Twitter’s acceptance of Elon Musk’s $44 billionA takeover bid brings Tesla’s billionaire CEO closer to ownership of the social media platform.
The agreement is expected to be concluded later this year. But before that, shareholders still have to weigh in, as well as regulators in the United States and in countries where Twitter does business, before the deal goes through.
Offer accepted, now what?
The process is off to a good start for Musk, given that Twitter’s board unanimously approved his offer and recommends shareholders do the same.
When announcing the deal on Monday, Twitter noted that the offer, which represents a 38% premium to the company’s closing share price on April 1, is a “substantial cash premium and would be “the best way forward for Twitter shareholders.”
When Twitter’s board passed an anti-takeover provision known as the “poison pill” just 10 days ago, the move was widely seen as a telltale sign that directors were preparing to push back against the company. Musk’s opening offer or perhaps looking for another suitor willing to pay more. .
But the battleground changed dramatically late last week when Musk revealed he had lined up $46.5 billion – including $21 billion from his personal fortune – to pay for the purchase. Musk said other investors could contribute funding.
The blocked funding not only underscored the seriousness of Musk’s lawsuit, but also appeared to open the door for other major Twitter shareholders interested in learning more about his plans for the San Francisco company.
Details of those conversations aren’t known, but Musk could point to a history of more than 20 years building and running multiple businesses, including as longtime CEO of Tesla. The electric car maker is currently valued at $1 trillion, about 25 times more than Twitter.
“I think there’s nothing better for Twitter than Elon Musk buying it and ideally replacing the board, and also doubling down on investments in products and new revenue streams” , said John Meyer, entrepreneur and technology investor. “Musk has the track record that he can do the impossible.”
It would be easy to see why other Twitter shareholders might welcome a reshuffle, as well as an opportunity to cash out their investment. Before Musk disclosed his 9% stake in Twitter earlier this month, shares were trading below $40 — not much higher than its $26 price when Twitter went public in November 2013. Since then, the Nasdaq , focused on technology, has more than tripled, even after a recent slowdown. Twitter has lagged because the company has struggled to consistently post profits while delivering lackluster revenue growth compared to the two dominant forces in digital advertising, Google and Facebook.
Meanwhile, Tesla’s stock is now worth nearly 300 times more than when it went public in 2010. And after struggling to make money for more than a decade, the automaker is now hugely profitable. with a net profit of $3.3 billion in the first three months of this year. single year.
Elon Musk announced Thursday morning that he wanted to buy Twitter. What would his purchase of the social media platform mean for our company? And what about the growing power and influence of the billionaire class in our world?
What happens next?
As is customary once a business agrees to be acquired, the buyer should take a closer look at its books to ensure that there are no red flags that have not appeared. through public company documents.
This step in the process should not hamper the deal, said CFRA technical analyst Angelo Zino.
“He’s acquiring this company, not from a financial standpoint,” Zino said. “He’s going to do what he wants with it and he’s probably going to be looking to make some significant changes to the company’s business model.”
What are the regulators saying?
Last year, Twitter generated $5 billion in revenue, including $2.8 billion in the United States and the rest overseas, Zino said. The Federal Trade Commission in the United States or the European Commission in the EU are among the regulators likely to review the proposed takeover of Twitter.
The main questions that agencies typically focus on are how selling a business might affect competition in an industry, or whether it violates antitrust laws.
These reviews can take months or even longer, but are usually a potential hurdle when two companies in the same industry combine, or in the case of a single buyer, the property already has a significant stake in companies in the same industry.
Neither Tesla nor Musk’s other company, Space Exploration Technologies, or SpaceX, are social media platforms, so antitrust concerns are unlikely to arise when regulators review the deal, analysts said.
“We don’t expect any major regulatory hurdles to close the deal as this soap opera now ends with Musk owning Twitter,” Wedbush analyst Daniel Ives wrote in a note on Monday. research.
When can shareholders vote?
The deal is expected to close in 2022, subject to Twitter shareholder approval. Twitter has not announced when shareholders will vote, although the company’s annual meeting is set for May 25, which could provide a good time to poll shareholders.
A company can choose to hold a shareholder vote at any time, even before regulators have finished reviewing a proposed takeover bid.