The Tesla founder offered $43 billion for the short message service in a hostile takeover. Not so, according to the board of directors, risking open conflict with one of its most active users.
Elon Musk likes to comment on Twitter – now he wants to take over the company entirely.
Twitter’s board of directors decided on Friday to resist Elon Musk’s takeover. In a maneuver involving “poison pill” acquisitions, 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 value of a single Twitter share would plummet. Musk currently owns 9.2 percent of the company. According to Twitter, the measure should remain in effect until April 2023.
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.
This is the latest chapter in a two-week saga between the short message service and the multi-billionaire. On Thursday, Musk offered $53.20 a share in his takeover bid, which he intended to use to buy the entire company for $43 billion. Musk announced that as the owner, he would delist the social media platform and would like to allow more freedom of speech on the platform.
However, it is by no means certain that Musk is now defeated by the defensive maneuvers of the board of directors. He tweeted one on Thursday opinion poll, in which he asked his followers whether it should be the company’s board of directors that should make a decision about the takeover, or rather the shareholders. More than 80 percent of the approximately 2.7 million Simmen who responded to the survey within a few hours were in favor of the shareholders and not the board of directors making the decision. Musk has already withdrawn the legitimacy in advance of the decision of the board of directors.
Investors did not believe in the takeover
Musk thinks Twitter has “extraordinary potential” and that he’s the person who can unleash it. However, investors were already skeptical on Thursday whether the takeover would take place. If they had believed it, they would have bought shares in Twitter until the price reached the $53.30 price indicated by Musk. But so far the price has remained well below $46. After the announcement of the decision of the Twitter board of directors, the price did not move after the trading day. The takeover bid remained well below the previous high of the share.
Musk uses Twitter for self-expression. He has over 81 million followers on the platform. Over the past few weeks he has built up his stake and made this public last week. He initially accepted the seat on the board of directors that Twitter management offered him, but then turned it down.
In the past few days, Musk himself has doubted that he will be successful with the takeover bid. “I’m not sure I’ll actually be able to buy it,” he said Thursday. But “technically speaking” he has the necessary funds, although the administrative hurdles are high. A key shareholder, Saudi Prince Alwaleed bin Talal, has already publicly rejected Musk’s takeover plans.
The «best and last offer»
Musk could settle the transaction from the “petty cash”. His fortune is currently estimated at $280 billion. The Tesla CEO uses Twitter extensively as a communication and advertising channel, but has often criticized the business policy of the social media platform. Musk has always emphasized the importance of freedom of expression for democracy. In his opinion, this was often and arbitrarily restricted by Twitter.
Musk had himself repeatedly strained this freedom of speech on Twitter in the past, including by comparing Canadian Prime Minister Justin Trudeau to Hitler and describing the measures to contain the corona pandemic as “fascist”.
In a letter Musk stated: “This is the best and last offer.” If it fails, he will also reconsider his previous position as a shareholder. He has no trust in management and does not believe that he can change Twitter as a listed company. He does not play games, but proceeds consistently. His involvement would not be a good investment without the necessary changes in strategy, he continued.
Should Musk decide to sell his shares in one fell swoop, it could cause at least a temporary price slide.
Lots of construction sites for Twitter
Musk also called on Twitter to launch an “edit button” that would allow subsequent corrections to tweets. He also complained that although the platform has numerous celebrity accounts – with followers in the three-digit million range – they hardly showed any activity.
In a tweet over the weekend, Musk also hinted that he would like to replace Twitter’s current business model, with advertising as its main source of revenue, with subscription revenue. Relying on ad revenue gives big corporations too much power, he wrote.
Meanwhile, Twitter is losing market share to video-focused platforms like Tiktok and Snapchat. Apple’s tightening of privacy practices has cost all social media platforms a lot of revenue. Since the introduction of the so-called App Tracking Transparency (ATT) in April 2021, apps have to ask Apple users for permission before they can track their online behavior.