Twitter board hastily grabs $44 billion

Reuters
Reuters

NEW YORK (Reuters Breakingviews) – You have to trust Elon Musk: he gets things done. Not only did he raise the funds for a $44 billion personal acquisition of Twitter within days, but he persuaded the company to accept his offer in no time. Just ten days after the social media company adopted a so-called poison pill to buy time, its administrators agreed https://www.prnewswire.com/news-releases/elon-musk-to-acquire-twitter -301532245.html the offer offered by the richest man in the world at its original value.

When the Tesla CEO appeared with a stake of over 9% on Twitter in early April, Musk agreed to join the board and not increase his stake beyond 14.9%. A few days later, he bailed out that deal. Soon after, he made an offer for the whole company. Musk lacked funding and in 2018 falsely claimed to have secured cash for a takeover of Tesla. Additionally, Twitter stock was trading more than 25% above the bid price last summer. The board therefore had reason to proceed with caution.

The norm would be to demand a higher price from Musk, ask others for offers, or argue that the company is worth more on its own. Maybe the board did a poor job of selling. Co-founder, board member and former chief executive Jack Dorsey tweeted https://twitter.com/jack/status/1515549577352564740 that the board “has always been the dysfunction of this company”. It’s a fair criticism given that the company hasn’t cashed in on its notoriety. A clear business strategy has been hard to discern.

In the meantime, Musk has bolstered his offer with a financial package led by Morgan Stanley. And it could be that the board, along with Twitter’s big shareholders, realized there were no other birds in the bush. Musk’s likely return on investment is low according to an analysis by Breakingviews. And at least to date, the company headed by Parag Agrawal has not received any other offers, according to Reuters sources.

Yet the speed of the council’s capitulation is curious. Another factor could be that Twitter’s quarterly results, scheduled for Thursday this week, will be disappointing. Good results would justify demanding a higher price or pushing for an independent route. But Facebook owner Meta Platforms lost around a quarter of its market value following the revelation of surprisingly weak growth earlier this year and, just last week, Netflix shares fell even further. . Twitter’s quick sellout may just mean Musk is paying a lot more than anyone else.

Follow @rob_cyran https://twitter.com/rob_cyran on Twitter

BACKGROUND NEWS

– Twitter said on April 25 that it had agreed to sell itself to an entity wholly owned by Elon Musk for $54.20 per share in a deal valued at $44 billion. The price represents a 38% premium to Twitter’s April 1 stock close, the last trading day before Musk disclosed his more than 9% stake in the social media company.

– Musk, the chief executive of electric car maker Tesla, secured $25.5 billion in committed debt and other funding secured by his Tesla stock. It has also pledged to provide equity of around $21 billion.

(Editing by Richard Beales and Sharon Lam)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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