Twitter Inc. TWTR 3.93% is reviewing Elon Musk’s $ 43 billion takeover bid after the billionaire sorted out funding for the offer, a sign that social media company may be more receptive to the deal.
Twitter was expected to reject an offer Mr Musk made earlier this month without saying how he would pay for it. But after he revealed last week that he now has $ 46.5 billion in funding, Twitter is reviewing the proposal and is more likely than before to seek negotiations, insiders said. The situation is evolving rapidly and it is still far from a guarantee that Twitter will do it.
Twitter is still working on a crucial estimate of its own value, which should come close to Mr Musk’s proposal, and may also urge sweeteners such as Mr Musk to agree to cover the breakdown protection if the deal fall apart, some people said.
The two sides are meeting Sunday to discuss Mr Musk’s proposal, people said.
Twitter is expected to affect the offer when it reports earnings for the first quarter on Thursday, if not earlier, people said. Twitter’s response is not necessarily black and white and may leave the door open for invitations to other participants or negotiations with Mr. Musk on terms other than price. Mr Musk has reiterated to Twitter chairman Brett Taylor in recent days that he will not back down from his $ 54.20 share offer, people said.
The potential turnaround on Twitter comes after Mr Musk met in private with several of the company’s shareholders on Friday to praise the merits of his offer, reiterating that the board must decide “yes or no”, according to people. familiar with the issue. He also vowed to address issues of free speech that he believes are plaguing the platform and the country more broadly, whether his proposal succeeds or not, they said.
The CEO of Tesla Inc. TSLA -0.37% made its offer to select shareholders in a series of video calls, focusing on actively managed funds, people said, hoping they could influence the company’s decision.
Mr Musk said he did not see a way for Twitter’s management to bring the stock to its bid price on its own, given the business problems and the constant inability to correct them. It was unclear whether he described in detail the specific steps he would take, although he tweeted that he wanted to reduce the platform’s dependence on advertising, as well as make simpler changes, such as allowing longer tweets.
Mr Musk already has some shareholders uniting behind him after the meetings. Laurie Bruner, who manages Thrivent Asset Management LLC’s high-capital growth fund, sees Mr Musk as a qualified operator. “He has a solid track record at Tesla,” she said. “It’s the catalyst for delivering strong operational results on Twitter.” Minneapolis-based Thrivent has about a 0.4 percent stake in Twitter worth $ 160 million and is also a shareholder in Tesla.
Mr Musk has already said he is considering taking his offer directly to shareholders through a tender. Even if he had to get significant support from shareholders in a tender offer – which is far from guaranteed – he will still need a way around the company’s poison pill, a legal maneuver it uses that effectively blocks it from increasing its stake to 15%. or more .
Elon Musk has already said he is considering making an offer directly to shareholders by launching an auction.
Photo: Miguel Roberts / The Brownsville Herald / Associated Press
A commonly used bidding tactic that seeks to gain control of the target’s dashboard is currently unavailable. The directors of Twitter have phased conditions, which means that a dissident shareholder will need several years to gain control, not a single shareholder vote. Last year, Twitter tried to remove the phased terms on the board, given that they were dissatisfied with the corporate governance community, but not enough shareholders voted in favor of the measure. The company is trying to do so again at this year’s annual meeting, scheduled for May 25. Only two directors are to be re-elected and it is too late for Mr Musk to nominate his own.
Shares of Twitter have been trading below the price of his offer since he made the offer on April 14, which is usually a sign that shareholders are skeptical that the deal will happen, even though they reached approximately 4% on Friday at $ 48.93 a day. after he revealed the financing for the deal. He pointed out that if the current bid fails, he could sell his stake of more than 9%.
The financing included more than $ 25 billion in debt coming from almost every global investment bank with blue chips, with the exception of two Twitter advisers. The rest is $ 21 billion in equity, which Mr. Musk will provide himself, possibly by selling existing stakes in other businesses such as Tesla. The speed with which funding has pooled and the market sell-off in recent days – making the all-money offer seem relatively more attractive – has probably contributed to Twitter’s greater willingness to entertain Mr Musk’s offer.
As Elon Musk tries to buy Twitter, WSJ looks back at past Twitter suitors such as Salesforce, Disney and Alphabet. Technical reporter Tim Higgins explains why these past conversations failed and what is different this time. Illustration: Nicki Walker
The Twitter board must commit to Mr. Musk because his shares “didn’t go anywhere” since the company went public eight years ago, said Jeff Gram, portfolio manager at Bandera Partners LLC, a New York hedge fund with about $ 385 million under management. The company last bought shares on Twitter in February and owns a total of about 950,000, representing about 11% of its portfolio.
Mr Gram said the Twitter board could not turn down Mr Musk’s offer without providing an alternative that gave real value to shareholders. “I’m not sure what that could be at this stage, other than finding a higher bid,” he said.
-Sarah E. Needleman contributed to this article.
Write to Kara Lombardo at cara.lombardo@wsj.com
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