Under the terms of the agreement, Twitter will become a private company and shareholders will receive $54.20 per share, the company said in a press release.
Ownership of Twitter gives Musk power over hugely important societal and political issues, perhaps most importantly the ban on former President Donald Trump that the website enacted in response to the Jan. 6 riots.
“Free speech is the foundation of a functioning democracy, and Twitter is the digital public square where issues vital to the future of humanity are debated,” Musk said in the statement. “I also want to make Twitter better than ever by improving the product with new features, making algorithms open source to increase trust, defeating spambots and authenticating all humans. Twitter has huge potential – I can’t wait to work with the company and the user community to unlock it.
The company’s board met with Musk on Sunday and negotiations dragged into the early hours of Monday, according to a person familiar with the negotiations, who spoke on condition of anonymity due to the sensitivity of the discussions. Both parties focused on whether Musk had the funding to complete the acquisition, and didn’t spend much time discussing Musks’ strategy for the social network’s future, the person said.
The deal, which is expected to be announced at market close on Monday, raises thorny questions about how the outspoken billionaire could put his mark on a platform widely used by celebrities, politicians, activists and heads of state. Rather than making money, Musk said his primary interest is restoring free speech on Twitter – a goal interpreted by some to mean he would lift restrictions the website has placed on influential figures. , including former President Donald Trump.
Why does Elon Musk want to buy Twitter?
Musk, an avid Twitter user with more than 83 million followers, hinted earlier Monday that a deal was done, laying out his vision for Twitter’s future in a midday tweet. “I hope even my worst critics stay on Twitter because that’s what free speech means,” he wrote.
Twitter shares rose nearly 6% to $51.62 in afternoon trading.
I hope even my worst critics stay on Twitter, because that’s what free speech means.
— Elon Musk (@elonmusk) April 25, 2022
The deal would rank among the largest activist takeovers of a publicly traded company, according to Dealogic, which tracks mergers data. The largest activist shareholder takeover of a company since 1995 was the purchase of Alexion Pharmaceuticals by AstraZeneca in 2021 for about $42 billion, Dealogic said.
The news follows weeks of evangelism about the need for ‘free speech’, as Tesla CEO seized on Twitter’s role as a ‘de facto public square’ and took umbrage at efforts to moderation of content which he saw as an escalation towards censorship. He said he sees Twitter as essential to the functioning of democracy and said the economics of the website is not an issue.
Musk said he would open up the website’s algorithm, highlighting content moderation decisions, though some researchers said that would be difficult. He also lobbied for simple and widely popular changes such as the addition of an edit button, as well as a commitment to eliminate spambots. And he said he wanted to open up Twitter’s verification process to more users, so the authenticity of accounts could be determined more easily.
The Wall Street Journal first reported news of the negotiations.
Twitter seemed poised to reject the Tesla CEO’s unsolicited offer of $54.20 per share for the social media platform. The board adopted a so-called “poison pill” plan the day after Musk’s bid, which would make it much harder for the billionaire to buy the company.
The strategy, known as the shareholder rights plan, would allow investors to buy Twitter shares at a discounted price not available to Musk. The influx of new shares would potentially make taking over the company prohibitively expensive for Musk.
Next, Musk described his funding last week, saying he secured $46.5 billion through loans from banks, including Morgan Stanley, and his own equity. These details seemed to give more credibility to his offer.
Musk had also met privately with several major Twitter shareholders in recent days, with some expressing support for his bid, the person said. Both parties did not view regulatory issues, such as an antitrust review, as likely obstacles to completing the deal, the person added.
Musk is worth around $259 billion according to the Bloomberg Billionaire Index, but much of his wealth is tied to stocks. The entrepreneur is CEO of electric car company Tesla, aerospace company SpaceX and co-founded payment service PayPal.
Beyond the bank loans, it’s unclear how Musk intends to pay off the more than $21 billion of the deal he described as “equity financing” on his part. It could borrow or sell shares of its Tesla stock, although that route would increase risks to the electric carmaker’s share price.
“If Elon Musk were forced to sell common stock that he has pledged to secure certain personal loan obligations, such sales could cause our stock price to decline,” Tesla warned in its annual filing.
What’s going on with Elon Musk and Twitter?
Musk took a more than 9% stake in Twitter earlier this year, which led to a wild two weeks of back and forth with the company. The company announced he would be joining the board, then a few days later he said he had stepped down. Musk launched his hostile takeover bid soon after.
Elon Musk is worth $270 billion. He would buy Twitter with an IOU.
The board’s willingness to have a “constructive conversation” makes a deal more likely, according to CFRA Research analyst Angelo Zino.
“It looks like Elon has put the board in a corner,” Zino said Monday in emailed comments to The Washington Post.
On Monday afternoon, the proposed deal did not include a so-called “go shop” provision which is a common term in large mergers that allows boards to continue to seek a higher offer from other potential bidders. , the person familiar with the mentioned agreement. The absence of this provision is likely to accelerate the conclusion of the transaction.
Some Tesla investors have bristled at Musk’s offer because they say it distracts him from his chief executive responsibilities and could slow the momentum of one of the world’s most valuable automakers. And internally, Twitter employees have raised concerns about Musk’s potential effect on culture.
Musk is very active on the platform, having tweeted more than 17,300 times. He averages 125,180 likes per tweet, according to Socialtracker. Musk has earned praise for his all-encompassing approach to the site: he freely switches between raw memes from rivals, polls on the state of free speech and critical business decisions.
His tweets got him in trouble with the Securities and Exchange Commission: In 2018, he wrote that he had “funding secured” to take Tesla private at $420 a share.
He said he chose the figure of $420 “because he had recently learned of the importance of this figure in the culture of marijuana and thought his girlfriend would find it funny, which is certainly not a good reason. to choose a price,” according to the federal complaint.
Musk has spent weeks tweeting about the need for “free speech” on the platform, challenging permanent bans and calling on Twitter to go public with its algorithm.