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The boss of electric car maker Tesla announced on Thursday an offer to buy all the shares of the short message service. The 50-year-old argued that he wanted to take Twitter off the stock exchange after its takeover because that was the only way the service could tap into its potential as a platform for free speech.
Musk owns 9% of Twitter so far. It is now offering all shareholders $54.20 per share, according to a statement from the U.S. Securities and Exchange Commission. The stock closed at just under $46 on Wednesday. The offer therefore does not contain a particularly high surcharge. However, Musk points out that the proposed price represents a premium of more than 38% over the last price before his entry was announced on Twitter.
The chances of success of Musk’s takeover are unclear. Twitter was recently worth $36 billion and Musk’s offer was worth around $43 billion. For the richest man in the world, whose fortune is estimated at around 260 billion dollars, this would be no problem. The key question, however, is whether enough current shareholders are willing to sell to Musk at this price to give him control.
In addition to the free float, Twitter has several financial investors as major shareholders, each holding between 2% and 8% of the shares. It would therefore not be enough to convince a few large shareholders to sell. Investors were skeptical of Musk’s chances of success on Thursday: Twitter shares were only marginally higher at just over $46 at the start of US trading.
At the same time, Twitter is not as well protected against hostile takeovers as Facebook, Amazon or Google, where founders received shares with more voting rights. This allows them to retain control of the business even though they no longer own the majority of shares.
But even if Musk could theoretically achieve his goal with Twitter alone with the majority of the stock – the service has plenty of ways to defend itself. The so-called “poison pills” companies use to defend themselves against hostile takeovers include, for example, issuing new, cheaper shares to other shareholders. This dilutes the stakes of an attacker like Musk. Twitter only announced on Thursday that the offer was being considered to act in the best interests of the company and its shareholders.
Musk wrote that the award would be his final offer. If the takeover attempt fails, he will have to reconsider his commitment to Twitter. “It’s 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 rather transparent reminder to shareholders that the price could fall very quickly.
Observers suspected Musk of launching a takeover after he refused a seat on the company’s board of directors over the weekend. According to an agreement with Twitter, he would have undertaken not to increase his stake above 14.9%. Not serving on the board allowed Musk to buy more shares.
The Tesla boss has over 80 million Twitter followers, making him one of the most popular users. He joined the service because he believes in Twitter’s potential “as a platform for free speech around the world” – and that’s crucial for a functioning democracy, he wrote on Thursday . In the meantime, however, he has come to the conclusion that the business in its current form can neither fulfill this role nor thrive financially. “Twitter has huge potential. I will unleash it,” Musk wrote.
How exactly Musk wants to change Twitter remains wide open – for example, where he sees free speech deficits. In recent years, it has been mostly conservatives in the United States, and especially supporters of ex-President Donald Trump, who have accused Twitter of “censorship”. Most of them concerned measures against the spread of false information about the corona virus and Trump’s claims that his victory in the 2020 presidential election was stolen from him.
Trump was banned from Twitter after his endorsement of supporters who stormed the Capitol in Washington on January 6, 2021 – and management has so far stressed there is no way the ex-president can to return to the platform.
At the start of the pandemic, Musk himself downplayed the dangers of the virus and called California’s corona restrictions “fascist.”
In a tweet over the weekend, Musk hinted that he would like to replace Twitter’s current business model, with advertising as its primary source of revenue, with subscription revenue. Relying on ad revenue gives big companies too much power, he wrote.
Musk’s fortune consists primarily of interests in electric car maker Tesla and aerospace company SpaceX. So he might have to sell more shares of the company to make enough money for Twitter shareholders./so/DP/men
Twitter shares soar
A Twitter takeover bid by Tesla boss Elon Musk sent shares of the short message service soaring on Thursday. They have sometimes risen 13% in US trading prior to trading on the NYSE. In official trading, the paper turned negative over the year and temporarily fell 0.26% to $45.73. Tesla shares are under pressure on the NASDAQ with discounts of 2.71% at times to $994.72.
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