Musk indicates that if his ‘best and final’ bid of $54.20 for each Twitter share he doesn’t already own isn’t accepted, he might sell off his stake
Twitter Inc.’s largest shareholder Elon Musk, disclosed a bid to buy the remainder of the San Francisco–based social media company’s stock that he doesn’t already own so he can transform it into the world’s “platform for free speech.”
The stock TWTR, -1.68% rallied at first, then reversed lower, as Musk, the “technoking” of Tesla Inc. and founder of SpaceX, also indicated that if his “best and final” bid isn’t accepted, he might sell off his stake.
In a 13D/A filing with the Securities and Exchange Commission, it was disclosed that Musk delivered a letter to Twitter on April 13 that contained a “nonbinding proposal” to buy all of Twitter’s outstanding stock that he didn’t own for $54.20 a share, which represents an 18.2% premium to Wednesday’s closing price of $45.85.
The bid also represents a 53.7% premium to the $35.27 closing price on Jan. 28, which was the trading session before Musk starting buying Twitter shares.
“Twitter has extraordinary potential,” Musk said. “I will unlock it.”
With 800.64 million shares outstanding as of Feb. 10, Musk’s bid would value Twitter at about $43.39 billion. And the 727.50 million shares outstanding that he currently doesn’t own would be valued at $39.43 billion at his bid price.
Twitter said it would “carefully review” Musk’s “unsolicited” bid and determine what it believes would be in the best interest of the company and its shareholders.
Twitter’s stock closed down 1.7% at $45.08, reversing intraday gains of as much as 5.8%, and earlier premarket gains of as much as 17.8%.
Meanwhile, Tesla’s stock TSLA, -3.66% dropped 3.7% to $985.00, amid concerns that Musk may be distracted from running the electric vehicle market leader. Another worry is that Musk could sell off some of the 172.61 million Tesla common stock that he owns, which is currently valued at about $170.02 billion, to fund a Twitter purchase.
Musk had disclosed in early April that he had spent $2.64 billion to buy 73.12 million shares of Twitter, or 9.1% of the shares outstanding, to become Twitter’s largest shareholder. Twitter than said it had named Elon Musk to its board of directors, only to have Musk confirm later that he wouldn’t join the board after all and could instead engage with the company without limitation.
In Musk’s letter to Twitter’s chairman, Bret Taylor, he explained his decision to buy the company: “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy. However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”
Musk said that he would not play a “back-and-forth game” and that his $54.20-per-share bid is his “best and final offer.”
“If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder,” Musk said.
He claimed that was “not a threat,” just an acknowledgment that Twitter is “simply not a good investment” without the changes that, in his stated view, need to be made.
Speaking at a Ted2022 conference in Canada, Musk said he offered to buy Twitter because it has become “a defacto town square.” He also said he’s not sure he’ll actually be able to acquire Twitter, The Wall Street Journal reported.
The WSJ also reported, citing sources, that Morgan Stanley, who Musk engaged as its financial advisor, would provide some debt financing for the bid.
Wedbush analyst Dan Ives said he believed that after “many twists and turns,” Twitter is likely to ultimately agree to being acquired by Musk.
“It would be hard for any other bidders/consortium to emerge and the Twitter board will be forced likely to accept this bid and/or run an active process to sell Twitter,” Ives wrote in a note to clients.
Ives noted that the bid raises many questions around financing, regulations and the balancing of Musk’s time as he’s also the head of Tesla and SpaceX.
Twitter’s stock has gained 4.3% year to date but has tumbled 35.4% over the past 12 months. In comparison, the S&P 500 index SPX, -1.21% has advanced 6.5% over the past year.