Elon Musk offers $43 billion cash for Twitter takeover

Elon Musk, the billionaire Tesla CEO, unveiled a $43 billion cash buyout offer for Twitter Inc (TWTR.N), arguing that the social media company needs to be taken private in order to grow and become a platform for free speech.

“Twitter holds a lot of promise. I’ll take care of everything.” Musk, who is already the company’s second-largest shareholder, wrote to the company’s board of directors on Wednesday. The offer was made public in a regulatory filing on Thursday.

His $54.20 per share bid represents a 38 percent premium over Twitter’s close on April 1, the last trading day before his 9.1 percent stake in the social media network was made public.

Musk, the world’s richest man with a fortune of $273.6 billion, declined an invitation to join Twitter’s board of directors this week after reporting his investment, a move analysts claimed suggested his takeover plans because a board position would have capped his shareholding to just under 15%.

Investors were initially sceptical. Twitter’s stock was flat to slightly down during noon trading. Some people thought Musk’s offer undervalued the microblogging network, which has grown into a global communication tool for individuals and world leaders.

Prince Alwaleed bin Talal of Saudi Arabia tweeted about the sale from his verified account. He called himself one of Twitter’s “largest & long-term owners” and claimed Musk’s offer undervalued the company, which he declined.

On Twitter, Musk indicated that it was his “best and final offer” and that if the board rejected it, he would reconsider his investment.

“Since investing, I’ve realised that the company, in its current state, will neither prosper nor meet this societal need. Twitter needs to be reorganised as a private company.” Musk stated in a letter to Twitter Chairman Bret Taylor.

Musk, a self-described “free speech absolutist,” has criticised Twitter and its limits, and recently polled Twitter users on whether they believe the social media network maintains the principle of free speech.

“A lot of people are going to be pretty dissatisfied with West Coast high tech as the de facto arbiter of free expression,” Musk said after Twitter banned former President Donald Trump over concerns about encouragement to violence during his supporters’ attack on the US Capitol last year.

In an interview with Sirius XM’s Americano Media on Wednesday, Trump said he “probably wouldn’t have any interest” in returning to Twitter, where he had more than 88 million followers.

Employees, some of whom were concerned about Musk’s impact on the company’s ability to control content, were expected to attend a Twitter all-hands meeting later on Thursday to discuss the news, according to one source.

Twitter will analyse the offer with the help of Goldman Sachs and Wilson Sonsini Goodrich & Rosati, according to a source.

For his offer, Musk said Morgan Stanley, a US investment bank, was working as his financial counsellor. He hasn’t specified how he’ll fund the deal if it goes through.

“If the deal is approved, we expect Musk will fund the acquisition with a combination of debt and Tesla equity. Given the amount of the deal (about $43 billion), we anticipate some Tesla shares could be sold, given how closely his fortune is related to the company “CFRA Research analyst Angelo Zino noted.

Musk paid off a tax debt last year by selling more than $15 billion in Tesla (TSLA.O) stock, accounting for roughly 10% of his stake in the electric vehicle maker.

Twitter’s recent lower-than-expected user additions have raised concerns about its growth prospects, even as it pursues large projects like audio chat rooms and newsletters.

“The fundamental dilemma for the Twitter board today is whether to accept a very generous offer for a company that has been a chronic underperformer and has a history of treating its users with apathy,” said Michael Hewson, chief market analyst at CMC Markets.

Twitter will not make a decision on Musk’s bid on Thursday, according to a source familiar with the situation. According to the source, the board is discussing the parameters of the valuation method, following which it would ask its specialists to evaluate the bid and wait for the results.

Since joining Twitter in 2009, Musk has amassed over 80 million followers and has used the platform to make a number of announcements, including dangling a Tesla go-private deal that landed him in legal trouble.

“His past run-ins with regulators might not be an issue if he really wants to take Twitter private – but it might make potential financing sources wary of providing the cash unless he’s willing to pledge a large portion of his Tesla holdings to collateralize the debt,” said Howard Fischer, a partner at Moses & Singer and former senior trial counsel at the US Securities and Exchange Commission (SEC).

Musk’s move also raises the potential of more bids for Twitter.

“It will be impossible for any other bidders/consortium to emerge,” Wedbush Securities analyst Daniel Ives wrote in a client note, “and the Twitter board will be pushed to accept this bid and/or initiate an aggressive process to sell Twitter.”