How Twitter’s Board Went From Fighting Elon Musk To Accepting Him

Twitter’s sign had reached the end of the road.

It was April 24. Ten days earlier, Elon Musk, the world’s richest man, had made an unsolicited offer to buy Twitter for $54.20 a share. Alarmed by the out-of-the-blue proposal and unsure if the offer was real, the social media company had adopted a “poison pill,” a defensive maneuver to prevent Mr. Musk from amassing more of his shares.

But by that Sunday, Twitter was running out of choices. Mr. Musk had lined up the funding for his offering and poked the company with his tweets. And after hours of discussions and reviewing Twitter’s plans and finances, the questions the 11 board members grappled with: Could the company be worth more than $54.20 a share? would there be another bidder? — all led to one unsatisfactory answer: No.

Less than 24 hours later, the $44 billion blockbuster deal was announced.

“What I will tell you is that based on the analysis and perceptions of risk, certainty and value, the board of directors has unanimously decided that Elon’s offer represented the best value for our shareholders,” said Bret Taylor, chairman of the company. Twitter, to the more than 7,000 employees Monday in an appeal that The New York Times listened to.

A central mystery of Mr Musk’s takeover of Twitter is how the company’s board went from installing a poison pill to agreeing to sell it in just 11 days. With most mega deals, adopting a poison pill leads to a lengthy battle. The tactic is a clear signal that a company wants to go into battle. The negotiations then drag on. Sometimes buyers walk away.

But interviews with a dozen people close to the transaction and not authorized to speak publicly show how few options Twitter’s board had.

And while there are many types of buyers that deal advisors are willing to fend off — hostile, aggressive, those who lowball and then are willing to negotiate — Twitter had to deal with an acquirer in Mr. Musk who wasn’t in a deal playbook. In essence, he was an “unknown quantity” acquirer, one who wouldn’t budge on price and was willing to publicly destroy the company and use his considerable fortune to negotiate a deal with limited dedication.

“Normal buyers might actually say, ‘You know, we actually want to talk to the people in there to see how the business is going and get more data than is available to the public,'” said Edward Rock, a professor of business administration. administration at New York University School of Law. “What was interesting,” he said, is that the Twitter board “has struck a deal in a short space of time — and such an unconditional deal.” He called the speed of the deal “unusual.”

Twitter declined to comment on the board discussions. Mr. Musk did not respond to a request for comment.

The groundwork for a deal was laid in January, when Mr. Musk began buying Twitter stock, eventually building a more than 9 percent stake in the company. When he disclosed his interests in a securities depository in early April, Twitter offered him a board seat. Mr. Musk briefly agreed to the idea before changing his mind.

Instead, on the evening of April 13, Mr. Musk sent a text message to Mr. Taylor, who has been the chairman of Twitter since 2016. (Mr. Taylor is also a co-chief executive of the software company Salesforce.)

“I am going to send you an offer letter tonight, it will be public tomorrow morning,” Mr Musk wrote to Mr Taylor. The exchange was included in a securities depository.

The next morning, a bare-bones offer letter arrived from Mr. Musk. It stated its intention to buy Twitter for $54.20 a share, but had few details about its plans for the company or financing.

Mr. Musk hired investment bank Morgan Stanley and used the services of two bankers, Anthony Armstrong and Michael Grimes. Mr. Grimes, who heads Morgan Stanley’s technology banking practice, led the public equity offerings of Facebook and other tech companies in 2012, while Mr. Armstrong was a longtime technology banker who was recently promoted to vice chairman of the company.

The Twitter board was not quite sure how to handle Mr. Musk’s offer, those with knowledge of the discussions said. Mr. Musk had no record of buying companies and had failed to fulfill a number of deals, including one in 2018 when he tweeted that he would take his automaker, Tesla, private but then didn’t.

A day after Mr. Musk’s offer went public, the Twitter board voted unanimously to delay him by approving the poison pill. To defend itself, Twitter turned to Goldman Sachs, the longtime banker, and JPMorgan Chase. For legal advice, Simpson law firm added Thacher & Bartlett to complement its longtime law firm Wilson Sonsini.

JPMorgan declined to comment. Morgan Stanley, Goldman Sachs and Simpson Thacher did not immediately comment.

Mr. Musk was not deterred. His bankers were trying to raise tens of billions of dollars in funding for a Twitter deal. His advisers gave would-be backers a few pages vaguely outlining Mr. Musk’s goals. The billionaire also spoke directly with banks, said one person with knowledge of the calls.

That helped persuade Citigroup, Bank of America, BNP Paribas and other banks to bet their money. Despite a lack of details about Mr Musk’s plans, lenders were partially reassured by the entrepreneur’s past successes and wealth, the person said.

Mr. Musk also campaigned on Twitter for a deal. He hinted that he would present his proposal directly to shareholders in a so-called takeover bid if the company’s board did not accept his offer. On April 16, he tweeted, “Love me tenderly.” Three days later, he tweeted “____ is the Night,” a reference to F. Scott Fitzgerald’s novel, “Tender Is the Night.”

Twitter’s sign is broken. On April 16, Jack Dorsey, a Twitter founder who stepped down as CEO and board member in November, said: tweeted that the board had been the “consistent dysfunction of the company”. When asked by a Twitter user if he could say so, Mr Dorsey replied “no”.

Mr Dorsey’s criticisms left other board members and Twitter executives confused, two people working on the deal said. Mr Taylor asked Mr Dorsey to stop tweeting negatively, one person said. mr. Dorsey continued: post references to the Twitter board.

A spokesman for Mr Dorsey declined to comment. A spokeswoman for Mr Taylor declined to comment.

On April 21, Mr. Musk lined up $46.5 billion in funding. He had received pledges from Morgan Stanley and other lenders for $13 billion in debt financing, while another group of banks promised $12.5 billion in loans for its shares in Tesla. Mr. Musk added that he would use an additional $21 billion in cash to buy the rest of Twitter’s equity.

The funding forced the Twitter board to take Mr. Musk seriously. No other offers for the company had come forward, two people familiar with the deliberations said.

On Twitter, Taylor weighed employee uncertainty and the societal implications of a deal against the board’s fiduciary duty, people with knowledge of the situation said. That meant making a decision based on whether Twitter could reasonably reach a higher value than what Mr. Musk had suggested.

Mr. Taylor and other board members debated whether the prospects for Twitter’s user and revenue growth were realistic. The San Francisco company, which had not made a profit for eight of the past ten years, had set aggressive business goals.

Twitter had also initially benefited from the pandemic, attracting a wave of new users and sending its shares to more than $77 in February 2021. But its advertising business lagged behind competitors, and as the pandemic boost waned, its shares fell to under $40.

Still, some board members were wary of letting a savior like Mr Musk invade, especially since Twitter had already relied on such figures — including Mr Dorsey — to set the record straight, two people said.

Mr. Musk began preparing to start a bid on Twitter, a person close to the discussions said. He had a potential ally on Twitter’s board of Egon Durban, a co-chief executive of the private equity firm Silver Lake, who had worked with Mr. Musk on his failed 2018 attempt to take Tesla private. But Mr Durban made it clear to the board that Silver Lake was not working with Mr Musk to provide financing for an acquisition, two people said.

Through a spokesperson, Mr Durban declined to comment.

Last Saturday, Mr. Musk spoke to Mr. Taylor and threatened to offer his offer directly to Twitter shareholders, without explicitly saying he would make a hostile offer, a person with knowledge of the call said.

The board of Twitter concluded on Sunday that it had to make a deal with Mr. Musk. The company couldn’t raise $54.20 a share on its own, the board members agreed, and no white knight came.

Mr Taylor told Mr Musk that Twitter would go ahead with a sale, a person with knowledge of the call said. Still, Mr. Musk a letter to Mr. Taylor in which he threatened a hostile bid.

Twitter’s advisers went into protections for the deal, such as a termination fee if Mr. Musk walked out and a six-month timeline to close the deal, which could be especially important if technology stocks continue to fall. Mr. Musk’s advisers supported financing details, with the billionaire personally signing on every point, said a person familiar with the negotiations.

After the deal was announced Monday afternoon, Mr. Musk took a victory lap.

“Yaaaa!!!” he tweeted and posted emojis of rockets, stars and hearts.

Anupreeta Das† Maureen Farrell and Kate Conger reporting contributed.