Elon Musk and the short message service Twitter have been playing a cat-and-mouse game for power and freedom of expression for three weeks. The most important questions and answers about the takeover offer.
Wanting to own Twitter: Entrepreneur Elon Musk after a court hearing in New York City, April 4, 2019.
The latest developments
- If Elon Musk actually manages to buy Twitter, he wants to eliminate bots and spam on the platform. This wrote Musk on Friday (4/22) on Twitter. He also wants to authenticate all users. Currently, Twitter has verified the identity of 400,000 users. A total of 206 million people regularly log on to Twitter.
- Elon Musk says he has enough money to buy Twitter. According to the American media, Elon Musk wrote in an information letter to the authorities on Thursday (April 21) that he has $46.5 billion at his disposal. He borrowed more than half of it from banks, including Morgan Stanley, Bank of America and Barclays.
- The Twitter board of directors has reportedly decided to resist the takeover by Elon Musk. On Friday (April 15), the information leaked to the public from circles on the Twitter board of directors that Twitter was using a “poison pill” to defend itself against the takeover by Elon Musk. If Musk were to buy more than 15 percent of all company shares, Twitter could issue new shares or sell shares to other investors at a discount. This would make the acquisition more expensive for Musk.
Why does Musk want to buy Twitter?
Elon Musk, CEO of Tesla and SpaceX, wants to buy the short message service Twitter and take the company private. That’s according to a letter from Musk dated April 14, in which he offered Twitter’s board of directors to acquire the company for $54.20 per share.
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.
The day after, 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.
Musk also wants to take Twitter out of the stock market and participate in product design. Among other things, he would like to introduce an edit button with which tweets that have already been published can be edited, and he would like to prevent bots and spam on the platform.
How does Twitter react to the takeover bid?
According to American media reports, the board of directors of Twitter decided on April 15 to resist Elon Musk’s takeover bid. In a maneuver nicknamed the “poison pill,” the council decided that if Musk bought more than 15 percent of all company shares, it would either issue new shares or sell shares to other investors at a discount. Should that actually happen, the purchase price for Musk would increase.
Musk currently owns 9.6 percent of the company.
The “poison pill” refers to a procedure that was introduced into American legislation in the 1980s. Formally, it bears the name «Plan for Shareholder Rights». It was invented to help companies defend themselves against hostile takeovers.
The Twitter board of directors has not yet spoken to Musk for or against a takeover.
Does Twitter Restrict Freedom of Speech?
Social networks such as Twitter or Facebook make controversial decisions every day about which content is deleted or provided with warnings. In doing so, they deliberately restrict freedom of speech on their platform.
In particular, politicians who spread anti-establishment ideas, conspiracy theories or false claims suffer from this – above all, of course, Donald Trump, who was banned from Twitter after the storming of the Capitol. Critics have repeatedly accused Twitter of distorting democratic discourse, favoring liberal opinions and suppressing conservative ideas.
With his takeover offensive, Elon Musk is now giving these voices a boost and using his influence to spread their arguments.
However, Musk’s user behavior to date shows that the platform already allows controversial opinions. In the early days of the Corona crisis, Musk downplayed the dangers of the disease and criticized pandemic measures as “fascist”. He also compared Canadian Prime Minister Trudeau to Hitler when he spoke out in favor of ending the truck drivers’ protests, but deleted the tweet again when major media reported about it and the Auschwitz memorial criticized the comparison.
Is this all just an Elon Musk joke?
It wouldn’t be the first time that Musk has announced a spectacular transaction with a company, but then backtracked. 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.
What other companies are considering a Twitter takeover?
American media reports of two other potential buyers. Accordingly, the private equity firms Vanguard Group and Thoma Bravo are each preparing an independent offer for Twitter. The Vanguard Group is currently the largest holder of Twitter stock. The group holds 10.3 percent of the shares.
On April 19, American industry insiders also came forward with the news that Apollo Global Management and Silver Lake Partners could support Tesla founder Elon Musk in financing the hostile takeover of Twitter.
On April 21, Elon Musk announced that he had raised enough funds to buy Twitter. He raised $46.5 billion, Musk said, including debt to three banks: Morgan Stanley, Bank of America and Barclays.
What is the value of Twitter?
Whether Twitter’s board of directors is in favor of or against a takeover will depend, among other things, on the price offered. Musk offered $43 billion, his “best and last offer,” he said. While the offering is above Twitter’s current stock market value, it is well below the stock market’s peak of February 2021.
Tech columnist Nils Jacobsen arrives in his analysis Finally, Musk’s takeover bid is fair, at least when you look at Twitter’s current business performance in comparison to that of the Facebook group Meta.
Meta is now valued 14 times higher than Twitter on the stock exchange, but turns over 23 times. And Twitter is currently in the red. In 2021, the company made a loss of $221 million.
The Twitter board of directors cannot simply reject Musk’s offer as too deep.
Is a Musk takeover likely?
Twitter shareholders don’t seem to believe that Elon Musk will buy the company. Musk offered $54.20 per share. If investors were convinced that Musk was actually taking over Twitter, they would buy shares until the price matched Musk’s offer.