Now what? Board of directors agrees to sell Twitter to the world’s richest man, who has frequently criticised the platform over “free speech”
Speculation over the past few weeks about the future of Twitter has been resolved on Monday, after Elon Musk clinched his daring bid to acquire the social media platform.
The world’s richest man and Twitter’s board of directors reached an agreement, that will see Elon Musk acquire Twitter for $44 billion in cash.
The deal is a remarkable development in the history of the 16 year old micro blogging platform, that was founded back on 15 July 2006 by Jack Dorsey, Noah Glass, Biz Stone, and Evan Williams.
However the acquisition of Twitter by Elon Musk was in doubt, ever since it was made public on 2 April that Musk had acquired more than 9 percent of the firm.
Days after that, Musk announced an audacious bid to acquire the social platform, with a promise to “unlock” its “extraordinary potential”.
Musk offered to buy Twitter for $41 billion in cash as part of his “best and final offer”, saying the firm needed to go private to see effective changes.
But a deal was by no means certain, and Musk threatened to bypass the board of directors and approach Twitter’s shareholder directly as part of his plan B approach.
Twitter’s board responded on Easter’s Good Friday, when it implemented a limited-duration ‘shareholder rights plan’ (a so called poison pill) – designed to stall or prevent Musk’s takeover attempt.
But Musk was not dissuaded, and last week he revealed he had secured funding of $46.5 billion for his bid.
This was made up of $33.5 billion of his own money, $21 billion from Musk, plus a further $12.5bn via a loan secured against his shares in Tesla.
Banks, including Morgan Stanley, agreed to provide another $13 billion in debt secured against Twitter itself.
This revelation that he had secured the funding needed for his bid was a direct appeal to Twitter’s shareholders (some of whom had tried previously to oust former CEO Jack Dorsey), and this coupled with no sign of any bids from other buyers, placed Twitter’s board under tremendous pressure to accept Musk’s offer.
Twitter’s board therefore started negotiating with Musk at the weekend to buy the company at the proposed $54.20 per share price, Reuters reported.
The transaction was then approved by the board and is now subject to a shareholder vote.
Shares rose 6 percent following the news to $51.90.
The deal represents a near 40 percent premium to the closing price the day before Musk disclosed he had bought a more than 9 percent stake.
However, the offer is below the $70 range where Twitter was trading last year.
There is concern among some observers that Musk’s championing of free speech could lead to the reinstatement of Donald Trump’s Twitter account, after he was banned on many social networking platforms for his role in inciting a mob of his supporters to storm the US Capitol building on Wednesday 6 January 2021, which resulted in the deaths of at least five people (including one police officer who was beaten to death).
“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,” Musk was quoted as saying in a statement by Reuters.
Last month Musk hit out at Twitter for “failing to adhere to free speech principles” and asked whether a new platform was needed.
Reuters pointed out however that Musk’s Twitter move continues a tradition of billionaires buying control of influential media platforms.
Previous examples include Rupert Murdoch’s takeover of the New York Post in 1976 and the Wall Street Journal in 2007; and Jeff Bezos’ 2013 acquisition of the Washington Post in 2013.
But there could be some regulatory scrutiny of the deal, considering Elon Musk’s relaxed approach to obeying regulations and his outspoken comments about the US government’s financial watchdog, the SEC.