5 things to know about Elon Musk’s Twitter bid

Elon Musk has thrown the tech world into a frenzy after sharing his offer to buy Twitter for $43 billion on Thursday, just days after news broke that the billionaire would not join the social media giant’s board of directors.

Musk, the world’s richest man, wrote in a letter disclosed to the Securities and Exchange Commission in a filing that, “Twitter has extraordinary potential. I will unlock it.”

“However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form,” he wrote. “Twitter needs to be transformed as a private company.”

The offer came after Musk turned down a spot on Twitter’s board of directors. He was offered the spot after becoming the company’s largest shareholder when he acquired a 9.2 percent stake in Twitter. 

Here are five things to know about Musk’s takeover bid.

The Offer

Musk, in a letter to Twitter Chairman Bret Taylor disclosed in a Securities and Exchange Commission filing on Wednesday, that he would purchase the company in its entirety for $54.20 a share, which, according to CNBC, gives Twitter a valuation of $43 billion.

The Tesla CEO said his offer is a 54 percent premium above the price for Twitter shares on the day before Musk started investing in the company and an 8 percent premium above it the day before his investment was publicly announced.

Musk, the largest shareholder of Twitter, owns a little more than 9 percent of the company.

“I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced,” Musk wrote in the letter.

Twitter’s stock prices fluctuate according to Musk’s statements

Twitter’s stock price made gains shortly after Musk released his offer to buy the company on Thursday, adding that his offer to buy the platform was his “best and final” at $54.20 a share.

However, the share price saw dip after Musk suggested that if his “best and final” bid isn’t accepted, he might sell off his stake. Musk said he would “need to reconsider my position as a shareholder,” according to a letter dated April 13.

“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.

Market Watch reported that Twitter’s stock rose 2.8 percent in morning trading. However, The New York Times noted that at noon on Thursday, Twitter’s shares were down on the day, and said it remained far below Musk’s bid, suggesting skepticism by traders over the offer.

GOP Reaction

Conservatives have welcomed the move by the tech billionaire to buy the social media giant, hailing it as a purchase that would reinstate free speech on the platform following its moves to increase moderation of harmful content.  

Former President Trump’s GOP allies have praised Musk’s offer and expressed their hope that the company will accept it.

But progressive activists, tech executives and scholars raised concerns last week that the platform could become a more hostile environment under Musk’s supervision.

“I hope Twitter’s board sees the light. If they reject his offer, the company’s stock will likely never recover,” Rep. Lauren Boebert (R-Colo.) tweeted. 

Former Rep. Justin Amash, who announced in 2019 that he was leaving the Republican Party and later became a Libertarian, also lauded the move on Thursday, tweeting that Musk buying Twitter “may be the best thing to happen to social media in years.

Since Twitter banned Trump permanently from its site following the aftermath of the Jan. 6, 2021, insurrection, Republicans have argued that the website is impinging on users’ First Amendment rights. 

They have also maintained that big platforms including Twitter and Facebook harbor anti-conservative bias in their content moderation policies.

Could Twitter’s board reject the offer?

Twitter’s board met Thursday shortly after news of Musk’s takeover offer broke, The New York Times reported, citing people familiar with the matter.

Twitter called an emergency meeting of the board of directors for 2 p.m. EST and an all-hands meeting for 5 p.m. EST.

“The Twitter Board of Directors will carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders,” the company said in a statement on Thursday in response to the offer.

However, a source told The Wall Street Journal that Twitter is considering a “poison pill” that would block Musk from increasing his stake in the company significantly.

Case Western Reserve University Assistant Professor of Law Anat Alon-Beck told The Hill that “There are several shark repellent measures that companies can take to counter hostile takeovers.”

“Most of the measures are included in the company’s charter and bylaws, which generally make the company less attractive to acquire,” she added.

Alon-Beck noted that Twitter’s board is bound to the Revlon rule, the legal principle stating that a company’s board of directors shall make a reasonable effort to obtain the highest value for a company when a hostile takeover is imminent.

“If a sale of control is in question, according to Delaware General Corporation Law, Revlon principles will apply. Courts will more closely scrutinize the board’s process and actions in order to ensure that the sole objective of maximizing shareholder value is sought to be achieved,” she said.

She added that both acquirers and targets in any take-private transaction need to be mindful of the fiduciary duties and related requirements applicable to the target company and its board of directors.

“In a transaction involving a sale of a public company for cash that results in a change of control of the target, as is usually the case with any take-private transaction, Delaware law typically requires the board to act reasonably to obtain the best price reasonably available to shareholders.”

Does Musk have the cash?

Elon Musk has topped the list of richest people in 2022 with a $224 billion net worth. However, despite his wealth, the billionaire is cash poor, with nearly all his assets tied up in shares of Tesla and SpaceX.

Musk said Thursday at the TED2022 conference in Vancouver, Canada, that he is “not sure” he’ll actually be able to buy Twitter, according to CNBC.

Wells Fargo analysts have also expressed concerns for Tesla shareholders about the distractions Twitter would present for Musk in a note on Thursday.

“If the deal is successful, there are two concerns from a TSLA (Tesla) shareholder perspective,” the Wells Fargo analysts said, according to the news outlet.

“One, TSLA is currently in the early days of ramping two factories, Austin & Berlin, which will likely double its global capacity. Running Twitter would be a possible distraction for a CEO that already has a full plate. Two, the takeover financing terms are unclear. Elon’s most liquid assets would be his TSLA shares valued at $170B. Forbes estimated his total net worth at $273.6B, mostly comprised of TSLA and SpaceX (estimated at $74B),” the analyst added, according to Wall Street publication Street Insider.

Alon-Beck added that “According to the Williams Act, when an acquiring company makes an offer, or in this case Musk, it is required to provide information about the tender offer to the shareholders of the target company and to the financial regulators. There is just not enough information here — not even info on financing sources.”