Elon Musk targets Twitter with $41 billion takeover bid

Elon Musk speaks at the Automotive World News Congress at the Renaissance Center in Detroit, Michigan January 13, 2015. REUTERS/Rebecca Cook

April 14 (Reuters) – Elon Musk took aim at Twitter (TWTR.N) with a $41 billion cash offer on Thursday, with the Tesla CEO and billionaire entrepreneur saying the social media giant must be private to grow and become a platform for freedom of expression.

“Twitter has tremendous potential. I’m going to unleash it,” Musk, who is already the company’s second largest shareholder, said in a letter to Twitter’s board on Wednesday. The offer was made public in a regulatory filing on Thursday.

Musk’s offer price of $54.20 per share represents a 38% premium to Twitter’s April 1 close, the last trading day before his 9.1% stake in the media platform social is made public.

Musk rejected an invitation to join Twitter’s board this week after disclosing his stake, a move analysts said signaled his takeover intentions because a seat on the board would have limited his stake. just under 15%. Read more

He told Twitter it was his best and final offer and said he would reconsider his investment if the board rejects it.

“Since I made my investment, I now realize that the business will not thrive and serve this societal imperative in its current form. Twitter needs to be turned into a private company,” Musk said in his letter to the president. from Twitter, Bret Taylor.

Musk, who calls himself a free speech absolutist, has criticized the social media platform and its policies, and recently conducted a Twitter poll asking users if they think it upholds the principle of freedom of speech. freedom of speech.

Twitter will consider the offer with advice from Goldman Sachs and Wilson Sonsini Goodrich & Rosati, a source told Reuters.

Shares of Twitter rose about 5% in premarket trading to $48.30 in New York, where they were most actively traded, while shares of Tesla fell about 2%. Based on its Wednesday closing price of $45.85, Twitter’s stock price reaction implied a 29% chance that Musk would strike a deal.

The total deal value of $41 billion was calculated based on 763.58 million shares outstanding, according to Refinitiv data.

Musk said US investment bank Morgan Stanley was acting as financial adviser to his bid. However, he did not specify how he would fund the deal if it went through.

“We believe Musk may seek to finance the transaction, if approved, through a combination of debt financing and potentially Tesla stock. Given the size of the transaction (approximately $43 billion), we believe that ‘It’s conceivable that some Tesla stock could be sold given so much of his wealth is tied to the company,’ said CFRA Research analyst Angelo Zino.

Musk, the world’s richest person according to a Forbes tally, sold more than $15 billion worth of Tesla stock, or about 10% of his stake in the electric vehicle maker, by the end of the year. last to settle a tax liability.

‘UNDERPERFORMING SERIAL’

Twitter’s lower-than-expected user additions in recent months have raised doubts about its growth prospects, even as it pursues big projects like audio chat rooms and newsletters.

“The big question for Twitter’s board now is whether to accept a very generous offer for a company that has been a serial underperformer and tends to treat its users with indifference,” Michael said. Hewson, chief market analyst at CMC Markets, after the announcement. of Musk’s offer.

Musk has amassed more than 80 million followers since joining Twitter in 2009 and has used it to make several announcements, including teasing a privatization deal for Tesla that landed him in hot water with the regulators.

He has also been sued by former Twitter shareholders who say he missed his recent share price rise because he waited too long to disclose his stake. Read more

“If he is serious about making Twitter private, his past run-ins with regulators might not be a barrier — but it might make potential funders reluctant to come up with the money for the deal — unless he is. willing to pledge a large portion of its Tesla holdings to secure the debt,” Howard Fischer, a partner at law firm Moses & Singer and former senior counsel at the U.S. Securities and Exchange Commission (SEC).

Musk’s decision also raises the question of whether other bidders could emerge for Twitter, although initial stock price reaction did not suggest that was widely expected.

“It would be difficult for any other bidder/consortium to emerge and Twitter’s board will likely be forced to accept this offer and/or initiate an active process to sell Twitter,” wrote Wedbush analyst Daniel Ives. Securities, in a client note.

“There will be a slew of questions about Musk’s (Tesla, SpaceX) funding, regulations, time balancing in the coming days, but ultimately based on this file, it’s an offer now or never for Twitter to accept,” Ives said.

Reporting by Chavi Mehta and Uday Sampath in Bengaluru; Greg Romeliotis in New York and Chris Prentice in Washington, DC; Written by Anna Driver; Editing by Anil D’Silva and Alexander Smith

Our standards: The Thomson Reuters Trust Principles.