Elon Musk buys Twitter: From joke to $44 billion deal

April 27, 2022 14:15 GMT+7

Elon Musk’s suggested price of $54.20 per share for Twitter on April 14 contained the number “420,” famous slang for smoking marijuana. The documents that he submitted to the authorities were signed on April 20.

In 2018, the number 420 was also mentioned by the billionaire in a tweet saying that he was considering taking Tesla private for $ 420 per share. This tweet caused him and Tesla to each pay a fine of $ 20 million to the US Securities and Exchange Commission (SEC).

(Photo: Reuters)

According to the richest man on the planet, he bid $ 420 because he just learned about the slang word “420” in the world of marijuana and thought his girlfriend would find it very interesting. He admits this is not a valid reason to bid.

However, discussions with Twitter then turned more serious when the company’s advisers, including banking experts at Goldman Sachs, JPMorgan Chase and Allen & Co, began digging through the assurance document. Financing Musk’s $44 billion offer.

Many of Wall Street’s major banks, led by Morgan Stanley, Bank of America and Barclays, pledged to provide the billionaire with a $25.5 billion loan, collateralized with Tesla shares. Musk himself will spend $21 billion in cash.

According to Reuters, Twitter’s board, which is considering Musk’s offer with little information, is rushing to complete an independent plan value analysis passed on by CEO Parag Agrawal. At the same time, they asked the banking experts to check to see if anyone had a better bid than Musk.

The deal was overseen by Twitter Chairman Bret Taylor and Salesforce co-CEO. Musk insists he doesn’t care about the economics of transactions and pursues Twitter because he wants to elevate freedom of speech and is “disillusioned” with the platform’s many censorship decisions.

Musk’s $44 billion offer to Twitter isn’t generous at all. Despite being 38% above market value prior to April 4, Twitter stock will still trade above $42.40 for most of 2021. Still, Twitter bankers predict, even if While the company is doing as well as it did last year, investors are still valuing it lower as the social media advertising market has become more competitive. Management doesn’t believe Mr. Agrawal can bring the stock back to $54.20 anytime soon.

This is the view shared by many Twitter shareholders, including major funds, who contacted Twitter after Musk said he would raise capital for his buyout offer. They suggest the company should not let the opportunity slip.

If Musk is ignored, some shareholders threaten to side with him in the event of a public bid. The “poison pill” used by Twitter will protect the company from a takeover, but it won’t prevent shareholders from turning away.

The time has come for Musk. Tech stocks have been rocking through most of April amid inflation and recession fears, and Twitter is no exception. Not only that, but Musk also has a number of allies on the Twitter Board such as Egon Durban, the Silver Lake fund operator or Jack Dorsey, the former Twitter CEO. In a tweet on April 25, Dorsey wrote: “Musk is the only solution I believe in.”

Twitter advisers met with Musk on April 24 and tried to convince him to raise the price, but he still maintained that $ 54.20 per share was the “best and last” offer. But Musk also conceded when he agreed to a “breakup” fee if he changed his mind and withdrew the offer.

In the first hours of Monday (April 25), the two sides came to an agreement and was approved by the Twitter Administration. “I hope even my worst criticism stays on Twitter because that’s what free speech means,” the billionaire wrote on Twitter on the historic day.

Du Lam (According to Reuters)