After rebuffing Elon Musk’s initial overtures, Twitter’s board on Monday said it will take Musk’s $44 billion offer for the company, ending a weeks-long saga over whether the company would accept his unsolicited bid.
“The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing,” Twitter chairman Bret Taylor said in a statement. “The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.”
Musk proposed the $54.20-a share transaction in April 14. This sparked a frenzy of weeks, as Wall Street and Twitter leaders scrambled to determine if Musk was really serious. It turns out that Musk is very serious. Musk described the financing for the bid, which included $46 billion in equity and loans from Morgan Stanley.
Twitter initially tried to stop Musk by adopting a poison-pill defense to prevent any potential takeover attempts. But Twitter has reportedly been under increased pressure by large shareholders to more fully consider Musk’s bid. The company’s stock has languished in recent months, having lost nearly 60% of its value in the 12 months preceding Musk’s disclosure in early April that he had made a large investment in Twitter shares.
Musk released a statement saying that “free speech is the basis of a functioning democracy” and Twitter was the place where vital issues for the future of mankind are being discussed. I also hope to improve Twitter by adding new features and making algorithms available to increase trust. Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”
Twitter shares rose 5.5% to $51.63 on Monday as investors digested the board’s decision. There remains a gap between the share price and Musk’s offer, a signal investors still believe there’s a possibility something fouls up the deal, which the company expects to close later this year.
From start to finish, Musk’s takeover bid lasted less than a month, a remarkably quick pace. On April 4, he revealed he had built up a 9.2% in the company in recent weeks, immediately making him a player in Twitter’s future. Twitter approached him with a request for a position on its board. He accepted but then declined. He followed that up with his $54.20-a-share proposal a week later, though he didn’t detail how he’d pay for it, usually a key point in hostile bids. By adopting the poison pill, Twitter’s board bought itself some time to gauge Musk’s intentions, complete its own valuation of the company and likely look around for other acquirers, a so-called white knight buyer it would find more suitable than Musk.
“It all came down to no other bidders or white knights emerging in the M&A process and Twitter’s Board back was against the wall once Musk detailed his $46 billion in financing last week to get pen to paper on this deal,” says Wedbush analyst Dan Ives.
Musk said that Twitter needs to drastically alter its direction and focus on uncensored speech. Twitter was long known for its cultural appeal and business success. Its stock languished before the pandemic. A renewed focus on growth partially revived it. But while the shares reached nearly $80 last year, they lost more than half their value over the past few months, at least partly the result of worries around the durability of Twitter’s mobile ads amid a change to Apple’s iOS software.
Twitter will report first-quarter earnings Thursday morning, providing the latest insight on the company’s health and on exactly what Musk has just spent $44 billion on.