Over the weekend, Twitter’s board of directors put in place a toxic pill ruling in an effort to block Elon Musk, who wants to buy the social media platform. This maneuver, which will make it more difficult and expensive for Mr. Musk to acquire shares without board approval, will give Twitter management time to evaluate the offer and possibly invite other buyers through the sale process.
At least one private equity firm, Thoma Bravo, is interested, though it’s unclear if that will lead to a formal bid. There are also other actions Mr. Musk can take to get around Twitter’s reluctant board. Twitter stock is up more than 2 percent ahead of the first trading session since the toxic pill was announced.
Meanwhile, the DealBook newsletter discussed some of the key questions that remain about Mr. Musk’s pursuit of Twitter:
Will Mr. Musk become hostile?
He seems to be threatening her. At least, that’s what he tweeted about Elvis Presley.”I love givingIn a bid offer, also known as a hostile bid, Mr. Musk would go directly to shareholders, asking them to “offer” their shares at a certain price (his bid is $54.20 a share, at the moment). That would require him to file a form with a committee. Securities and Exchanges that provide, among other things, details about the financing behind his bid.This is important, because questions remain about how Mr. Musk got the money to pay for the Twitter deal.
Remember, Mr. Musk is still dealing with the legal fallout over allegations he made about financing his failed attempt to acquire Tesla in 2018.
Could a hostile attempt bypass the toxic Twitter pills?
No, but he could pressure Twitter’s board of directors to remove the defense, if enough contributors support Mr. Musk’s offer. In 2012, for example, CVR Energy removed a toxic pill it had put in place to frustrate activist investor Carl Icahn after its bid garnered widespread support.
What is the value of Twitter?
Several analysts said they believed Mr. Musk’s bid was too low and that the board was likely to accept only an offer of $60 per share or more. But that depends in part on Twitter’s ability to reach huge financial goals in 2023: 315 million users and $7.5 billion in revenue, up from 217 million users and $5.1 billion in revenue in 2021.
Twitter’s stock soared to more than $70 a share when it announced those goals last year but has since fallen to around $45, as investors questioned the company’s ability to achieve its goals and fend off competition from other social media sites. Management remains confident: “Our strategy and goals for 2023 that we shared about a year ago remain unchanged,” Parag Agrawal, CEO of Twitter, said in February.
What is the value of “uncensored” Twitter?
It’s hard to say. Mr Musk suggested he would promote more “freedom of speech” on the platform, but Twitter insiders point out that user growth stalled in 2016, ahead of the company. Tighten the moderation of the contentas a warning.
“They’ve been meaningfully growing users over the past few years,” Rich Greenfield, media industry analyst at LightShed Partners. “I think if the platform leads to chaos, it will make users go in the wrong direction.”
Will other buyers get involved?
Can. Antitrust concerns are likely to make it difficult for many corporate buyers, especially in the tech industry. It’s a big check for private equity, far exceeding $30 billion last year from Medline, its largest leveraged purchase in more than a decade. Twitter’s limited free cash flow also makes it less attractive to fund with a lot of debt.