Just a week ago, financial analysts were wondering if Elon Musk was serious or simply trolling when he declared that he wanted to buy Twitter.
Sure, he’s the richest man in the world with more than enough capital to buyout the 16-year-old social networking platform, but the bigger question behind such an investment was whether it would be worth it for Elon Musk to take up this endeavour.
Well, the verdict is out.
Tesla and SpaceX CEO Elon Musk has agreed to buy Twitter for US$44 billion (S$60.5 billion), one billion more than his initial bid of US$43 billion.
To date, it Is one of the biggest leveraged buyouts deals ever made in history, to takeover a site that has become the city for public discourse and heated debates.
Before the Acquisition
At the start of 2022, Elon Musk started to acquire the shares of Twitter Inc. quietly, until it was eventually revealed that he had gathered a 9.1% stake in Twitter’s shares.
By nearly owning a tenth of Twitter’s shares, it directly propelled him into the largest shareholder of Twitter.
Although he was offered a seat in Twitter’s Board of Directors, he chose to reject it, whilst maintaining his large online presence on Twitter and ramping up the criticism he had towards Twitter’s current algorithm and moderation practices by March.
Then on 14 April, he offered to make Twitter private, stating that he’d make the platform a “bastion of free speech”, while hinting at some of the changes that he would implement if he became the owner of the social networking platform.
Among his many ideas are the addition of the editing tweet function, open sourcing Twitter’s algorithm, reducing the level of moderation that Twitter has, putting more effort into combatting cryptocurrency scam bots— or suggesting something as absurd as turning Twitter’s San Francisco headquarters into a homeless shelter.
The last comes with noble intentions, just like how Bruce Wayne turned his own family mansion into an orphanage, but it’s almost as ridiculous as sending a Tesla car to the moon.
More troll than function, if anything.
In view of his declaration, Twitter’s Board of Directors announced a shareholders rights plans immediately, a poison pill strategy that is meant to make a company less palatable to the active acquirer.
Should Musk’s acquires more than 15% of the stock with the prior approval, and tries to take control of the company through the open market accumulation, he will have to pay the shareholders an appropriate amount of control premium.
However, Elon Musk has always been an unpredictable person.
Instead of trying to win the acquisition battle through the influencing of retail proxies or verbally flyting the Board of Directors to defeat on his Twitter account, with an army of 83 million followers to support him, he took them straight to the negotiation table with a deal that they would find difficult to refuse.
Sealing the Deal
On Monday (25 Apr), Elon Musk issued a statement: “ Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.”
Yes, the topics surrounding fandoms, questionable memes, and the anti versus stans wars waged daily is humanity at its peak.
He adds, “Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”
Elon Musk offered US$44 billion to buy Twitter and turn it into a private company, of which je wi;; be providing US$21 billion in equity to fund the deal.
During the acquisition process, he pulled in 12 other banks, led by Morgan Stanley, which secured him US$25.5 billion of debt and marginal loan financing to ensure that he would be able to accomplish the buyout.
Of course, Twitter’s acceptance doesn’t come without its own condition.
In the contract, Twitter included a provision where the billionaire will be required to pay a fee to the company if he were to walk away or if the deal falls apart.
Given the high price, each investor will receive US$54.20 for each Twitter share they own. This is a 38% increase from 1 April, the last business day before Musk unveiled the significant stake he owned in the company, which incited a share rally.
Since the deal has been announced, Twitter’s shares have jumped by 5.7% to US$52.70 at the stock market exchange.
Truth to be told, Elon Musk is probably surprised that the negotiations went as smoothly as it did, considering how he had voiced his doubts about the acquisition during a recent TED talk interview.
Prior to his attempt, Twitter had tried to sell itself in 2013 and 2016, such that it drew the interest of conglomerates like Walt Disney and Salesforce.
In 2020, Dorsey had a finger dipped into Twitter as an activist investor, forcing Twitter to set growth targets and increased the board’s accountability.
However, his actions also instigated Dorsey’s second departure so he could shift more of his attention to his digital-payments company called Block.
Agrawal currently serves as the company’s Chief Technology Officer (CTO), though his tenure, which started last November, has been cut short by Elon Musk’s interception.
Who knows what Elon Musk will do to the current Board of Directors?
Twitter is his oyster now, both literally and figuratively.
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Management Changes and Bureaucracy
Since Twitter is changing hands, and so abruptly too, it’s natural that the Twitter employees are at the edge of their seats.
After all, the handover is bound to have a trickle-down effect on how their company functions, especially given the loud complaints that Musk has about Twitter’s moderating.
Currently, Twitter has imposed a temporary ban to keep employees who may be reluctant about the deal from “going rouge”, according to one of the insiders.
Having a well-known Twitter troll as your employer definitely doesn’t inspire much confidence.
In the deal announcement, Twitter also mentioned that it will report its first-quarter earnings as per usual on 28 April before the market opens in New York, but it won’t host a conference to discuss the results.
Although it’s part of the US Securities and Exchange Commission’s (SEC) job to review the plan once Twitter submits a preliminary proxy statement, the regulator is merely the witness; they neither have the power nor right to block the merger.
You have to love American corporate politics sometimes.
However, if there’s one thing bureaucracy is well-known for, it is all its red tapes and its lack of efficiency.
The SEC can slow down the process by asking Twitter for clarifications on aspects of the deal.
The shareholders can only vote to approve the transaction once the agency has had their fill of questions.
It’s hard to tell what kind of social networking platform Twitter will become under Elon Musk’s guide, but it will surely be like a rocky ride to the Moon.
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