San Francisco Elon Musk has spoken out publicly for the first time after making a $43 billion takeover bid for Twitter. “This is not a way to make money. My strong intuitive feeling tells me that a public platform that enjoys maximum trust and includes a broad public is extremely important, “ Musk says on Thursday.
“So it’s about the future of civilization, but the economic aspects don’t matter,” Musk said during the TED 2022 conference in Vancouver. The algorithm behind Twitter must be made public, Musk demanded.
In addition, he announced that it must be possible in the future to change messages on the platform retrospectively. This feature should only be available for a limited time after a tweet has been sent. In addition, the change must also reset the number of likes and retweets.
“I invested in Twitter because I believe in its potential to be a platform for freedom of expression around the world, and because I believe that freedom of expression is a social imperative for a functioning democracy,” Musk said in his acceptance letter. “Twitter has extraordinary potential. I will release it.“
The central person is no longer Twitter CEO Parag Agrawal, but the chairman of the Board of Directors, Brett Taylor. The former head of technology at Facebook and co-CEO of Salesforce enjoys an excellent reputation in the US technology scene. He is aware of the special role of the platform.
On Thursday evening, Agrawal assured the company’s employees that Twitter could not be “held hostage” by Elon Musk’s purchase offer. Agrawal told employees that the board will continue to consider Musk’s offer. We will act in the best interests of shareholders.
Twitter was launched 15 years ago in San Francisco. The founding team led by Jack Dorsey wanted to build a global social network. The chances were good then. But while other platforms were getting bigger and bigger, both in terms of reach and stock market valuation, Twitter was always lagging behind.
Rival Snap also launched in Silicon Valley a decade ago and is now worth around $56 billion on the stock market. Twitter stands at around 35 million, despite its share price jumping by more than a quarter after Elon Musk became a major shareholder. Snap has also passed Twitter in terms of user numbers. At the end of last year, Snap had 319 million daily users, while Twitter had 217.
These comparisons are likely to play an important role in the evaluation of Twitter. These are the scenarios for Twitter.
1: Twitter and shareholders accept takeover offer
Musk is offering $54.20 per Twitter share. This is a significant premium to the company’s valuation. This is 54 percent more than when Musk first bought Twitter shares. The premium is still 33 percent above the time of the announcement of Musk’s rise to major shareholder. Analyst Mark Shmulik from Bernstein assesses the offer as fair.
So Twitter and the shareholders could simply accept Musk’s takeover offer. The Tesla BOSS had announced that he would then take the company off the stock exchange and rebuild the business model. One thing is clear: there is a lot of potential in Twitter’s business. Especially since the Russian invasion of Ukraine, Twitter has become an important platform for the exchange of information. However, Twitter is still wrestling with a flood of misinformation.
2: Twitter wants more money
Twitter insiders told Handelsblatt that the chairman of the Board of Directors, Brett Taylor, should not be satisfied with Musk’s offer. At the beginning of 2021, Twitter shares were still worth $ 70. Musk’s offer is far from that. The Tesla CEO himself argued that the platform has great potential, which it is necessary to raise.
“$60 per share would be the minimum price for a counter-offer,” said Bank of America analyst Justin Post. While Musk has argued that the offer of $54.20 per share is final, the Board of Directors is committed to playing through all options for a higher price, Post argued. If Taylor tries to negotiate out more money, Musk could let the deal fall apart altogether.
Musk even went one step further. If his offer is not accepted, “I will have to reconsider my position as a shareholder”. In other words, Musk is threatening to sell his shares. He currently holds about 9.2 percent of Twitter’s shares.
3: White Knight strikes
The takeover bid by Elon Musk has shocked the technology industry in the USA. Several big tech companies contacted their lawyers on Friday to play through scenarios for their own takeover bids. A “white knight” could emerge in the form of a new takeover bid, and offer more money for Twitter than Elon Musk.
Other tech companies are interested in Twitter, Post also argued. “But we think a deal with Alphabet or Facebook, for example, is very unlikely due to concerns about antitrust issues,” Post wrote.
4: Blocking important shareholders
Musk is not the only major shareholder in Twitter. The Vanguard Group recently increased its stake in the company to 10.3 percent, according to data from S&P Global Market Intelligence. This means that Elon Musk is no longer the largest single shareholder.
Saudi Prince Alwaleed also issued a clear rejection of a takeover of the company by Elon Musk on Thursday. “I don’t think the offer matches the value of Twitter given the growth prospects,” Alwaleed said. According to his own statement, he holds more than five percent of the shares in Twitter directly or via his Kingdom Holding, making him one of the major shareholders.
There is already resentment among shareholders about Musk. A shareholder of the company launched a potential class action lawsuit against the multibillionaire in a court in New York for alleged securities fraud. The plaintiff accuses Musk of not making his Twitter investment public within the legal reporting period. As a result, a stock market reaction was delayed and the share price was kept artificially low while he continued to expand his share.
