Elon Musk has offered to buy Twitter worth about $ 43 billion. Here’s what will or could happen next:
The board is reviewing the offer. The board will work with its advisers at Goldman Sachs to consider Mr Musk’s proposal. They will have to consider, among other things, whether the deal is fairly valued by the company and whether Mr. Musk has the funding to make the deal.
The board can’t just decide it doesn’t like Mr. Musk as a suitor, but it can “come up with reasons why they don’t like the offer,” such as his ability to fund it, said Stephen Davidoff Solomon, a law professor. University of California, Berkeley.
The board announces its decision. The council will probably take a few days to review the offer. If he rejects the offer, he can do so in one of several ways: he can put in place a safeguard known as a poison pill that limits Mr. Musk’s and any other shareholder’s ability to buy shares on Twitter in the open market.
After doing so, he may still decide to sell, but without pressure from Mr. Musk – or any other suitor – to threaten to acquire it by buying a significant number of shares on the open market.
There are reasons why Twitter may choose not to take a poison pill. One can be wary of potential criticism that a poison pill diverts the concerns of a vocal member of his community.
Similarly, Mr Musk, whose latest shareholding in Twitter was just over 9 percent, has an incentive to keep his stake in Twitter below 10 percent. Once it reaches this threshold, it is limited in how quickly it can be sold by the company.
Assuming Twitter rejects the offer and chooses not to take a poison pill, Mr. Musk may raise his offer – although he has already said it is the best and final. He could also take the offer directly from other shareholders through what is known as a tender in which he will buy shares from other shareholders.
However, at least one shareholder has already said the offer underestimates the company.
The board is potentially looking for a white knight. “Twitter has been essentially sold since it went public,” said Howard Burkenblit, who heads the capital markets group at Sullivan & Worcester.
Mr Musk’s latest work is likely to boost Twitter’s interest and propensity for a deal. Some private equity companies may be put off by Twitter’s limited cash flow, but a number of technology companies may consider it, given the growing interest in the power and reach of the social media giant.
There may be great suitors. Recall that Microsoft, which owns LinkedIn, and Oracle competed for a deal with video-sharing company TikTok. However, potential antitrust considerations are likely to be a significant deterrent, given the Biden administration’s control over major technology deals.
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