the pledged shares can be borrowed. Musk has 172.6 million shares worth $176.47 billion, as per data source FactSet. According to a Tesla proxy statement filed in August, just over 51% of his stock has already been pledged as collateral. Musk could then use the remaining ownership as security for a $21.5 billion loan. He may potentially take out a loan against his SpaceX stock, which is kept private.
According to Chester Spatt, a former SEC chief economist, the SEC might punish Musk for causing harm to other investors by failing to report his purchase of Twitter shares in a timely manner, but it’s doubtful that it will do anything to prevent a takeover. “This is going to play out reasonably quickly,” said Spatt, who currently teaches finance at Carnegie Mellon University. “For the most part, the SEC weighs in after the fact,” he added.
The billionaire has been a harsh critic of Twitter, mostly because he believes it violates free speech ideals. Followers of Donald Trump and other far-right political leaders have had their accounts terminated for breaking the social media platform’s content policies on violence, bigotry, and harmful propaganda. Musk has defined himself as a “free speech absolutist,” yet he has also been accused of censoring Twitter users who question or disagree with him.
According to a filing, once Musk declared his position, Twitter swiftly gave him a seat on its board of directors on the condition that he did not control more than 14.9 percent of the company’s outstanding stock. However, five days later, the corporation announced that he had declined. Musk proposed substantial changes to the firm in a series of now-deleted and not-always-serious tweets, including removing ads — the company’s primary source of revenue — and converting its San Francisco headquarters into a homeless refuge.
Last year, Twitter did not perform as well as its social media competitors, and it lost money. The firm recorded a net loss of $221 million in 2021, which was mostly due to the settlement of a shareholder lawsuit alleging that the company deceived investors about how large its user base was expanding and how much users interacted with its platform. Jack Dorsey, the company’s co-founder, resigned as CEO in late November and was succeeded by Agrawal.
After Musk tweeted about having the money to take Tesla private for $420 per share, Musk and Tesla agreed to pay $40 million in civil fines and have Musk’s tweets vetted by a corporate counsel in 2018. Although this did not materialize, Tesla’s stock price rose as a result of the tweet. Musk’s current trouble with the SEC might be due to his failure to tell regulators of his increasing Twitter investment.