Elon Musk has made an offer to buy Twitter (TWTR) and take it private, saying he thinks the company needs to be “transformed”.
According to an SEC filing, Musk has offered to acquire all shares of Twitter he does not own for $54.20 per share, valuing the company at $41.4 billion. That’s a 38% premium to the April 1 closing price, the last trading day before Musk revealed he had become Twitter’s largest shareholder, and an 18% premium to its stock price. closes Wednesday.
Musk said the cash offer was his “best and final offer,” according to the SEC filing, adding that if it’s not accepted he would have to reconsider his position as a shareholder.
The Tesla CEO sent an offer letter to the company on Wednesday evening, according to the filing.
“I invested in Twitter because I believe in its potential to be the platform for free speech worldwide, and I believe that free speech is a societal imperative for a functioning democracy” , he said in a letter he sent to Twitter. “However, since making my investment, I now realize that the business will not thrive or serve this societal imperative in its current form. Twitter needs to be transformed into a private enterprise.
The letter was addressed to Bret Taylor, Twitter’s chairman of the board, not CEO Parag Agrawal, who assumed the role last fall. He concludes: “Twitter has extraordinary potential. I will unlock it.
Twitter issued a statement on Thursday confirming that it had received the offer. The company said its board of directors would carefully consider the proposal “to determine the course of action that it believes is in the best interests of the company and all Twitter shareholders.”
Shares of Twitter (TWTR) soared as much as 13% in premarket trading on the offering on Thursday, but quickly fell back. The shares were trading down around 6% after the market opened, suggesting investors doubted the offer would be accepted.
But it will be difficult for Twitter to reject Musk’s offer at the price he is offering, said Dan Ives, technology analyst at Wedbush Securities.
“Musk puts the back of the Twitter board against the wall,” Ives said. “The bounty is at a level that will be difficult to see any other deals happening.”
But to get a return on such a high bid, Twitter would have to do more to generate subscriber revenue and cut costs, Ives said. Musk’s pledge to use the company to promote greater freedom of speech does little, if anything, to boost its bottom line.
“Musk talks about freedom of speech, which is the exact opposite of what any other corporate thief would do to monetize corporate value,” Ives said. “It’s historic and bizarre at the same time.”
Musk has far more Twitter followers than any other CEO at 81.6 million, and is a far more prolific tweeter than the handful of celebrities who have more followers.
While other Twitter critics complain that the social media platform hasn’t done enough to control the spread of misinformation, Musk expressed more concern about efforts to limit what users are allowed to tweet. Last month, he said he was seriously considering creating a new social media platform.
“Given that Twitter serves as the city’s de facto public square, failure to uphold the principles of free speech fundamentally undermines democracy,” Musk said. tweeted last month. “What should be done?”
Last week, Musk revealed that he had been buying shares of Twitter since late January and had spent $2.6 billion to rack up 73.1 million shares, which at the time represented a stake of 9.1%, according to what the company disclosed at the time. the number of shares held by investors.
But in February, Twitter announced plans to repurchase $2 billion worth of stock in a bid to boost its share price. And on Thursday, the company revealed there were 37 million fewer shares outstanding than previously reported.
This reduction in the total number of shares brought Musk’s stake to 9.6% without him having to buy a single additional share. And that reduced the company’s total value by $2 billion based on Musk’s $54.20 offer price.
After Musk’s stock purchase was disclosed, he initially accepted an offer of a seat on the board, a deal that capped his total investment in the company at 14.9%.
On Sunday, Twitter CEO Parag Agrawal revealed that Musk had decided not to join the board, removing that limit.
Musk had been unusually quiet about his plans for Twitter in the days that followed.
Musk did not reveal how he plans to finance his purchase. He said he hired Wall Street giant Morgan Stanley (MS) as financial adviser for the transaction.
Although Musk is the richest person on the planet, most of his $274 billion net worth is tied to his holdings in publicly traded Tesla (TSLA) and private SpaceX, and he has been reluctant to sell shares of Tesla (TSLA) beyond what he needed to pay his taxes. Shares of Tesla (TSLA) fell 3% in early trading on Thursday, possibly on fears that Musk would sell shares to raise cash, or that he could be distracted from his duties at Tesla (TSLA) by his latest interest in Twitter.
It’s very possible that Musk doesn’t need to sell Tesla shares and could instead use them as collateral to borrow the money he needs to buy Twitter, Ives said. Musk’s Tesla shares are worth around $177 billion, even with the slight drop in premarket trading on Thursday.
“Banks will be lining up to be part of the world’s richest person lender consortium,” Ives said.
Musk doesn’t like his companies to be publicly traded. While other private space exploration companies such as Virgin Galactic (SPCE) have gone public, SpaceX has remained private, despite speculation that it is ripe for a public offering. And in August 2018, he announced – on Twitter – that he was considering taking Tesla private, saying he thought it was the best way forward.
Musk’s tweet about taking Tesla private, in which he said he had “secured funding” for the bid when he didn’t, got him in trouble with the SEC. He eventually had to give up his position as president of Tesla and allow his tweets containing important information about Tesla to be scrutinized by other company executives.
Making a company private, or keeping it private, reduces the monitoring agency’s oversight of its operations.
The price he suggested for Tesla at the time, $420 per share, was seen to mark April 20, the unofficial marijuana lovers’ holiday. The $54.20 per share offer for Twitter also includes “4.20”.
— Brian Fung and Brian Stelter contributed to this article.