Looking at the richest individual in the world attempting to take over one of the most influential firms in the world is an experience of a lifetime. Orderly and smooth are not what anyone expects or predicts out of the eccentric billionaire Elon Musk. He likes moving the financial markets with his various tweets and sharing funny memes with his more than 80 million followers on the same social networking site, Twitter. The whole issue started when it became clear that Elon Musk wanted to buy Twitter. The entire saga over the takeover bid for Twitter by Elon Musk is getting warmed up. It is said that Elon Musk wants to buy Twitter for more than forty billion dollars. But the firm's board is not accepting the bid. This is because there are other entities who have also shown interest in acquiring the firm. So, it is still not clear whether the bid for Twitter by Elon Musk will eventually find victory, or is he going to back down on his offer?
Are there any other elements involved that can hinge the bid one way or the other? Let us go through all the details of the news that Elon Musk buys Twitter.
The board of directors of the firm is soon going to officially reject or accept the unsolicited offer by Elon Musk to buy their firm. A few days earlier, the board of Twitter started a poison pill. This is officially called the shareholder rights plan to keep the bid by Elon Musk at bay. The latter is the owner of nearly ten percent of the shares of Twitter. This poison pill would make it much costlier for any buyer interested in purchasing a substantial amount of shares of the firm. Suppose anybody tries to buy such a substantial amount of shares. In that case, the board of Twitter will fill the financial markets with discounted shares that Elon Musk will not be able to buy. The discounted shares will lead to diluting his stake. It is a very defensive tactic from the board of Twitter and gives the firm a lot more time to think about the bid and why Elon Musk might buy Twitter. The board of the firm can also attempt to get another buyer called the white knight. They may also go for an official sale process in public.
The firm has hired the services of JPMorgan Chase and Goldman Sachs as advisors. Several experts say that the firm and the bankers have already started examining the other probable candidates who want to purchase the firm.
A few days ago, Elon Musk tweeted the name of a song by Elvis Presley to remind the firm to treat him gently. Several experts say that he may be trying to hint to the firm's shareholders with what is called a tender offer. In this method, Elon Musk will quote a price for the shares at which the shareholders will be willing to sell their shares of the firm to him. But that is precisely the type of hostile takeover that the board of the firm wants to thwart. But if the offer by Elon Musk is good enough, shareholders can put pressure on the board to remove the clause of the poison pill. Elon Musk has said a lot of times in the past few weeks that the investors of the firm should be ready to make the last decision. They should make up their mind regarding the fact that Elon Musk wants to buy Twitter. The main duty of the board of directors is to function in the peak interest of the investors of the firm.
Elon Musk has said that the economic interests of the board are not in sync with the interests of the shareholders. This was a reply to a tweet that said that the directors other than the erstwhile CEO Jack Dorsey do not have a lot of shares in the firm. Even Jack Dorsey is leaving the board in the next month.
Elon Musk has some drawbacks in getting a successful bid for Twitter. If he makes an offer directly to the shareholders of the firm, it would need him to say how he wants to finance this purchase of the firm. He has not made any comments regarding this so far. Many experts are saying that he will have to take some kind of loan against the stock of Tesla, which is where most of his wealth lies. But there are many people who are saying that he will not be able to convince any bank to cooperate with him in this deal. This is because financing a deal that costs this amount of money tied to shares that have seen a lot of fluctuations in the past has a lot of risks attached to it. The shares of the firm have increased in the previous week. But they are still some level below the offer price given by Elon Musk. This means that investors of the firm are still not sure that the deal is going to happen.
Firms such as Salesforce and Disney have thought about purchasing Twitter over the past years. But none of the deals could be finalized. But since it became well known that Elon Musk wants to buy Twitter, there are many others that want to join the fray once again. The private equity company Thoma Bravo owns software firms that include the famous antivirus firm McAfee. It said that it is finalizing its own bid for Twitter. Elon Musk could also make the team with several other investors to boost his bid. One of the possibilities that experts are predicting is that he could join hands with the private equity company Silver Lake. The firm has worked alongside Elon Musk on his attempt to take Tesla private, but that did not find success ultimately. The chief executive officer of Silver Lake, Egon Durban, joined the board of Twitter a couple of years ago because of an agreement with another investor called Elliott Management. The latter had criticized the slow growth pace of Twitter.
A few days ago, there were media reports that the buyout company Apollo Global, the owner of Yahoo, is trying to get involved in the drama regarding the news that Eon Musk has bought Twitter. It can give financing to another probable buyer or Elon Musk himself. Analyst at research firm Third Bridge Scott Kessler said, "This is a moment in time which may not be replicable in the future. One thing [Musk] has unquestionably done is to start conversations about the future of the company – whether in fact Twitter will remain a publicly-traded company or will it be acquired."
In a recent communication between Elon Musk and the board of Twitter, the former said that the current bid for Twitter was the best and final offer on his behalf. This did not go down well with many experts on Wall Street. This is because acquisitions and mergers go through a very long negotiation path. If Elon Musk remains firm in his belief, this could be the last offer, and he can withdraw if the offer is not accepted. There is a chance that he can go on to sell all his shares that are present in the firm. In a letter written by Elon Musk to the chairman of the board of the firm Bret Taylor, the former said that there was a chance that he would reconsider his position as a shareholder if the proposal to purchase the firm did not succeed. Elon Musk is the biggest shareholder of the firm. If he sells his entire stake in the firm, it could send the prices of the share crashing. But this will be a relief to the people who do not want to see the news that Elon Musk buys Twitter. This is because they view the bid as a threat to the future existence of the firm.
The withdrawal of the offer and selling the shares could leave the firm where it started. The firm has not seen growth as fast as the investors had wanted. They are also quite vulnerable to several activists.