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The head of electric car maker Tesla announced Thursday an offer to buy all shares of the short message service. The 50-year-old argued that he wanted to take Twitter off the stock market after he took over, because that was the only way the service could exploit its potential as a platform for free speech.
Musk has taken up a good nine percent of Twitter so far. He is now offering all shareholders $54.20 a share, according to a release from the US Securities and Exchange Commission. The stock closed at just under $46 on Wednesday. Therefore, the offer does not contain a particularly high surcharge. However, Musk notes that the proposed price represents a premium of more than 38 percent over the last price before his entry was announced on Twitter.
The chances of success of Musk’s takeover attack are unclear. Twitter was recently worth a good $36 billion, on Musk’s offer a deal would be around $43 billion. For the world’s richest man, whose fortune is estimated at around $260 billion, that wouldn’t be a problem. The key question, however, is whether there are enough current shareholders willing to sell Musk at that price to give him control.
In addition to the free float, Twitter has several financial investors as major shareholders, each of whom owns between two and eight percent of the shares. Therefore, it would not be enough to convince a few major shareholders to sell. Investors were skeptical of Musk’s chances of success on Thursday: Twitter shares were up just over $46 in early US trading.
At the same time, Twitter is not as well protected against hostile takeovers as, for example, Facebook, Amazon or Google, where the founders received shares with more voting rights. This allows them to retain control of the company even if they no longer hold a majority of the shares.
But even if Musk could theoretically accomplish his goal with just Twitter with the most stock, the service has plenty of ways to fight back. The so-called “poison pills” that companies use to defend themselves against hostile takeovers include, for example, issuing new and cheaper shares to other shareholders. That dilutes the bet of an attacker like Musk. Twitter only announced Thursday that the offer was being reviewed to act in the best interests of the company and its shareholders.
Musk wrote that the price would be his final offer. If the bid attempt fails, he will have to reconsider his commitment to Twitter. “This is not a threat, it’s just not a good investment without the changes that need to be made,” Musk wrote. Threat or not: In any case, this can be seen as a fairly transparent reminder to shareholders that the price could very quickly fall again.
Observers suspected Musk might launch a takeover attack after he turned down a seat on the company’s board of directors over the weekend. Under an agreement with Twitter, he would have agreed not to increase his share above 14.9 percent. Resigning as a board member paved the way for Musk to buy more shares.
The Tesla boss has more than 80 million followers on Twitter, making him one of the most popular users. He joined the service because he believes in Twitter’s potential “as a platform for free expression around the world,” and that it is crucial to a functioning democracy, he wrote Thursday. In the meantime, however, he has come to the conclusion that the company in its current form cannot fulfill this role or prosper financially. “Twitter has tremendous potential. I will unleash it,” Musk wrote.
Exactly how Musk wants to change Twitter remains largely open, for example where he sees deficits in free speech. In recent years, it has been mainly conservatives in the United States, and especially supporters of former President Donald Trump, who have accused Twitter of “censorship.” Most of these were about measures against the spread of false information about the corona virus and Trump’s claims that victory had been stolen from him in the 2020 presidential election.
Trump was banned from Twitter after endorsing supporters who stormed the Capitol in Washington on Jan. 6, 2021, and management has so far stressed that there is no way for the former president to return to the platform.
In the early days of the pandemic, Musk himself downplayed the dangers of the virus and criticized California’s coronavirus restrictions as “fascist.”
In a tweet over the weekend, Musk hinted that he would like to replace Twitter’s current advertising-based business model with subscription revenue. Relying on advertising revenue gives large corporations too much power, he wrote.
Musk’s fortune consists mainly of holdings in electric carmaker Tesla and aerospace company SpaceX. So it could be that he has to sell more shares of the company to have enough money for Twitter shareholders./so/DP/men
Twitter stocks skyrocket
A takeover bid for Twitter by Tesla boss Elon Musk boosted shares of the short-messaging service on Thursday. They were up a good 13 percent at times in US premarket trading on the New York Stock Exchange. In official trade, the paper turned negative over the course of the year, temporarily falling 0.26 percent to $45.73. Tesla shares are on the NASDAQ discounted 2.71 percent to $994.72 under pressure.
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