san francisco Elon Musk has spoken out for the first time after making a $43 billion takeover bid for Twitter. “This is not a way to make money. My strong intuitive feeling tells me that a public platform that enjoys maximum trust and includes a broad public is extremely important,” Musk said on Thursday.
“So it’s about the future of civilization, but the economics don’t matter at all,” Musk said during the TED 2022 conference in Vancouver. The algorithm behind Twitter must be made public, Musk demanded.
He also announced that in future it must be possible to subsequently change messages on the platform. This feature should only be available for a limited time after a tweet has been posted. In addition, the change must also reset the number of likes and retweets.
“I invested in Twitter because I believe in its potential to be a platform for free speech around the world and because I believe that free speech is a societal imperative for a functioning democracy,” Musk said in his acquisition communicated in writing. “Twitter has extraordinary potential. I will release it.”
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The central figure is no longer Twitter CEO Parag Agrawal, but Board Chairman Brett Taylor. The former Facebook CTO and Salesforce Co-CEO has a solid reputation in the US tech community. He knows about the special role of the platform.
On Thursday evening, Agrawal assured company employees that Twitter would not be “held hostage” by Elon Musk’s purchase offer. Agrawal told employees the board will continue to review Musk’s offer. We will act in the best interests of the shareholders.
Twitter started 15 years ago in San Francisco. The founding team around Jack Dorsey wanted to set up a global social network. The odds were good back then. But while other platforms grew both in terms of reach and market valuation, Twitter always lagged behind.
Rival Snap also started in Silicon Valley ten years ago and is now worth around $56 billion on the stock exchange. Despite the jump in price by more than a quarter after Elon Musk’s rise to major shareholder, Twitter is around 35 million. Snap has also overtaken Twitter in terms of user numbers. At the end of last year, Snap had 319 million daily users, while Twitter had 217.
These comparisons should play an important role in evaluating Twitter. Those are the scenarios for Twitter.
1: Twitter and shareholders accept takeover offer
Musk is offering $54.20 per Twitter share. That’s a significant premium to the company’s valuation. That’s 54 percent more than Musk’s first purchase of Twitter shares. The premium is still 33 percent higher than when Musk was announced as a major shareholder. Analyst Mark Shmulik from the analysis house Bernstein assesses the offer as fair.
So Twitter and shareholders could easily accept Musk’s takeover bid. The Tesla boss had announced that he would then take the company off the stock exchange and rebuild the business model. One thing is clear: there is some potential in the Twitter business. Especially since the Russian invasion of Ukraine, Twitter has become an important platform for the exchange of information. However, Twitter is still grappling with a torrent of misinformation.
2: Twitter wants more money
Insiders from around Twitter told the Handelsblatt that the chairman of the board of directors, Brett Taylor, should not be satisfied with Musk’s offer. At the beginning of 2021, Twitter shares were still worth $70. Musk’s offer is far from that. The Tesla boss himself argued that the platform had great potential that needed to be leveraged.
“$60 a share would be the minimum price for a counter-offer,” said Bank of America analyst Justin Post. While Musk has argued that the $54.20 per share offer is final, Post argued that the board has an obligation to evaluate all options for a higher price. If Taylor tries to negotiate more money, Musk could go through with the deal altogether.
Musk even went a step further. If his offer is not accepted, “I will have to reconsider my position as a shareholder.” In other words, Musk is threatening to sell his shares. He currently holds around 9.2 percent of the shares in Twitter.
3: White Knight strikes
Elon Musk’s takeover bid has shocked the US tech industry. A number of large tech companies contacted their lawyers on Friday to play through scenarios for their own takeover bids. A “white knight” could emerge in the form of a new takeover bid, offering more money for Twitter than Elon Musk.
Post also argued that other tech companies are interested in Twitter. “But we think a deal with, say, Alphabet or Facebook is very unlikely due to antitrust concerns,” the Post wrote.
4: Block major shareholders
Musk isn’t the only major shareholder on Twitter. The Vanguard Group recently increased its stake in the company to 10.3 percent, according to data from S&P Global Market Intelligence. This means that Elon Musk is no longer the largest single shareholder.
Saudi Prince Alwaleed also clearly rejected a takeover of the company by Elon Musk on Thursday. “I don’t think the offering represents Twitter’s value given the growth prospects,” Alwaleed said. According to his own statements, he holds more than five percent of the shares in Twitter, either directly or through his Kingdom Holding, and is therefore also one of the major shareholders.
There’s already displeasure with Musk among shareholders. A shareholder of the company launched a potential class action lawsuit against the multi-billionaire in a court in New York over alleged securities fraud. The plaintiff accused Musk of not making his Twitter investment public within the statutory reporting period. As a result, a stock market reaction was delayed and the share price was kept artificially low while he continued to expand his stake.
More: Elon Musk’s billion-dollar offer for Twitter is met with skepticism by investors.