Elon Musk could seize Twitter TODAY as talks reach 'final stages' | Daily Mail Online
Elon Musk has called for his ‘worst critics’ to remain on Twitter as he closes in on seizing the social media giant for $43billion.
The billionaire said he wanted them to keep using the platform because 'that is what free speech means’ as talks of a deal for him to take over entered their final stages.
The tycoon’s representatives were said to be hammering out terms including a timeline and fees if an agreement was signed and then fell apart.
The two sides were reportedly working into the early morning to finalize the 'fluid and fast-moving’ negotiations.
Twitter shares soared by four per cent as the markets opened to $50.84 a share amid reports it would be seized by Musk.
It comes a fortnight after the entrepreneur first sought to woo shareholders with his $54.20-per-share bid.
The billionaire (pictured earlier this month in Texas) could take over the company as soon as this morning as the board reportedly looked set to accept his offer of $54.20 per share
Bret Taylor is the Chair of Twitter’s board of directors who are said to be reconsidering Musk’s bid
Twitter stocks rocketed four per cent as the market opened in New York on Monday morning
Musk tweeted today: 'I hope that even my worst critics remain on Twitter, because that is what free speech means.’
Earlier, in a cryptic post on his official account, he also wrote: 'And be my love in the rain.’
His team and Twitter met to discuss the prospective $43billion sale Sunday, with the Wall Street Journal reporting progress had been made.
It is unclear whether Musk himself attended those talks. These were two days after he met with actively-managed funds which hold shares in Twitter.
The paper said there were still issues to hash out after Sunday’s meeting, and there was no guarantee a final deal would be reached.
Those issues are said to include what penalty Musk will pay should the deal fall apart before it is completed.
Dan Ives, an analyst at Wedbush Securities, told the New York Times the deal could be 'the beginning of the end for Twitter as a public company with Musk likely now on a path to acquire the company unless a second bidder comes into the mix’.
Others suggested Twitter would only approve a deal valuing it at over $60 per share, having slumped from $70 last year to around $48 this year.
Bosses rebuffed Musk’s initial April 14 offer after he did not offer information on how he would buy the network.
He began to win over shareholders after revealing he had secured financing with the help of Morgan Stanley, with half his stake in Tesla offered as collateral.
He committed $21 billion in equity, $13 billion from Morgan Stanley in debt facilities and another $12.5 billion from the bank and others in margin loans.
Twitter’s share price rocketed since news of Musk’s purchase of 9.2 per cent of the firm and initial offer, from around $39-a-share to $48.93 when the markets closed.
That is still below Musk’s offer, which he has always insisted will be the only one he makes.
Musk has been meeting with Twitter shareholders in the last few days, seeking support for his bid.
He said Twitter needs to be taken private to grow and become a genuine platform for free speech.
Earlier Sunday, Musk tweeted he was 'moving on' to his more than 83million followers, leaving many in the lurch as to what he was moving on from.
But he later clarified it was in reference to 'making fun of [Bill] Gates for shorting Tesla while claiming to support climate change action’.
Earlier on Sunday, Musk had tweeted that he was 'moving on’ to his more than 83 million followers, leaving many in the lurch as to what he was moving on from for several hours
Many Twitter shareholders reached out to the firm after Musk outlined a detailed financing plan for his bid on Thursday and urged it not to let a deal slip away.
Musk’s insistence his bid for Twitter is his 'best and final’ has emerged as a hurdle in the deal negotiations, sources said.
But Twitter’s board has decided to engage with Musk to gather more information on his ability to complete the deal, and potentially get better terms, the sources added.
Twitter has not yet decided if it will explore a sale to put pressure on Musk to raise his bid, according to sources.
The people with knowledge of the matter declined to be identified because the deal discussions are confidential.
Twitter wants to know more about any active investigations by regulators into Musk, including by the US Securities and Exchange Commission (SEC), sources said.
Securities lawyers say Musk, who settled charges he misled investors four years ago, may have breached SEC disclosure rules as he amassed a stake in Twitter this year.
Musk has spent the last ten days interacting with his followers over the potential Twitter bid
Elon Musk’s attempted hostile takeover of Twitter timeline:
Twitter is also looking into whether regulators in any of the major markets it operates would object to Musk owning the company, the source added.
Were Twitter to find a sale to Musk would be risky, it could ask for a sizeable break-up fee, according to the sources.
The social media company adopted a poison pill after Musk made his offer to prevent him from raising his more than 9 per cent stake in the company above 15 per cent without negotiating a deal with its board.
In response, Musk threatened to launch a tender offer he could use to register Twitter shareholder support for his bid.
Twitter’s board weighed concerns that unless it sought to negotiate a deal with Musk, many shareholders could back him in a tender offer, the sources said.
While the poison pill would prevent Twitter shareholders from tendering their shares, the company is worried its negotiating hand would weaken considerably if it was shown to be going against the will of many of its investors, the insiders added.
The Wall Street Journal reported earlier on Sunday Musk and Twitter had met to discuss the acquisition offer.
The price expectations among Twitter shareholders for the deal diverge largely based on their investment strategy, the sources said.
Active long-term shareholders, who together with index funds hold the biggest chunk of Twitter shares, have higher price expectations, some in the $60s-per-share, the sources said.
They are also more inclined to give Parag Agrawal, who became Twitter’s chief executive in November, more time to boost the value of the company’s stock, the sources added.
'I don’t believe that the proposed offer by Elon Musk ($54.20 per share) comes close to the intrinsic value of Twitter given its growth prospects,’ Saudi Arabia’s Prince Alwaleed bin Talal, a Twitter shareholder, tweeted on April 14.
Short term-minded investors such as hedge funds want Twitter to accept Musk’s offer or ask for only a small increase, the sources said.
Some of these are fretting a recent plunge in the value of tech stocks amid concerns over inflation and an economic slowdown makes it unlikely Twitter will be able to deliver more value for itself anytime soon, the sources added.
Sahm Adrangi, portfolio manager at Kerrisdale Capital Management, a hedge fund that owns 1.13 million shares in Twitter, or 0.15 per cent of the company, said: 'I would say, take the $54.20 a share and be done with it.’
One silver lining for Twitter’s board is Musk’s offer did not appear to convert much of his army of 83million followers into new shareholders in the firm, the sources said.
Twitter’s retail investor base has increased from about 20 per cent before Musk unveiled his stake on April 4 to some 22 per cent.
Twitter’s board is led by chairman Bret Taylor, who is also the co-CEO of business software giant Salesforce
Twitter CEO Parag Agrawal (left) and co-founder Jack Dorsey (right) also hold board seats
If the board were to reject Musk’s tender offer, he could then approach the shareholders, who may accept the offer. Musk could also employ a proxy fight in which opposing groups of stockholders attempt to persuade other stockholders to let them use their shares’ proxy votes. Twitter’s San Francisco headquarters is pictured in July 2021
Poison pill plans use the threat of dilution to dissuade takeovers
The Twitter board, meeting on Thursday afternoon, decided to combat Musk’s takeover bid with a so-called 'poison pill’ provision that would prevent the Tesla CEO from increasing his stake in Twitter.
Also known as shareholder rights plans, poison pills typically trigger an automatic stock dilution through a flood of new shares if a corporate raider’s ownership stake grows too large.
For instance, if a single shareholder hits 15% ownership, a poison pill could be designed to allow every other shareholder to buy a new issue of shares at a discount.
Knowing such a plan could be triggered, raising the cost of a takeover astronomically, the bidder would be disinclined to pursue a takeover without the board’s approval. In Twitter’s case, the idea of such a plan would be to prevent Musk from increasing his 9.1 percent stake in order to pressure the board to accept his deal.
Last week Musk said 'all real humans’ on Twitter would be verified if his takeover bid succeeds.
The Tesla and SpaceX CEO tweeted on Thursday if he is able to buy the company he would focus on removing spam from the site.
He posted: 'If our twitter bid succeeds, we will defeat the spam bots or die trying! And authenticate all real humans.’
Authentication on Twitter refers to when the site provides a blue check mark on a user’s handle name.
It is generally used by the firm to show public figures’ accounts actually belong to them - and is often seen as a status symbol among users.
Pensions & Investment Research Consultants (Pirc) claimed Musk’s battle to seize control of Twitter could be a distraction from his work at Tesla.
One analyst at Pirc said: 'This latest episode of the Elon Musk show is a consideration for shareholders of Tesla.
'Musk is rich, but he does not have unlimited funds, and for his multi-billion bid to come off, it is likely he would need to sell some of his shares in Tesla to finance the deal.
'And with his time preoccupied running Twitter, a successful acquisition may take Musk’s attention away from the electric car company to the detriment of its operations.
'That may represent a further investor risk to Tesla shareholders.
'Even if the bid fails, the fact that the Tesla chief executive seems to be distracted by a social media company may not be seen as a good thing.’
Despite this, Tesla posted record quarterly results on Thursday amid booming demand for its electric cars.
The Tesla and SpaceX CEO tweeted on Thursday if he is able to buy the company he would focus on removing spam from the site
The company reported huge revenues of $18.65 billion for the first three months of 2022.
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It was 81 per cent higher than a year earlier as profits rose 147 per cent to $5.48 billion. The figures came as Tesla delivered a record 310,000 cars in the first quarter.
Shares in Tesla rose four per cent in afterhours trading, having fallen five per cent earlier amid a tech sell-off sparked by dreadful results from Netflix.
The surge in turnover was achieved despite challenges in the supply chain, such as Covid-19 outbreaks and chip shortages.
Tesla’s latest trading update also recognized the increased cost of raw materials for the company.
Tesla shares have risen nearly 1,800 per cent in the past three years, from just over $50 to around $980.
That values the company at over $1trillion – making it worth more than the next 12 largest carmakers combined.
Musk sent shockwaves through the tech world two weeks ago with an unsolicited bid to buy the company.
He said the promotion of freedom of speech on Twitter as a key reason for what he called his 'best and final offer’.
Meanwhile he teased on Twitter about his plans for the company, apparently referring to a tender offer in a tweet saying 'Love Me Tender’.
He also appeared to suggest he would banish the board, saying its salary would be $0 'if my bid succeeds’.
Elon Musk’s 'Love Me Tender’ tweet hints at a tender offer.. but what does it mean?
Elon Musk’s Love Me Tender tweet appeared to hint at a tender offer to shareholders. The 50-year-old simply tweeted on Saturday afternoon 'Love Me Tender’ with musical notes around it.
A tender offer, also known as a hostile bid, would see him bypass the board and go straight to the shareholders with his offer of $54.20 a share. But he would need to file a form with the SEC for this, meaning he would need to show how he would fund his bid.
It could pose as a problem for the Tesla billionaire, with it still unclear how he would pay for any deal to buy Twitter.
He was also backed on social media by Twitter cofounder Jack Dorsey, who has lashed out at the board for being 'dysfunctional’.
Twitter last Monday filed its 'poison pill’ plan with the SEC as it cemented its attempt to block Musk from executing the hostile takeover.
The document said: 'In connection with the adoption of the Rights Agreement, on April 15, 2022 the Board approved a Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred Stock (the “Certificate of Designation”) setting forth the rights, powers and preferences of the Preferred Stock.
'The Certificate of Designation was filed with the Secretary of State of the State of Delaware on April 18, 2022.’
The strategy triggered a dilution of company shares if any shareholder builds up a 15 per cent stake without the board’s approval.
But it did not prevent Twitter from accepting Musk’s offer or entering negotiations with him or other potential buyers.
Yet it will stop the billionaire from putting pressure on the board by buying up ever more shares on the open market.
Twitter said its 'poison pill’ plan was 'similar to other plans adopted by publicly held companies in comparable circumstances’.
It said: 'The Rights Plan will reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium.’
It meant if Musk or any other person or group acquires at least 15 per cent of Twitter’s stock, the 'poison’ pill will be triggered.
Every other shareholder aside from Musk would be allowed to purchase new shares at half the market price.
The flood of half-price shares would effectively dilute his ownership stake, making it massively more expensive for him to build up a controlling position.
Twitter said its board had voted unanimously in favor of the plan, which will remain in effect until April 14, 2023.
Its board is led by chairman Bret Taylor. Twitter CEO Parag Agrawal and co-founder Dorsey also hold board seats.
Rounding out the board are: MasterCard executive Mimi Alemayehou, private equity investor Egon Durban, karaoke tycoon Martha Lane Fox, former Google exec Omid Kordestani, Stanford professor Fei-Fei Li, venture capitalist Patrick Pichette, 1stDibs CEO David Rosenblatt, and former banker and diplomat Robert Zoellick.
Despite Twitter’s latest move, Musk could still defy the board and take over in a proxy fight by voting out the current directors - though this strategy could take years.
He previously responded to reports the board was mulling a 'poison pill’ plan by tweeting: 'If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty.’
'The liability they would thereby assume would be titanic in scale,’ he added, apparently referring to potential shareholder lawsuits.
This content was originally published here.
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