Twitter’s acceptance of Elon Musk’s $44 billion takeover bid has taken the billionaire Tesla CEO one step closer to owning the social media platform.
Twitter’s acceptance of Elon Musk’s $44 billion takeover bid has taken the billionaire Tesla CEO one step closer to owning the social media platform.
The deal is expected to close this year. But before that, shareholders as well as regulators in the US and the countries where Twitter does business still have to weigh before the deal closes.
PROMOTION ACCEPTED, WHAT IS IT?
The process is off to a head start for Musk, as Twitter’s board unanimously approved his offer and recommended that shareholders do the same.
In announcing the deal Monday, Twitter noted that the bid, which represents 38% of the premium over the company’s closing stock price on April 1, was a “substantial cash bonus.” and would be “the best way forward for Twitter shareholders.”
When Twitter’s board approved the so-called “poison pill” anti-takeover provision just 10 days ago, the move was seen by many as a sign that the directors were preparing to turn down the offer. Musk’s opening proposal or possibly looking for another suitor willing to pay more.
But the battlefield changed dramatically last weekend when Musk revealed that he had lined up $46.5 billion — including $21 billion of his personal fortune — to pay for the sale. Musk said other investors could contribute to the financing.
The limited funding not only underscores the seriousness of Musk’s pursuit, but opens the door for other major Twitter shareholders interested in hearing more about his plans for the company. in San Francisco.
The details of those conversations are not known, but Musk can point to a more than 20-year history of building and running a number of businesses — most notably as a longtime Tesla CEO. The electric carmaker is currently valued at $1 trillion — about 25 times more than Twitter.
“I think there’s nothing better for Twitter than for Elon Musk to buy it and ideally replace the board, while also doubling the investment,” said John Meyer, an entrepreneur and tech investor. into new products and revenue-generating sources. record that he can do the impossible. “
It is easy to see why other Twitter shareholders might welcome a change, as well as the opportunity to cash in on their investment. Before Musk revealed his 9% stake in Twitter earlier this month, the stock was trading under $40 — not much more than the $26 price tag when Twitter went public in November 2013. Meanwhile, the tech-driven Nasdaq has more than tripled, even after a recent downturn. Twitter is a laggard as the company has struggled to consistently post profits while generating revenue growth that pales in comparison to the two dominant forces in digital advertising, Google and Facebook.
Meanwhile, Tesla’s stock is now worth nearly 300 times what it was when it went public in 2010. And after more than a decade of struggling to make money, the automaker is now extremely profitable with earnings. net income of $3.3 billion in the first three months of the year. year alone.
WHAT HAPPENS NEXT?
As is customary, once a company agrees to be acquired, the buyer takes a closer look at the company’s books to make sure there aren’t any red flags that haven’t appeared through the company’s public records. company.
Angelo Zino, technology analyst at CFRA, said this step in the process should not pose any obstacle to the deal.
“He is acquiring this company, not from a financial perspective,” Zino said. “He’s going to do what he wants with it, and he’s probably looking to make significant changes to the company’s business model.”
SAY WHAT CAN MANAGERS HAVE?
Last year, Twitter generated $5 billion in revenue, with $2.8 billion coming from the U.S. and the rest being earned overseas, Zino said. The Federal Trade Commission in the US, or the European Commission in the EU, are among a number of regulators that could consider the proposed Twitter acquisition.
The main issues that agencies often focus on are how selling a company might affect competition in an industry or whether it violates antitrust laws.
These assessments can take several months or longer, but generally represent more potential roadblocks when two companies in the same industry are combining or in the case of only one buyer, whether ownership already has a large stake in companies in the same industry.
Neither Tesla nor Musk’s other company, Space Exploration Technologies or SpaceX, are social media platforms, analysts say, so antitrust concerns won’t arise as regulators agreement review.
Wedbush analyst Daniel Ives wrote in a research note on Monday: “We don’t expect any major regulatory hurdles for the deal to work out as this soap opera ends with Musk. owns Twitter”.
WHEN SHOULD THE SHAREHOLDERS BE REMOVED?
The deal is expected to close in 2022, with approval from Twitter shareholders. Twitter has not announced the time of a shareholder vote, although the company’s annual meeting is set for May 25, which could provide a convenient time to poll shareholders. bronze.
A company can hold a shareholder vote at any time, even before regulators have finished reviewing the takeover proposal.
WHAT ABOUT TWITTER LEADERSHIP?
At this early stage, it’s still unclear what will happen to Twitter’s current board or management team if the deal is finalized, but Musk has made it clear that he believes the company has performed poorly. effective. That review is a strong indication that Musk’s makeover will also include a purge of Twitter’s top ranks.
