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Elon Musk has made a controversial offer to buy Twitter Inc., saying the company has extraordinary potential and he is the person to unlock it.
The world’s richest person will offer $54.20 per share in cash, valuing Twitter at about $43 billion. The social media company’s shares rose just 5.3% to $48.27 at the market open in New York as investors began to assess how one of the platform’s most outspoken users will succeed in his takeover attempt.
Musk, 50, announced the potential deal in a filing with the U.S. Securities and Exchange Commission on April 14, after turning down a potential board seat at the company. The billionaire, who also controls Tesla Inc., first disclosed a stake of about 9% on April 4.
Tesla fell 3.8% in late-morning trading April 14 in New York. Through April 13, the stock had dropped about 5.7% since Musk revealed a stake in Twitter last week, more than double the decline in the broader S&P 500 Index over that time.
“As the CEO of a trillion-dollar company, Elon Musk should focus on Tesla and not waste time attempting to acquire and manage a $43 billion company,” said David Trainer, CEO of investment-research firm New Constructs, in an email.
Tesla faces “significant competition” as major automakers are catching up on innovation in electric vehicles, Trainer said. Shareholders may be worried that Musk — the world’s richest person, according to the Bloomberg Wealth Index — would be pulled away from operations if his Twitter bid is accepted. Musk controls product decisions at Tesla and plans to start production of the Cybertruck, Semi and next-generation Roadster next year.
The bid is the most high-stakes clash yet between Musk and the social media platform. The executive is one of Twitter’s most-watched firebrands, often tweeting out memes and taunts to @elonmusk’s more than 80 million followers. He has been vociferous about changes he’d like to consider imposing at the social media platform, and the company offered him a seat on the board following the announcement of his $3.35 billion stake.
Musk immediately began appealing to fellow users about prospective moves, from turning Twitter’s San Francisco headquarters into a homeless shelter and adding an edit button for tweets to granting automatic verification marks to premium users. One tweet suggested Twitter might be dying, given that several celebrities with high numbers of followers rarely tweet.
Unsatisfied with the influence that comes with being Twitter’s largest investor, he has now launched a full takeover, one of the few individuals who can afford it outright. He’s currently worth about $260 billion according to the Bloomberg Billionaires Index, compared with Twitter’s market valuation of about $37 billion.
Although Musk is the world’s richest person, how he will find $43 billion in cash has yet to be revealed.
“This becomes a hostile takeover offer which is going to cost a serious amount of cash,” said Neil Campling, head of TMT research at Mirabaud Equity Research. “He will have to sell a decent piece of Tesla stock to fund it, or a massive loan against it.”
That would represent a risk for Tesla shareholders if Musk chose to sell some of his stake in the automaker to pay for the Twitter deal, according to Wells Fargo analyst Colin Langan. Musk owns about 17% of Tesla shares, valued at about $170 billion, and Langan said in a research note that offloading some of them to pay for the takeover may put pressure on the stock price.
Much of Musk’s ire against Twitter has been directed against what he perceives as censorship by the platform. In a letter to Twitter’s board alongside details regarding his offer, Musk said he believes Twitter “will neither thrive nor serve [its free speech] societal imperative in its current form. Twitter needs to be transformed as a private company”
Musk is offering a 54% premium over the Jan. 28 closing price, the date after which he began building his initial stake in Twitter. The takeover attempt is unlikely to be a drawn-out process.
“If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder,” said Musk.
Speaking at a TED event in Vancouver April 14, Musk admitted, “I am not sure that I will actually be able to acquire it.” The offer is intended to create “an inclusive arena for free speech,” not as a way to make money, Musk said. He also said he has sufficient assets to complete the deal.
Musk informed Twitter’s board over the previous weekend that he thought the company should be taken private, according to the April 14s statement.
The $54.20 per share offer is “too low” for shareholders or the board to accept, said Vital Knowledge’s Adam Crisafulli in a report, adding that the company’s shares hit $70 less than a year ago.
Although Musk said his offer was “best and final,” it opens the gates to rivals, either to team up with or outbid his offer. Oracle CEO Larry Ellison, also on the board of Tesla, previously attempted to buy a stake in social media platform TikTok.
Musk has hired Morgan Stanley as his adviser for the bid. The offer price also includes the number 420, widely recognized as a coded reference to marijuana. He also picked $420 as the share price for possibly taking Tesla private in 2018, a move that brought him scrutiny from the SEC.
“There will be host of questions around financing, regulatory, balancing Musk’s time (Tesla, SpaceX) in the coming days,” said Dan Ives, analyst at Wedbush. “But ultimately based on this filing it is a now-or-never bid for Twitter to accept.”
— With assistance from Zac Fleming, Ryan Vlastelica, David Welch, Catherine Larkin, Katrina Lewis and Ed Ludlow
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