April 14 (Reuters) – Elon Musk has targeted Twitter (TWTR.N) With a $41 billion cash offer Thursday, the Tesla CEO and billionaire entrepreneur said the social media giant needs to get private to grow and become a platform for free speech.
“Twitter has extraordinary potential. I’m going to unleash it,” Musk, already the company’s second-largest shareholder, said in a letter to Twitter’s board of directors on Wednesday. The offer was announced in a regulatory filing on Thursday.
Musk’s offer price of $54.20 per share represents a 38% premium on closing Twitter on April 1, the last trading day before his 9.1% stake in the social media platform was announced.
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Musk declined an invitation to join Twitter’s board this week after revealing his stake, a move analysts said indicated his intent to take over because a board seat would have limited his stake to less than 15%. Read more
He told Twitter it was his best and last offer and said he would reconsider his investment if the board of directors rejected it.
“Since I made my investment, I now realize that the company will not thrive and will not serve this societal imperative in its current form. Twitter needs to transform into a private company,” Musk said in his letter to Twitter Chairman Brett Taylor.
Musk, who calls himself an absolute freedom-of-speech, has criticized the social media platform and its policies, and recently conducted a Twitter poll asking users if they think it adheres to the principle of free speech.
A source told Reuters that Twitter will review the offer with advice from Goldman Sachs, Wilson Soncini Goodrich and Rosati.
Shares in Twitter rose about 5% in pre-market trading to $48.30 in New York, where it was the most heavily traded, while Tesla stock was down about 2%. Based on Wednesday’s closing price of $45.85, Twitter’s stock price reaction implied a 29% chance of Musk striking a deal.
According to Refinitiv data, the total value of the deal of $41 billion was calculated on the basis of 763.58 million shares outstanding.
Musk said US investment bank Morgan Stanley was working as a financial advisor for his presentation. However, he did not say how he would finance the deal if it went ahead.
“We believe that Musk could look to fund the deal, if approved, through a combination of debt financing and possibly Tesla stock. Given the size of the deal (approximately $43 billion), we believe it is conceivable to sell some of Tesla shares in the event that some Tesla shares are sold off,” said Angelo Zino. The analyst at CFRA Research says much of his fortune is tied to the company.
Musk, the world’s richest person according to Forbes statistics, sold more than $15 billion of his shares in Tesla, about 10% of his stake in the electric car maker, late last year to settle a tax obligation.
“Series underperforming”
Less-than-expected Twitter user additions in recent months have cast doubt on its growth prospects, even as it pursues big projects like voice chat rooms and newsletters.
“The big question on Twitter’s board now is whether to accept a very generous offer for a company that has been sequentially underperforming and tending to treat its users carelessly,” Michael Hewson, chief market analyst at CMC Markets, said after the announcement. From Musk Show.
Musk has amassed more than 80 million followers since joining Twitter in 2009 and has used it to make several announcements, including teasing a special deal for Tesla that got him in trouble with regulators.
He has also been sued by former Twitter shareholders who claim that they missed out on the recent rally in his share price because he waited too long to reveal his stake. Read more
“If he really wants to make Twitter private, his past disagreements with regulators may not be an obstacle — but they may make potential funding sources apprehensive about making money for the deal — unless he is willing to pledge a significant portion of his Tesla car collectibles to secure the debt,” Howard Fisher, a partner at the law firm Moses & Singer and a former senior trial advisor with the US Securities and Exchange Commission (SEC).
Musk’s move also raises the question of whether other bidders might appear on Twitter, although the initial stock price reaction did not indicate that this was widely expected.
“It will be difficult for any of the other bidders/consortium to appear and the Twitter board will likely have to accept this offer and/or operate an active Twitter sale,” Daniel Ives, an analyst at Wedbush Securities, wrote in a client note.
“There will be a host of questions about financing, regulation, and balancing Musk’s time (Tesla and SpaceX) in the coming days, but based on that submission, Twitter’s offer is now or not at all,” Ives said.
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Additional reporting by Shafi Mehta and Uday Sampath in Bengaluru; Greg Romiliotis in New York and Chris Prentice in Washington, DC; Writing by Anna Driver. Editing by Anil de Silva and Alexander Smith
Our criteria: Thomson Reuters Trust Principles.
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