Despite the announcement on Monday of a $ 44 billion agreement with the leaders of the social network, the offer to buy Twitter by Elon Musk can still fail. If the billionaire wants to take full control of the company, he must manage to get it out of the New York Stock Exchange. A case that could turn out to be more complicated than expected.
She certainly seems to be on the right track. This Thursday, the social network published its results for the first quarter of 2022. Its turnover from January to March amounted to 1.2 billion dollars, up from the previous quarter, even if a hair less than the 1.22 billion expected by the market. But above all, exceptionally, Twitter did not provide a financial outlook for the rest of the year, as is generally expected of listed companies, which must publish their results every quarter. In a press release, the firm says it anticipates that its sale to Elon Musk will be completed by the end of the year.
A deal under conditions
To be endorsed, this takeover must meet several conditions. First, regulatory. Elon Musk will have to rub shoulders with the regulators of the Securities and Exchange Commission (SEC), the policeman of the American stock market who must estimate whether his financing plan is viable. At first glance, this one is solid. The American billionaire presented a financial plan endowed with 46.5 billion dollars. The majority (25.5 billion) comes from a loan obtained from a banking consortium which includes one of the main investment banks on Wall Street Morgan Stanley, but also BNP Paribas and Société Générale. The remaining 21 billion comes directly from Elon Musk’s personal fortune.
The latter essentially corresponds to the shares he holds in his own company, Tesla Inc. Except that since the announcement of his plan to take over Twitter, the price of the car manufacturer has collapsed. As of April 1, the stock was still worth $1,084. At the close of Wall Street on Wednesday, it fell to 840 dollars. Knowing that Elon Musk intends to repay half of his loan of 25.5 billion with his Tesla shares, the situation worries investors.
Shareholder vote on May 25
Another continent, other problems: Tuesday the European Commissioner for the Internal Market Thierry Breton warned that in the event of a takeover, Twitter “will have to fully adapt to European rules”. Among them, the Digital Services Act (DSA, regulation on digital services). Presented last January, it is supposed to force the major platforms to better fight against illegal content. Elon Musk, who wants to make Twitter “an open arena for freedom of expression” where hateful content would proliferate without moderation, risk of coming up against these regulations. To discourage investors…
The current shareholders of Twitter will also have their say on this possible takeover. This could be decisive. Some had rejected Musk’s first takeover bid in mid-April. This was the case of Kingdom Holding Company (holder of 5.2% of the capital of Twitter) which estimated that the share buyback offer proposed by the CEO of Tesla (54.20 dollars), did not correspond to “intrinsic value” of the company. The fact that the board of directors has finally accepted the takeover offer on Monday may suggest that the billionaire has managed to convince recalcitrant shareholders. But surprises cannot be ruled out. All shareholders must vote at their annual meeting, scheduled for May 25. If the deal were to fall apart, Elon Musk could still come out a winner. According to Reuters, an indemnification clause of one billion dollars is included in the agreement reached with the leaders of Twitter. What compensate for the fall in the stock market of Tesla…