Phew! It was quick!
A little over 11 days after Elon Musk proposed paying $54 a share for Twitter, the company’s board approved the transaction on Monday, a surprise reversal. Twitter initially seemed opposed to the idea—it adopted a poison pill, a defense against an unsolicited bid like Musk’s—but warmed up to it last weekend after Musk detailed how he could pay for it. Answer: A lot of debt (about $25 billion), some equity (roughly $21 billion), all of it wrapped in Musk’s Tesla shares. He has a lot of them, worth around $230 billion. The price of the stock on Twitter is $44 billion, which represents a 38% increase over what it traded at Musk’s first disclosure.
So that’s it—Elon won? We can expect to see an employee-parking spaceship soon. Truthfully, we’re a few orbits around the Sun from that, but Musk is definitely on course to getting what he says he wants.
What Are Musk’s Next Steps?
The agreement between Twitter’s board and Musk doesn’t seem to include a “go-shop period.” Some buyout deals have these provisions, a time in which the board welcomes any competing bids. (It’s like when the auctioneer with the honeyed voice starts with, “Going once, going . . . ”) Go-shops vary in length, their terms dictated by what buyer and seller agree to. It takes about one month to six weeks. The board will do its best to obtain the most price for the go-shop. Investors see it as a win. But go-shops aren’t required by law in Delaware, where Twitter is incorporated, so it’s not totally strange for Twitter not to do one. On Wall Street, skipping is a source of suspicion.
will add to the feeling on Wall Street that even with JPMorgan’s and Goldman Sachs’ help, Twitter found little interest when it shopped itself around over the last few weeks, trying to avoid Musk.)
Musk will make his next $54.20 tender offering to boost Twitter’s shareholding to at minimum 50%. He makes a tender offer to shareholders asking them to sell their shares. He owns 9.2%, some 73.5 million shares. He needs 319.5 million more shares to get above 50%. This will run him $17.2 billion. Easy-peasy. There are $46 billion of financing available to him.
Musk was reportedly on the phone last weekend with large shareholders to win their trust, while the board deliberated. From there, it doesn’t require any rocket science: Musk or some member(s) of Team Musk have undoubtedly added up the yeses from last weekend and knows Musk can cross over to majority control. The unlikely possibility of a shareholder revolt that stops Musk from reaching 50% is possible. It is unlikely again. It has been approved by the board, with many analysts following Twitter giving their thumbs up.
The tender offer will be open for 20 working days. “And then any shareholder who didn’t tender into his offer will get cleaned up by the company,” says Brian Quinn, a corporate law professor at Boston College. “The company cuts you a check for $54.20 for every share you still own.”
Musk’s Future: What Can You Do?
Except for an unforeseeable act of God it is unlikely. U.S. regulators don’t seem likely to oppose it over antitrust concerns, since Twitter is not combining with, say, Snap or something.
What we can’t account for or really predict is some unforeseen act of Elon. Musk’s unforeseen acts are possible, although it is unlikely. He is an unpredictable man. One minute, he’s on Twitter making penis jokes involving Bill Gates. The next, he’s buying Twitter, having won approval from a board of 11 highly educated and well-compensated directors, including Twitter’s cofounder and (twice) former CEO, Jack Dorsey.
What are Musk’s Plans for Twitter—and Twitter Inc.?
According to the board, it is expected that the deal will close in this year. Parag Agrawal, the CEO of Parag Agrawal will continue to be there until that deal is closed. After that, it won’t be a surprise to see him go, perhaps less than a year after taking over the job from Dorsey last November. Musk was not shy about criticizing Agrawal’s performance and the state of current-state Twitter. If he wants to fire Agrawal, it will trigger a $38.7 million severance package, though it probably won’t come to that. More broadly, the company reportedly told employees there won’t be any layoffs “at this time” during an all-hands meeting on Monday.
We will see if Twitter executive, who is a spaceship executive, can propel it to something closer to warp speed. Or if he really does want to. Following a messy relationship with an investor who was initially not welcome, Twitter has grown in ambition over the last few years. Wall Street began to question whether Twitter would be able achieve the lofty goals Dorsey set prior to his departure. That includes revenue growing by 50% from 2021 to $7.5 billion in 2023, a bold projection that won’t be helped by (1) a general slouch in the ad market right now over consumer-spending fears; (2) continued fallout from a change to Apple software that has made mobile ads less valuable; and (3) the inherent distraction caused by a hostile takeover, even one concluding as quickly as this one. This really happened quickly. For comparison, the Oracle-PeopleSoft saga stretched over 18 months—18!—to get to the same point Musk and Twitter reached in less than three weeks.)
Musk has variously said he’d like the platform to better embrace free speech principles, reduce ads, open up its algorithm, add an editing tool, increase user verification and tamp down on spam bots. He also at one point used a TED Talk interview to suggest he didn’t really care about the business part of Twitter at all. There is, of course, the entire other part of Twitter, the cultural cache it emanates—the part that for 16 years has made Twitter a draw for presidents and celebrities alike and an unhealable sore point for one celebrity-turned-president. This culture part has always seemed in great disproportion to the business part, and such a situation is a blinking-neon invitation to someone like Musk, who will think he can finally fix what Ev Williams, Dick Costolo and Jack Dorsey (twice) could not, since—hey, it can’t be harder than rocketing men into outer space on a semiregular basis.
Here’s Musk sounding very Musk-like in a press release announcing the deal, talking about the future and why he did this in the first place:
“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” said Mr. Musk. “Twitter has tremendous potential—I look forward to working with the company and the community of users to unlock it.”
One thing’s for certain. Musk will need to make these alterations much faster than it took him to purchase the site.