Dusseldorf Tech billionaire Elon Musk wants to buy Twitter. In a statement to the US Securities and Exchange Commission, the Tesla boss announced his offer on Thursday: The 50-year-old is offering Twitter shareholders $54.20 per share – which amounts to a total valuation of $43 billion.
The Twitter group leadership confirmed that they had received an unsolicited and non-binding offer. The offer will be carefully examined.
“I invested in Twitter because I believe in its potential to be the platform for free speech around the world,” Musk wrote in a letter to Twitter Chairman Bret Taylor. In the meantime, however, it is clear to him that the company in its current form will neither thrive nor fulfill this social task.
Twitter must be delisted, the billionaire said. “Twitter has extraordinary potential. I will release it.”
Twitter shares initially surged higher in premarket trading. After Wall Street opened, however, it was only just up at $47 – well below Musk’s bid.
The difference to the takeover price reflects investors’ skepticism as to whether the deal will really go through. Also, no takeover battle with other bidders is to be expected, which could still drive up the price. “My offer is the best and final offer,” Musk said in the statement.
Musk already owns nearly 10 percent of Twitter stock
The Tesla boss and SpaceX founder already owns 9.2 percent of Twitter. He acquired the shares over months, as he had only disclosed last week. If Twitter declines the offer, then “I would have to reconsider my position as a shareholder,” Musk wrote.
Analysts reacted differently to the offer. Wedbush Securities’ Dan Ives said Twitter’s board of directors must accept the offer. The price is 38 percent higher than when it was announced that Musk was buying shares. “Twitter has its back against the wall,” Ives said.
Adam Crisafulli, founder of the research company Vital Knowledge Media, sees things quite differently. Musk’s offer was “too low” and the stock was trading at $70 less than a year ago.
Twitter has resources to defend itself against a takeover
On the one hand, Twitter is not as well protected against hostile takeovers as, for example, Facebook, Amazon or Google, where founders were given shares with more voting rights. This allows them to retain control of the company even if they no longer hold the majority of shares.
But even if Musk could theoretically achieve his goal with Twitter alone with the majority of shares – the service has many ways to defend itself. One of the so-called “poison pills” companies use to defend themselves against hostile takeovers is to issue new, cheaper shares to other shareholders. That dilutes the stake of an attacker like Musk.
Observers have already suspected that Musk could launch a takeover attack after he turned down a seat on the company’s board of directors over the weekend. He would have committed himself not to increase his stake above 14.9 percent. Forgoing membership of the board cleared the way for Musk to buy more shares.
How exactly Musk wants to change Twitter remains largely open. He joined the service because he believes in its potential “as a platform for free speech around the world” – and that is crucial for a functioning democracy, he wrote on Thursday. In the meantime, however, he had come to the conclusion that the company in its current form could neither do justice to this role nor prosper financially.
Twitter plays a prominent role in politics, entertainment and media, but can only make limited profits from it. With around 270 million daily users and sales of $5.1 billion in the last fiscal year, the online service is small compared to Facebook and YouTube. Even Snapchat has a wider reach.
Twitter has long been considered a takeover target
As a result, Twitter is not considered “Big Tech” on the stock exchange. This can be seen in the valuation: Facebook has reached around 580 billion dollars despite a significant price decline since the beginning of the year, Snapchat is valued at 56 billion dollars. With a recent valuation of $37 billion, Twitter was a potential takeover target.
Facebook has shown great interest in the past, and Salesforce founder Marc Benioff has also been planning a purchase in the meantime. Most recently, the activist investor Elliott Management 2020 used the low price for an entry.
It was not until November that Twitter founder Jack Dorsey withdrew from the top management and handed over the baton to Parag Agrawal. Musk is an avid Twitterer himself with more than 81 million followers. He recently called on them to vote on a so-called editing option, which Twitter has so far rejected. In less than three hours, more than 1.2 million users took part in the survey. Around three quarters were in favor of Twitter allowing tweets to be corrected afterwards.
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Since then, the Tesla boss has followed up with a new survey on Twitter. He asked users if Twitter’s San Francisco headquarters should be turned into a homeless shelter, a plan Amazon founder Jeff Bezos supports. Most recently, the billionaire proposed changes to the premium subscription service Twitter Blue, including lowering the price, banning advertising and allowing payments with the cryptocurrency Dogecoin.
It is still questionable how the Tesla boss wants to finance the takeover. According to Bloomberg, Musk is the richest person in the world at $260 billion. But the vast majority of his wealth is in his stakes in electric-car maker Tesla and aerospace company SpaceX.
Offer is not good news for Tesla
A few weeks ago, Musk sold Tesla shares worth a total of $16 billion on a large scale for the first time. But he has to pay billions in taxes on options and price gains. Musk basically has two options: sell more Tesla stock or use his holdings as collateral for bank loans.
The takeover bid is not good news for Tesla. There are almost no synergies between Twitter and the electric car manufacturer. In contrast, the potential acquisition will take up a lot of Musk’s time, time away from his work at Tesla. The stock reacted accordingly, falling by more than two percent on Thursday.
Musk plays a central role at Tesla. The company just opened two important factories in Grünheide and Austin, which have to be ramped up this year. Crucial new models are pending. In 2023, Tesla finally wants to launch the Cybertruck pick-up, which has already been postponed several times.
Incidentally, anyone who is surprised at the curiously detailed takeover price of $54.20 per Twitter share: Behind it is more of a bizarre joke by Musk than strategic calculation. Among insiders, the number 420 is considered the code for marijuana. Musk wanted to take Tesla private in 2018 – and named a possible share price of $420.
With agency material
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