Suzanne Cordeiro/AFP by way of Getty Photographs
Watching the richest individual on the planet attempt to take over one of the vital influential social networks is a head-spinning expertise.
Easy and orderly will not be precisely what the world has come to count on from mercurial billionaire Elon Musk. He relishes shifting markets along with his tweets as a lot as he loves sharing duck memes along with his greater than 82 million Twitter followers.
The drama over Musk’s $43 billion takeover bid for Twitter is heating up, not simply because the corporate’s board is resisting him, however as a result of different gamers are beginning to seem on the scene.
So will the billionaire’s bid succeed, or will he again down? And what vital components are nonetheless in flux?
This is a rundown of the place issues stand and what might occur subsequent.
Twitter’s board has a poison capsule, however will a white knight emerge?
Twitter’s board of administrators is anticipated to formally settle for or reject Musk’s unsolicited buy supply quickly.
On Friday, the board put in place a “poison capsule” – formally often known as a shareholder rights plan – to fend off Musk, who at the moment owns about 9% of Twitter shares. The measure would make it costlier for Musk or anybody else to extend their stake within the firm to fifteen% or extra.
If that threshold had been crossed, the board might inundate the market with discounted shares that Musk would not be capable to buy, diluting his stake. It is a defensive transfer, and it provides the board extra time to contemplate Musk’s supply.
The board might additionally attempt to discover another purchaser – also known as a “white knight” – and even open up a proper public sale course of. Twitter has employed Goldman Sachs and JPMorgan Chase as advisors, and analysts say the corporate and its bankers are doubtless already evaluating different potential suitors.
What does it imply to “Love Me Tender”?
On Saturday, Musk tweeted “Love Me Tender” – the title of an Elvis Presley music. Some observers took that as a touch that he might attempt to attraction on to Twitter shareholders with what’s often known as a young supply, naming a worth at which he’d purchase their shares.
However that’s precisely the kind of hostile transfer that the poison capsule is designed to discourage. If Musk’s supply is engaging sufficient, nonetheless, shareholders might strain the board to scrap the poison capsule.
Musk has tweeted a number of instances lately saying that the corporate’s buyers ought to get to make the ultimate choice a few sale.
Whereas the board of administrators has an obligation to behave in one of the best curiosity of Twitter’s buyers, Musk has argued that “their financial pursuits are merely not aligned with shareholders.” He was replying to a tweet noting that administrators aside from former CEO Jack Dorsey (who’s leaving the board in Might) personal little or no Twitter inventory.
Can Musk actually pay for Twitter?
There are drawbacks for Musk: making a suggestion on to shareholders would require him to elucidate how he plans to finance his buy, which the maverick billionaire has not completed to date.
Most analysts assume Musk must take out a mortgage towards his Tesla inventory, which accounts for the majority of his wealth, however some are skeptical he would be capable to persuade a financial institution to cooperate. Financing a deal north of $40 billion tied to a inventory with a historical past of volatility carries loads of threat.
Twitter shares rose 7.5% to $48.45 on Monday, however are nonetheless buying and selling under Musk’s supply worth of $54.20 a share, suggesting buyers stay skeptical about his possibilities of success.
Will different patrons emerge from the wings or give Musk the cash he wants?
Firms from Disney to Salesforce have thought-about shopping for Twitter over time, although none of these offers materialized. However now, Musk’s supply has put Twitter in play as soon as once more.
“It is a second in time which will not be replicable sooner or later,” mentioned Scott Kessler, analyst at analysis agency Third Bridge. “One factor [Musk] has unquestionably completed is to begin conversations about the way forward for the corporate – whether or not the truth is Twitter will stay a publicly traded firm or will it’s acquired.”
The personal fairness agency Thoma Bravo, which owns software program corporations together with antivirus supplier McAfee, is engaged on a possible bid for Twitter, the New York Publish reported final week.
Musk himself might additionally group up with different buyers to bolster his bid. One risk that observers are buzzing about: the personal fairness agency Silver Lake, which labored with Musk on his failed try and take Tesla personal in 2018. Silver Lake’s co-CEO Egon Durban joined Twitter’s board in 2020 as a part of an settlement with one other activist investor, Elliott Administration, which has criticized Twitter’s sluggish development.
On Monday, the Wall Avenue Journal reported the buyout agency Apollo International, which owns Yahoo, is weighing getting concerned within the Twitter drama, by offering financing to Musk or one other potential purchaser.
Musk might at all times name it quits
In his communications with Twitter’s board, Musk mentioned $54.20 a share was his “finest and remaining supply,” which struck many Wall Avenue analysts as weird, since mergers and acquisitions sometimes comply with a prolonged negotiation course of.
If true to his phrase, nonetheless, Musk might withdraw his supply, and may even promote all of his shares in Twitter. In his letter to the chairman of Twitter’s board, Bret Taylor, Musk hinted at that risk, writing that if his buy proposal is turned down, he “would wish to rethink my place as a shareholder.”
Retreating from his 9% stake, which makes Musk Twitter’s largest particular person shareholder, might ship the inventory worth plunging. Nonetheless, it might come as a reduction to those that view Musk’s aggressive come-on as a risk to the way forward for the corporate.
However that would depart Twitter the place it began off: an organization that has struggled to develop as rapidly as some buyers have demanded – and certain nonetheless susceptible to activists. Regardless of its cachet amongst politicians, celebrities and journalists, Twitter’s base of 217 million month-to-month lively customers is way smaller than Fb’s 2.9 billion, and even upstart TikTok’s 1 billion customers. Twitter has struggled to develop its promoting gross sales and constantly flip a revenue.
As for Musk, if he sells he might make off with a pleasant pile of cash. Twitter’s inventory worth is up 32% since he first started shopping for shares on Jan. 31. At Monday’s closing worth, Musk’s Twitter stake was value $3.5 billion.
What concerning the SEC?
Musk has a well-documented historical past of thumbing his nostril on the Securities and Trade Fee, even saying in 2018 that he doesn’t respect the monetary regulatory company.
After his now-infamous tweet that 12 months claiming he had “funding secured” to take Tesla personal, Musk and Tesla agreed to pay a $40 million effective to settle a securities fraud cost introduced by the SEC. Musk additionally stepped down as Tesla’s chairman.
Now all eyes flip as to if the SEC will act once more.
Below a consent decree stemming from the 2018 tweet, Musk agreed to not make any unfaithful statements concerning the shopping for or promoting of shares and to not omit any related details when publicly talking about inventory buying and selling. Violating the settlement might set off fines and different penalties.
Thus far, the SEC has not accused Musk of breaking any guidelines in connection along with his Twitter takeover try, however regulators are doubtless inspecting the best way he constructed up his stake.
Musk disclosed to the SEC that he had snapped up a large chunk of Twitter 11 days after the authorized deadline for reporting the acquisition. A shareholder lawsuit alleged his tardy submitting resulted in $143 million in financial savings for Musk and thousands and thousands misplaced for buyers.
Specialists say regulators might ding Musk over what’s principally a technical paperwork mistake, however the SEC is extra more likely to probe all of Musk’s statements and actions main as much as and through his try to purchase Twitter.