Now That Elon Musk Has Offered to Buy Twitter, What Happens Next?

Elon Musk has provided to purchase Twitter at a valuation of about $43 billion. Here’s what will — or may — occur subsequent:

The board evaluations the supply. The board will work with its advisers at Goldman Sachs to overview Mr. Musk’s supply. They must take into account, amongst different issues, whether or not the deal pretty values the corporate, and whether or not Mr. Musk has the financing to cobble collectively a deal.

The board can not merely determine it doesn’t like Mr. Musk as a suitor, however they will “give you the reason why they don’t just like the bid,” like, for instance, his potential to fund it, stated Steven Davidoff Solomon, a professor on the College of Regulation on the College of California, Berkeley.

The board broadcasts its determination. The board will probably take up to a couple days to overview the supply. If it rejects the supply, it will probably go in certainly one of a number of methods: It could possibly put in a protection mechanism often known as a poison capsule that limits the power of Mr. Musk, and each different shareholder, to purchase up Twitter shares within the open market.

As soon as it does that, it may nonetheless determine to promote itself, however with out the stress of Mr. Musk — or some other suitor — threatening to accumulate it by shopping for a big quantity shares within the open market.

There are causes Twitter might decide to not do a poison capsule. It is likely to be cautious of potential criticism {that a} poison capsule is deflecting the considerations of a extremely vocal member of its neighborhood.

Likewise, Mr. Musk, whose final reported stake in Twitter was slightly over 9 %, has incentive to maintain his proportion of Twitter shares beneath 10 %. As soon as he hits that threshold, he’s restricted in how shortly he can promote out of the corporate.

Assuming Twitter rejects the supply, Mr. Musk may increase his supply — regardless of having already stated it was finest and last. He may additionally take the bid on to different shareholders, by means of what is named a young supply, by which he would purchase shares from different shareholders.

Nonetheless, no less than one shareholder has already said the bid undervalues the corporate.

The board doubtlessly appears for a white knight. “Twitter has basically been on the market since they went public,” stated Howard Berkenblit, who leads the Capital Markets group at legislation agency Sullivan & Worcester.

Mr. Musk’s newest exercise almost definitely heightened curiosity in and Twitter’s amenability to a deal. Some non-public fairness companies could also be delay by Twitter’s restricted money circulate, however numerous know-how corporations might have a look, given heightened curiosity within the social media large’s energy and attain.

There might be huge suitors. Recall that Microsoft, which owns LinkedIn, and Oracle each vied for a deal with video sharing firm TikTok. Nonetheless, potential antitrust issues would probably be a big deterrent, given the Biden administration’s scrutiny of massive know-how offers.

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