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Twitter defies: Musk's billions unwanted

20.4.2022

Translation: machine translated

The tug-of-war between the world's richest man and the social media platform Twitter is entering the next round. Whether, how and by whom the tech company will be bought is still unclear.

Last week it became known that Elon Musk had acquired a 9.2 percent stake in the short message service Twitter in mid-March. That was probably not enough for the multi-billionaire. On Maundy Thursday, he therefore offered to buy Twitter outright.

After this share purchase, Twitter CEO Parag Agrawal initially welcomed him as a new member of the tech company's board of directors. But shortly thereafter Musk rowed back again, did not accept the post and submitted three days later an official purchase offer for the entire company to the U.S. Securities and Exchange Commission SEC. Musk wants to acquire Twitter for $54.20 per share.

If he succeeds, the group would be under his sole control. In stock market jargon, this approach is known as a "hostile takeover."

A poison pill as a response

No matter how "hostile" the intentions, a lucrative takeover offer must be taken seriously by the board of directors concerned. This is also the case with Twitter. Because Elon Musk is offering a total of 43 billion US dollars for a company with a current stock market value of 37 billion.

Despite the good offer, those responsible at the tech company do not seem to want to jump into the arms of the billionaire. Indeed, on Good Friday, Twitter's board of directors confirmed a so-called "poison pill" measure.

This is a protective measure intended for smaller shareholders to defend themselves against "hostile takeovers". "Any person or group who acquires 15 percent or more of the common stock without the approval of the board of directors will be subject to a substantial penalty, according to the document the board of directors submitted to the Securities and Exchange Commission.

If the protective measure is activated by a 15 percent override, everyone except the "hostile acquirer" will be able to purchase Twitter stock at a lower price. This disincentive is designed to make a takeover of the group that is not approved by the board of directors more expensive and more cumbersome. The "Poison Pill" measure has been set for one year for the time being.

Concrete financing still unclear

Even if Elon Musk is the richest man in the world, that does not mean that the billions are in his account. For a purchase of Twitter, he would first have to make the corresponding financial resources liquid. The CEO of Tesla and SpaceX has not yet specified exactly where the necessary billions would come from.

Bloomberg estimates Musk's currently accessible assets in cash at 2.95 billion US dollars. In addition, Musk is known for using his Tesla shares as a guarantee for loans. With this measure, he could possibly gather the missing 40 billion US dollars, calculates the online magazine Business Insider.

Apart from that, the rumor mill already began to bubble last week around further investors. According to the news agency Reuters, the investment company Thoma Bravo has shown interest in a competing offer. In the meantime, names of other investment companies such as Silver Lake, Elliott Management, KKL or Apollo Global Management have been added, which are said to be interested in making an offer or supporting an existing one.

Musk wants freedom of expression and democracy

Musk is aware that his intentions to buy are not profit-driven. "I don't care about the economics," he confirmed in an interview before Easter at the TED2022 Conference in Vancouver. He said he wanted to dig so deep into his pocket because it was essential for the future of civilization to have a trustworthy and inclusive communications platform. He wants to ensure that by granting freedom of expression on the platform. In addition, the source code of the Twitter algorithm should be publicly accessible so that it is possible to see exactly how the platform works.

These criticisms are not new. The tech company has long been concerned with why its algorithm is more likely to spread certain political content than others. It already has a specific team working to minimize such inequalities. However, it's not as simple as that, he said. "The question of why these observed patterns occur is difficult to answer, as it is a product of the interactions between humans and the platform," reads a study summary on the matter. Whether disclosing Twitter's algorithm would actually help with this problem is hard to say.

Shortly after the details of the "poison pill" clause were released, Musk announced in a tweet that he would eliminate the salary of Twitter's board of directors in the event of an acquisition. This proposal is just one of many that Musk repeatedly makes known at irregular intervals on Twitter and in interviews. Which of them are actually serious is hard to say. In an interview at the TED2022 Conference, the billionaire himself confirmed that he doesn't give much thought to his tweets and that his comments are more "spontaneous whirls of thought" than strategically considered plans.

What's next.

The tech company could officially reject Musk's offer. In that case, the billionaire announced a mysterious "Plan B" at the TED2022 Conference, but he declined to comment on it yet.

If Musk's offer is not rejected outright, it could lead to renegotiations between the two parties, in which Twitter could demand a better price for the acquisition. In light of his announcements at the time of the purchase offer, Musk would likely not agree to such a demand. At the time, he made it clear that the $54.20 per share was the "best and final offer." It remains to be seen whether the aforementioned investment companies will actually step in as purchase competitors.

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Coya Vallejo Hägi

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coya.vallejo@digitecgalaxus.ch

«I want it all! The terrifying lows, the dizzying highs, the creamy middles!» – these words spoken by an iconic American TV celebrity could have been mine. It's a take on life I also apply to my job. What does this mean in concrete terms? That every story has its charm; no matter how small, large, exciting or trivial. The more eclectic the mix, the better.

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