Elon Musk is off to achieve his ultimate goal of acquiring Twitter.
Last week we explained in a teardown analysis why Elon Musk’s decision to invest in Twitter must be considered the first move to acquire Twitter. Without much adieu, Elon Musk has made a “best-and-final” offer to acquire Twitter Inc. now. He said that the social media platform has extraordinary potential and that he is the one who would like to unlock it.
Offering $54.20 per share, the world’s wealthiest person is ready to buy Twitter in an all-cash deal. Musk has valued the company at close to $43 billion. As a result of it, pre-market trading saw the shares of the social media company soared 18%, and experts believe that the market will respond even more promising way once it’s open.
Musk Elon disclosed his offer to the U.S. Securities and Exchange Commission on Thursday, after turning down a potential board seat at Twitter, Inc. On April 4, the billionaire disclosed owning 9% of Twitter Inc. Musk now controls Tesla Inc and Space X, besides many sizeable investments he has made in various companies to date.
Interestingly, it’s the response from Twitter Inc that has surprised many. Twitter’s board would review the proposal and make a decision that would benefit “all Twitter stakeholder“. This is sounding quite different from its earlier statement of “Elon won’t be allowed to own more than 15% in the company”.
Musk’s offer to acquire Twitter has come within a few weeks of him buying a stake in the social media company making him the largest individual stakeholder. Elon Musk has always been known to make Twitter users dance to his tune and emerged as the most powerful and influential Twitter user. He is undoubtedly one of Twitter’s most popular firebrands. He tweets memes and taunts to his more than 80 million followers. After the announcement of his stake, he was open to hearing suggestions about the changes his followers would like to see on the social media platform.
Musk immediately made an appeal to other users to discuss possible moves, including converting Twitter’s San Francisco headquarters to a shelter for homeless people, adding an edit button to tweets, and granting premium users automatic verification marks.
Despite all his influence and stake in the company, Musk is apparently not satisfied and has launched a full-scale takeover. Make no mistake, Musk is among those few people who can afford to do it. According to Bloomberg Billionaire’s Index, the net worth of Elon Musk is hovering at approximately $260 billion, compared to Twitter’s current market value of $37 billion.
To make his proposal more appealing, Musk wrote a letter to Twitter’s board expressing his strong views. He believes that Twitter will not thrive or serve its free speech societal imperative in its current form. He wants Twitter to transform into a private company.
It is unlikely that the takeover will be prolonged. Musk stated that if the deal fails, it may have consequences.
“Given that I don’t have confidence or ability to drive the necessary changes in the public markets, and I don’t believe management will allow me to do so, I won’t be able it to work,” Musk said.
However, not everyone is excited about Musk’s offer! According to Vital Knowledge’s Adam Crisafulli, the $54.20 per share offer is “way too low” and won’t excite Twitter’s shareholders and the board.
Just a year ago twitter’s stock was trading at $70 apiece, and if Musk is really serious about his offer, he must beat that figure.
There is no doubt that Musk, who is the richest person in the world, can manage to execute the deal conditioned to acceptability by Twitter’s board, but it’s not clear how he will get $43 billion that pay in cash. Some experts see it as a hostile takeover proposal that will require a serious amount of cash.
“To fund the transaction, Musk will need to either sell some Tesla stock or take out a huge loan,’ says Neil Campling, Mirabaud Equity Research’s head of TMT research.
At the same time Musk seems to be quite serious about acquiring Twitter. He has hired Morgan Stanley to be his advisor on the deal.
Even if he manages to convince the board of Twitter, the acquisition of Twitter may not prove a cakewalk for him. SEC, which has penalized Musk multiple times for his tweets, may shoot a host of questions around financing, regulations, etc. Besides, the existing board of tesla may also be willing to have visibility on how Musk would be balancing his time between Twitter, Tesla, and Space X.
Whatever may be the situation for Musk, one thing is certain, it is a now or never bid for Twitter to accept, and the board will have to react wisely, especially when dealing with Elon Musk who is often addressed as the most intelligent person on earth currently.