Elon Musk plans to take over Twitter for $44 billion.
(Photo: AP)
Dusseldorf, Frankfurt Elon Musk plans to take over Twitter for $44 billion. The chances of further price gains are great, but so are the risks. How should shareholders behave? Is it still worth buying Twitter shares now? Here are the most important questions and answers for investors:
Those who hold the shares get $54.20 per share. Right?
That’s just the offer, but the deal is far from over. After initial rejection, the board of directors of Twitter signaled approval. Large investors like Vanguard, Morgan Stanley and Blackrock have not yet positioned themselves. Whether they agree is not certain. It is also not clear whether and how many small investors will respond to the offer.
do i have to sell
no Investors can simply continue to hold the shares for the time being.
Should Investors Sell Now?
This is a weighing of opportunities and risks. On Wall Street, a Twitter share was last worth $51.70. The euro exchange rate in trading on Tuesday is the equivalent of just under 52 dollars. This expresses doubts as to whether the deal will actually come about. Anyone who expects to buy should continue to hold the stock – and wait until the price rises towards $ 54.20.
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What are the risks?
Musk could withdraw his offer. It is also not certain whether he will get enough shares or whether the deal will collapse in the end because it is not enough. In both cases, the price is likely to fall because the takeover fantasy that is now in the price is escaping.
Could the price even rise above Musk’s bid of $54.20?
Yes. Musk wants to delist the shares, so he needs a lot of stocks. It’s quite possible that Musk will make a second, higher offer if he doesn’t get enough shares at the first bid price. In this case, higher price gains beckon.
But this speculation is very risky. If Musk loses patience or interest, or if the takeover falls through, the price is likely to fall below the current level of just under $52.
How is Musk funding the deal?
According to Forbes magazine, Elon Musk is the richest person in the world at $265 billion. But Musk isn’t “liquid.” His fortune consists almost exclusively of shares in the electric car manufacturer Tesla and his space company SpaceX. Musk therefore needs loans, which he will almost certainly get.
After a majority takeover, can Musk squeeze out the remaining shareholders?
Yes, that would be a so-called squeeze-out, also known as a freeze-out in the USA. The majority owner makes the minority shareholders an offer they cannot refuse.
How is this legally regulated?
In the USA, the states are responsible for legislation in this area. Twitter is based in San Francisco, California. But like many US companies, the group is registered in the state of Delaware. Delaware is considered very pro-business by law and case law, including when it comes to disputes with shareholders. In this case, that means: From a 90 percent majority ownership, a simplified procedure is possible, after which only the severance payment can be negotiated if fraud or illegal activities are not involved.
Can a squeeze-out lead to court proceedings?
Similar to Germany, this is very often the case in the USA, especially if there is no simplified procedure. The question of how much a squeezed-out minority shareholder gets in the end can therefore remain unresolved for a long time.
What do the courts pay attention to?
A brief account from Cornell Law School states: “Generally, the courts impose an increased fiduciary duty on majority or controlling stockholders. The court pays attention to two aspects: fair handling and fair price.”
Attorney Bryan Springmeyer in San Francisco explains on his homepage “as a rule of thumb: If the acquisition has an independent, reasonable purpose with clear but fair consequences for the minority shareholders, then it is likely to pass the test. If it’s just a matter of squeezing them out or curtailing their ownership rights, then there will likely be commitments from majority owners or a halt to the deal.”
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