Over the holiday weekend, the Twitter board introduced a poison pill provision in an attempt to block Elon Musk, who wants to buy the social media platform. The maneuver, which would make it more difficult and expensive for Mr. Musk to acquire shares without board approval, will give Twitter management time to review the offer and potentially invite other buyers through a sale process.
At least one private equity firm, Thoma Bravo, is interested, although it’s unclear whether that will culminate in a formal offer. There are also other measures Mr. Musk can take to outsmart Twitter’s unwilling governance. Shares of Twitter were up more than 2 percent before the first trading session since the poison pill was announced.
In the meantime, the DealBook newsletter addressed some of the key questions that remain about Mr. Musk to Twitter:
Will Mister Musk become hostile?
He seems to threaten it; at least that’s what his tweet quotes Elvis Presley’s “love me tenderly‘ seems to suggest. In a public offer, also known as a hostile offer, Mr. Musk would go directly to the shareholders and ask them to offer their shares at a certain price (his offer is currently $54.20 per share). This would require him to file a form with the Securities and Exchange Commission detailing, among other things, the financing behind his offer. That’s important, because questions remain about how Mr. Musk would get the money to pay for a Twitter deal.
Remember, Mr. Musk is still dealing with the legal ramifications of the claims he made about financing his failed bid to take Tesla private in 2018.
Could a Hostile Bid Overwrite Twitter’s Poison Pill?
No, but it could pressure Twitter’s board of directors to remove the defense, if enough shareholders support Mr. Musk’s offer. For example, in 2012, CVR Energy removed a poison pill it had used to thwart activist investor Carl Icahn after its takeover bid gained widespread support.
What is Twitter worth?
Several analysts said they thought Mr. Musk’s offer was too low and that the board of directors would likely only accept an offer of $60 a share or more. But that’s partly based on Twitter’s ability to hit lofty financial goals by 2023: 315 million users and $7.5 billion in revenue, up from 217 million users and $5.1 billion in revenue in 2021.
Shares of Twitter rose above $70 a share when it announced those goals last year, but have since fallen to around $45 as investors questioned the company’s ability to achieve its goals and fight off competition from other social media sites. keep out. Management remains confident: “Our strategy and our goals for 2023 that we shared about a year ago are not changing,” said Parag Agrawal, CEO of Twitter, in February.
What is an “uncensored” Twitter worth?
That’s even harder to say. Mr. Musk has suggested he promote more “free speech” on the platform, but Twitter insiders point to stalling user growth in 2016, before the company tightened content moderationas a warning.
“They’ve seen users grow significantly in recent years,” said Rich Greenfield, media industry analyst at LightShed Partners. “To make the platform chaos, I think users are going in the wrong direction.”
Are other buyers stepping in?
Could be. Antitrust issues would likely make it difficult for many business buyers, especially in the tech industry. It’s a sizable check for private equity, far surpassing Medline’s $30 billion acquisition last year, the largest leveraged buyout in more than a decade. Twitter’s limited free cash flow also makes it less attractive to finance with a lot of debt.
