Tech billionaire Elon Musk wants to buy Twitter. In a statement to the US Securities and Exchange Commission, the Tesla CEO announced his offer on Thursday: the 50-year-old is offering Twitter shareholders $ 54.20 per share – which amounts to an overall valuation of $ 43 billion.
The Twitter Group management confirmed that it had received an unsolicited and non-binding offer. The offer will be carefully examined.
“I invested in Twitter because I believe in its potential to be the platform for free expression around the world,” Musk wrote in a letter to Twitter Chairman Bret Taylor. In the meantime, however, it was clear to him that the company in its current form would neither prosper nor fulfill this social task.
Twitter should be taken off the stock market, the billionaire explained. “Twitter has enormous potential. I will release it.“
Twitter shares initially surged in premarket trading. After the opening of Wall Street, however, it was only slightly up at $ 47 – well below Musk’s bid.
The difference to the takeover price reflects investor scepticism as to whether the deal will really go through. Also, no takeover battle with other bidders is to be expected, which could drive the price even higher. “My offer is the best and final offer,” Musk said in the statement.
Musk already owns almost ten percent of Twitter shares
The Tesla CEO and SpaceX founder already owns 9.2 percent of Twitter. He acquired the shares over a period of months, as he disclosed only last week. If Twitter rejects the offer, then “I would have to reconsider my position as a shareholder,” Musk wrote.
Analysts reacted differently to the offer. Dan Ives of Wedbush Securities said Twitter’s board of Directors had to accept the offer. The price is 38 percent higher than when it became known that Musk bought shares. “Twitter is standing with its back to the wall,” Ives said. Analyst Mark Shmulik of the Bernstein analysis firm also said: “We think Musk’s offer contains a fair premium to the price.“
Adam Crisafulli, founder of the research company Vital Knowledge Media, sees things quite differently. Musk’s offer was “too low,” with the stock trading at $70 less than a year ago.
Analyst Ali Mogharabi of the US financial house Morningstar also thought the price was too low. “The Board of Directors will consider the offer of the Tesla CEO. However, the probability that Twitter will also accept is less than 50 percent,” Mogharabi wrote.
Twitter has the means to defend itself against a takeover
On the one hand, Twitter is not as well protected against hostile takeovers as Facebook, Amazon or Google, where founders got shares with more voting rights. This allows them to retain control of the company even if they no longer hold the majority of the shares.
But even if Musk could theoretically reach his goal with the majority of shares on Twitter alone – the service has many ways to defend itself. One of the so-called “poison pills” that companies use to defend themselves against hostile takeovers is, for example, the issue of new cheaper shares to other shareholders. That dilutes the share of an attacker like Musk.
That Musk could launch a takeover attack was already suspected by observers, after he had knocked out a seat on the company’s board of directors over the weekend. In doing so, he would have committed himself not to increase his share above 14.9 percent. The waiver of membership in the supervisory board cleared the way for Musk to buy more shares.
Exactly how Musk wants to change Twitter remains largely open. He joined the service because he believes in the potential “as a platform for free speech around the world” – and that is crucial for a functioning democracy, he wrote on Thursday. In the meantime, however, he had come to the realization that the company in its current form could neither fulfill this role nor prosper financially.
Twitter plays a prominent role in politics, entertainment and the media, but can only make a limited profit from it. With about 270 million daily users and a revenue of $ 5.1 billion in the past fiscal year, the online service is small compared to Facebook and Youtube. Even Snapchat has a wider reach.
Twitter has long been considered a takeover target
As a result, Twitter is not considered “big tech” on the stock market. This can be seen from the valuation: despite a significant decline in share prices since the beginning of the year, Facebook has reached around $ 580 billion, Snapchat is valued at $ 56 billion. Twitter was a potential takeover target, with a valuation of $37 billion last year.
Facebook has shown great interest in the past, and Salesforce founder Marc Benioff has also been planning a purchase in the meantime. Most recently, the activist investor Elliott Management 2020 used the low price for an entry.
Elon Musk wants to buy Twitter
Only in November, Twitter founder Jack Dorsey had withdrawn from the top of the group and handed over the baton to Parag Agrawal. Musk himself is an avid Twitterer with more than 81 million followers. He recently called on them to vote on a so-called editing option, which Twitter has so far rejected. In less than three hours, more than 1.2 million users took part in the survey. About three-quarters were in favor of Twitter allowing the correction of tweets afterwards.
Since then, the Tesla boss has followed up with a new survey on Twitter. He asked users if the Twitter headquarters in San Francisco should be converted into a homeless shelter, a plan that Amazon founder Jeff Bezos supports. Most recently, the billionaire proposed changes to the premium subscription service Twitter Blue, including lowering the price, banning advertising and the ability to pay with the Dogecoin cryptocurrency.
It is still questionable how the Tesla BOSS wants to finance the takeover. According to Bloomberg, Musk is the richest person in the world with $ 260 billion. But the vast majority of his wealth is in his shares in the electric car manufacturer Tesla and the space company SpaceX.
An offer is not good news for Tesla
A few weeks ago, Musk sold Tesla shares worth a total of $ 16 billion for the first time on a large scale. However, he has to pay billions of dollars in taxes on options and price gains. Musk basically has two options: sell more Tesla shares or use his holdings as collateral for bank loans.
For Tesla, the takeover offer is not good news. There are almost no synergies between Twitter and the electric car manufacturer. By contrast, the potential acquisition will take up a lot of Musk’s time, time that comes from his work at Tesla. The stock reacted accordingly, which fell by more than two percent on Thursday.
Musk plays a central role at Tesla. The company has just opened two important factories in Grünheide and Austin, which have to be ramped up this year. Decisive new models are in the pipeline for this purpose. For example, in 2023 Tesla wants to finally bring the Cybertruck pick-up, which has already been postponed several times, to the market.
By the way, if you are wondering about the unusually “crooked” takeover price of $ 54.20 per Twitter share, there is more of a bizarre joke from Musk than strategic calculation behind it. Among insiders, the number 420 is considered the code for marijuana. In 2018, Musk wanted to take Tesla off the stock market – citing a possible stock price of $ 420.
With agency material