Elon Musk, the world’s richest person, wants a global free speech platform and has set his sights on Twitter by making a $43 billion offer to take over the company.
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As one of the smaller big players in social media, Twitter is not flying high.
The number of new users signing up is disappointing, and the board looks out of fresh ideas about how the site can generate cash.
The corporation seemingly has little direction since the departure of co-founder and chief executive Jack Dorsey stood down to pursue other interests in November 2021.
Musk’s offer follows a quiet campaign to snap up 9.2 per cent of Twitter’s shares. The purchase gives him a sizeable voice in how the company is run, but he has declined a seat on the board.
Elon Musk’s Twitter Bid
The offer is simple – Musk wants to buy the entire company for $54.20 a share to become the sole owner. The price offers shareholders a 16 per cent premium on the current value of Twitter shares.
Musk has threatened to tantrum if he doesn’t win. He says he will sell his shares and walk away, leaving the company susceptible to another hostile takeover.
Twitter is heading for a poison pill shares plan. The idea is to issue more shares and offer them a discount to current shareholders. The idea is to dilute Musk’s shareholding.
However, Musk is confident his bid will succeed.
In a Twitter poll, 73 per cent of responses backed Musk, and he sent a note to the board with the offer bragging the offer was “a high price and the shareholders should love it.”
Another Hostile Bid Waiting
One who doesn’t is the influential Saudi Prince Alwaleed bin Talal. He said the deal doesn’t “come close to the intrinsic value” of the social media platform.
Meanwhile, another hostile bid is waiting in the wings from private equity firm Thoma Bravo, which is watching Musk’s progress.
Dorsey has yet to comment on the Musk bid. However, he has said Twitter should go into private ownership because, as a public company, the platform is always considered for sale and vulnerable to active investors and takeovers.
The market views the Twitter takeover ambivalently. Share prices had remained flat, despite a three per cent spike when the Musk bid was announced.
Take It Or Leave It, Says Musk
The future of Twitter is about which side holds its nerve the longest.
Musk has left shareholders with a take it or leave offer and says he won’t increase his price.
The company wants to fend him off or take a sweetheart offer from elsewhere.
The likely outcome is Musk will win as he will play out a war of attrition until he gets what he wants – which he usually does.
His $54.20 premium offer is just shy of $10 above the last closing price of $45.08. In the past 12 months, Twitter shares have traded at a high of $73.34 and as low as $31.30. The Musk offer is 8 cents off the 12-month average share price of $52.32.
Where’s the cash coming from?
It’s unclear if Musk intends to bankroll the purchase of Twitter from his vast wealth or borrowing.
He certainly has the money. Musk is the richest person on the planet. According to the Forbes magazine ranking of billionaires, he is worth an almost unimaginable $219 billion as CEO and principal shareholder at electric car maker Tesla and space exploration outfit SpaceX.
Musk made his initial fortune as the co-founder of PayPal.
10 Facts About Twitter
Founded in March 2006, Twitter is based in San Francisco and employs 6.100 people.
The most important metric is monetisable daily active users (MDAU). MDAU is the way Twitter tracks visits that adverts are sold against.
- The social media platform has 217 million daily active users sending 500 million tweets a day.
- In Q4 2022, the company generated revenue of $1.57 billion.
- One in four American adults uses Twitter. Just over 70 per cent are men, and 40 per cent access the platform daily.
- Politically, users are more likely to vote Democrat than Republican.
- Most of the audience are men aged 25 to 34 years, with a college degree or higher (33 per cent) and live in an urban area (27 per cent).
- A third of Twitter users earn $75,000+ a year, while 29 per cent earn between $30,000 and $49,000.
- Countries with the biggest Twitter user bases are the USA (77 million users), Japan (58 million), and India (24 million).
- Almost 400 million Twitter accounts have no followers, although the average user has 707 followers.
- Users spend an average six minutes a day on the platform, with 30 per cent visiting several times a day.
- A third of US Twitter users visit the site for news updates.
Elon Musk Takeover v Twitter FAQ
What is Twitter?
Twitter is an online news and social media platform where users can send short messages called ‘tweets’. The site is an easy to read microblog, where Tweets are limited to 280 characters. There’s a suggestion that Elon Musk wants to lift the cap on message length.
What are Twitter @ and #hashtags?
Hashtags (#) are Twitter’s grouping posts on a common topic. If you follow #ElonMusk, expect to see a lot of messages about him, while @ElonMusk is his own stream of postings and responses.
What’s a poison pill corporate defence?
The poison pill is considered a defensive strategy by a board of directors attempting to stave off a hostile takeover. The strategy is called a shareholder rights plan and involves the company issuing discounted shares to shareholders other than Musk. The aim is to diminish the hostile shareholder’s stake. So far, the Twitter board has not named a price for the discounted shares.
Netflix was one of the last companies to adopt the poison pill approach against a hostile takeover. The deal stated Netflix shareholders could buy a share and get one free if a new buyer took control of 10 per cent of the shares or more.
The advantage is the offer can see off a takeover, but the downside is that the company’s share price is likely to drop.
How are Musk’s other businesses doing?
Some cynical observers suggest Musk’s pursuit of Twitter is aimed at taking away attention from Tesla’s Chinese operation, which Covid restrictions have badly hit in Shanghai. The factory went into lockdown three weeks ago and has lost production of more than 40,000 cars worth millions of dollars.
SpaceX is busy ferrying satellites for NASA and putting in place a low-orbit network of satellites to launch a global broadband network.
Musk bought SolarCIty from his cousins for $2.6 billion in 2016 and restructured the business as Tesla Energy.
Is Elon Musk married?
Musk has seven boys with two mothers – musician Grimes (Clare Boucher) and ex-wife Justine Wilson.
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