Twitter’s takeover attempt by Musk

Twitter’s takeover attempt by Musk: Billionaire, entrepreneur, eccentric, all of this fall short to describe the  Chief executive of Tesla, SpaceX, and others. The world’s richest person, Elon Musk now wants to add Twitter to the list of countries he owns and control. He already has around a 9.1 percent stake, making him the second-largest shareholder in the company, and now wishes to own 100 percent of the social media company.

Tesla CEO Elon Musk has offered to buy 100 percent of Twitter for $54.20 per share in cash. When asked about his bid at a TED talk in Vancouver, Elon Musk said that it was important to have “an inclusive arena for free speech”.

Twitter, is a micro-blogging platform that has become a global means of communication for individuals and world leaders alike. Probably the most controversial and in the news of all social media platforms, Mr. Musk has quite a history with the platform.

Musk made the bid on Wednesday through a letter to the board of Twitter and it was made public in a regulatory filing on Thursday. His offer price of $54.20 per share represents a 38% premium to Twitter’s April 1 close, the last trading day before his 9.1% stake in the social media platform was made public.

Musk had earlier on Sunday, refused an offer to join Twitter’s board after he had made his stake in the company public. According to various analysts, this was indicative of his takeover intentions, since taking a board seat would have limited his shareholding to 15 percent.

Musk also after his Ted talk hinted at the possibility of a hostile bid wherein he would bypass Twitter’s board and go directly to the shareholders. This can be seen by his tweet, “It would be utterly indefensible not to put this offer to a shareholder vote.”

According to reports, Twitter was evaluating the offer with guidance from Goldman Sachs and Wilson Sonsini Goodrich & Rosati. The company was also preparing a poison pill as a protective measure against Musk raising his stake as early as Friday, some reports claim. Meanwhile, the shares of Twitter fell 2% in afternoon trading, depicting that investors were not immediately convinced.

Saudi Arabia’s Prince Alwaleed bin Talal tweeted from his verified account about his views on the deal. Describing himself as one of the “largest & long-term shareholders of Twitter,” he said Musk’s offer undervalued the company and he rejected it.

On the other hand, Musk has made it clear that this was his “best and final offer” and said he would reconsider his investment if the board rejects it, also saying that “This is not a way to sort of make money,”.

Musk wishes to take the company private in order to enable it to meet the aims and understanding of free speech that Musk has. Musk, a self-described “free speech absolutist,” has been critical of the social media platform and its policies, and recently ran a poll on Twitter asking users if they believed it adheres to the principle of free speech. “My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive, is extremely important to the future of civilization,” Musk added.

Musk revealed that the  U.S. investment bank Morgan Stanley was acting as a financial adviser for his offer. He did not mention or elaborate upon how he would finance the transaction if it goes ahead but told the TED talk audience that he “had sufficient assets,” without saying anything else. Analysts predict that Musk could finance the deal jointly with debt and proceeds from the sale of Tesla shares.

Musk had sold more than $15 billion worth of his Tesla TSLA.O shares, about 10% of his stake in the electric vehicle maker, last year to settle a tax obligation.

Twitter has been, to put it colloquially a ‘Serial Underperformer’ in recent months with lower-than-expected user additions raising serious concerns about its growth aspects and potential. This is at a time the company is pursuing big projects such as audio chat rooms and newsletters.

Twitter will not decide on the fate of Musk’s bid on Thursday, according to a source familiar with the situation. What the board is discussing is the parameters of the valuation process and it would then ask its advisers to review the bid and wait for the results, the source said.

“If he really wants to take Twitter private his past run-ins with regulators might not pose an obstacle but it might make potential financing sources leery of providing the cash for the deal unless he is willing to pledge a large portion of his Tesla holdings to collateralize the debt,” said Howard Fischer, a partner at law firm Moses & Singer and former senior trial counsel at the SEC.

Musk’s move also raises the question of whether other bidders might emerge for Twitter.

“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,” Wedbush Securities analyst Daniel Ives wrote in a client note.

Asked if there was a “Plan B” if Twitter rejected the offer, Musk told the TED conference audience without elaborating: “There is.”