Musk Beelines for Outright Twitter Buy With 54% Premium Bid

The multi-billionaire entrepreneur launched a broadside at the lack of free speech on social media in regulatory filings, explaining he wanted to "unlock" the platform's value.

Ollie Smith 14 April, 2022 | 6:49AM
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Elon Musk

Elon Musk has tabled an offer to buy social media platform Twitter (TWTR) outright at a 54% premium, after reconsidering his initial investment.

In an astonishing hostile takeover bid announced through regulatory filings and a public statement today, the Tesla (TSLA) CEO said he intended to "unlock" the platform's value by privatising it.

"I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy," he said. 

"However, since making my investment I now realise the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.

"As a result, I am offering to buy 100% of Twitter for US$54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced.

"My offer is my best and final offer and if it is not accepted, I would need to reconsider
my position as a shareholder. Twitter has extraordinary potential. I will unlock it."

"While the board will take the Tesla CEO's offer into consideration, we believe the probability of Twitter accepting it is likely below 50%. However, we think the board may also be pondering whether it should discuss leadership changes, such as replacing CEO Parag Agrawal, with Musk as that may lessen the likelihood of Musk selling his shares if the bid is rejected," said Morningstar analyst Ali Moghrabi. 

Twitter shares are currently trading at around US$45, so Musk's premium bid of US$54.20 values the whole company at around US$43.4 billion, based on the 800 million shares outstanding in the firm. In pre-market trading, Twitter shares are up 10% to nearly US$51 per share.

All Becomes Clear

Musk's dealings with the business have been front and centre of business news in the last two weeks, after he initially announced his intention to take a controlling stake in Twitter and join the company's board. The latter plan was subsequently retracted, though it was at first unclear precisely why.

"When Elon Musk took a 9.2% stake in Twitter and then declined to take a position on the board there was much speculation as to his motives for not accepting the role," says Michael Hewson, chief market analyst at CMC Markets.

"Today we found out why he was so reticent. [...] As a member of the board, he would have been precluded from making such a bid. The big question for the Twitter board now is whether to accept a very generous offer for a business that has been a serial underperformer and tends to treat its users with indifference.

"Whatever your feelings on Musk he would certainly shake things up, with the only question as to whether he would make things worse or improve them."

“If Musk’s offer is rejected, he could still attempt to raise the capital necessary to create a similar social media platform to compete with Twitter, although attracting millions of daily active users, as Twitter had at the end of 2021, would be a tough task. Whether Twitter accepts the offer or Musk sells or keeps his stake in the firm, we think his influence on the platform will remain very high. However, as Musk has displayed his thirst to change Twitter mainly with regard to content moderation, some large brands may become hesitant to place ads next to what they consider may be more questionable content,” Moghrabi said.


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Ollie Smith   is editor of Morningstar UK.

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