The latest developments
Elon Musk has recently distanced himself more and more from his original offer for Twitter, and now he wants to withdraw from the purchase entirely. The most important questions and answers about the takeover offer.
Elon Musk is set to pay $44 billion for Twitter.
The latest developments
- Elon Musk resigns from Twitter purchase, but the company wants to push through the deal in court. The lawyers of the tech billionaire justified the withdrawal on Friday (July 8th) with allegedly insufficient information on the number of fake accounts on the short message service. Twitter was convinced that it would prevail in a legal dispute. Twitter shares fell more than 5 percent in after-hours trading on Friday. Musk had publicly questioned the Twitter numbers for weeks. This was interpreted by observers as an attempt to at least lower the price. At his bid, the deal would be worth more than $44 billion, while Twitter was last valued at around $28 billion on the stock exchange. To the report
- Twitter’s board of directors is sticking to the plan to sell the short message service to Elon Musk for around $44 billion. In documents released Tuesday (June 21), the oversight board reiterated its unanimous support for Musk’s $54.20 per share bid, as it did in May. Musk pointed out in a conference interview on Tuesday that he still had to finally get the financing for the deal in place and get the approval of the majority of Twitter shareholders for the takeover. He already holds a stake of a good nine percent.
- After a Twitter takeover, Elon Musk also wants to get involved in the product development of the service. At a video conference with Twitter employees, Musk said he assumes that employees would listen to his suggestions for features. Among the product ideas that Musk mentioned on Thursday (June 16) was, for example, taking money for today’s free user verification. He also confirmed the intention to fight against automated bot accounts. Musk’s previous criticism that Twitter overly restricts free speech had also raised concerns that more false information or offensive tweets could remain on the platform under his direction. In the video conference, he reiterated that users should be allowed to post “pretty outrageous” things, but Twitter could throttle the distribution of such tweets.
On April 4, 2022, Elon Musk, the head of Tesla and SpaceX, announced that he had become the largest Twitter shareholder with a stake of over 9 percent. On April 14, the multi-billionaire submitted a takeover bid for the entire company in a letter to the Twitter board of directors. He’s paying $54.20 a share, he said. This brings the takeover price of Twitter to $44 billion. The company’s top management first threw itself across and reacted with a “poison pill” under stock corporation law that would have made an acquisition significantly more expensive.
On April 25, Twitter dropped its opposition to the takeover. The online service announced that a deal had been agreed with Musk. Musk could take over Twitter for $44 billion. The decisive factor was probably that the 50-year-old, who was considered erratic, presented real financing guarantees.
It seems that Twitter wanted to secure itself financially in case the takeover should still fail. Musk is said to have committed $25.5 billion in loan commitments and committed to contributing up to $21 billion of his own funds.
If Musk cancels the acquisition, he would have to pay Twitter $1 billion in compensation. The same applies vice versa.
On May 13, out of the blue, Musk announced that he was now shelving the acquisition. He justified the step with outstanding information on the number of spam and false accounts. Twitter first has to prove that these actually make up less than 5 percent of user profiles, as the company has previously claimed.
In a letter to government agencies in early June, Musk spoke of the company’s refusal to provide data it had requested about bots and fake profiles on the platform. According to the terms of the takeover deal, however, Twitter is obliged to disclose this information. Twitter told American media that Musk waived the usual due diligence before the purchase agreement.
Musk estimates that around 20 percent of user profiles are fake or run by bots. This would depress the overall value of the company because advertisers would probably pay less for ads if in fact one in five users was fake or a computer program.
Despite the dispute, Musk reiterated that he remains behind the acquisition. Superficially, he probably wanted to absorb the sharp reaction of the markets. Twitter shares lost around 20 percent of their value at the time. Apparently, many investors are convinced that Musk is not serious about his takeover bid.
Still committed to acquisition
— Elon Musk (@elonmusk) May 13, 2022
However, observers continue to assume that Musk wants to reduce the purchase price of Twitter with the dispute over bots and fake accounts. Since most of his wealth is tied up in shares in his companies Tesla and SpaceX, he may have trouble putting the agreed $44 billion on the table. In any case, Musk has been looking for additional investors for days. So it cannot be ruled out that Musk’s somewhat strange intervention is intentionally causing the price of Twitter shares to crash. He could figure he can renegotiate the agreed price of $54.20 a share if the price plummets well below that mark.
Twitter and Musk plan to complete the acquisition by the end of the year. Since Musk announced the takeover, there has been an uproar in the social media world: Many users fear that Musk will rebuild the short message service according to his own taste after the takeover.
However, it would not be the first time that Musk has announced a spectacular transaction with a company, but then backtracked in the end. This is what happened with Tesla in 2018.
Resourceful commentators also point out that Musk could be making a cannabis joke with the acquisition. The $54.20 per share tender offer includes the American slang code for cannabis: 420.
Musk drew a lot of media attention when he was filmed smoking a joint with podcaster Joe Rogan in 2018. He also once tweeted that he wanted to take Tesla private for $420 a share, which never happened.
Musk wants to establish Twitter as a global platform for freedom of expression and thus strengthen democracy. This shows a opinion poll Musk from the end of March: “Freedom of expression is essential for a democracy. Do you think Twitter respects that concept?” Musk asked his followers. Within a very short time, two million people responded to the survey, with over 70 percent saying no.
Musk wrote that Twitter is now what the village square used to be: an important discussion forum. However, since the short message service fails to enforce freedom of speech, it undermines democracy. Musk justifies his takeover bid with social considerations. As the owner, Musk wants to be involved in product design.
After a takeover of Twitter, Musk is considering introducing fees for the online service. “Twitter will always be free for casual users but may cost a little for commercial/government users,” he tweeted.
Musk also wants all users to be authenticated. To do this, he wants to fight bots and spam more on the platform and introduce a functionality that allows you to edit tweets that have already been sent thanks to an edit button.
Investors aren’t yet fully convinced that Musk can pull off the acquisition. In any case, the market value of the company at $38.5 billion is still well below the $44 billion offered by Musk. At just under $40, the share price is far from the $54.20 offered in the takeover bid.
Saudi Prince al-Walid bin Talal, a nephew of the ruler King Salman, is supporting Musk with $1.9 billion in the takeover. In addition, Larry Ellison, co-founder of Oracle, committed with a billion. Other backers include crypto exchange Binance.com and two venture capital firms Sequoia Capital and Andreessen Horowitz.