Update. On April 25, 2022, Twitter’s board of directors unanimously agreed to Musk’s offer to purchase the social media platform at a price of $44 billion. In a statement posted to Twitter, Musk stated, “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.” Musk plans on taking Twitter private, meaning Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock once the transaction closes.
Last Wednesday, the Securities and Exchange Commission (SEC) released filings showing Tesla and SpaceX CEO Elon Musk made a $43 billion bid to buy Twitter and make it a privately owned, non-traded company. Musk, an active Twitter user with over 80 million followers, recently became the platform’s largest individual shareholder and has advocated for several significant changes. Twitter offered Musk a seat on its board of directors after his initial purchase, which he initially accepted but later reversed course.
On April 4, Musk disclosed that he had acquired the 9.2% stake in Twitter in an SEC form that investors must file when they own more than 5% of a company. However, security law experts say the filing came later than it should have as the SEC requires it within 10 calendar days of an individual meeting the 5% threshold. Musk appears to have waited 21 days to file the form, prompting a lawsuit from several lawyers that argue his delay illegally allowed him to continue buying shares at lower prices. Musk is already entangled in litigation with the SEC over a 2018 tweet about a potential Tesla buyout.
Musk has frequently criticized Twitter, saying it restricts free speech by engaging in censorship. In a letter to Twitter’s board that presents details about his offer, Musk said the platform: “will neither thrive nor serve [its free speech] societal imperative in its current form. Twitter needs to be transformed as a private company.” Musk also stated: “Twitter should free the algorithm (for people to see) and make any changes made to accounts public.” He has also suggested the social media company “fundamentally undermines democracy.” Musk has argued for several changes on the platform, including making its policies and algorithm public and opting for “time-outs” for users instead of outright bans.
Twitter’s board is evaluating Musk’s buyout proposal and has said it will respond according to the best interests of its shareholders. With an estimated net worth of about $260 billion, Musk has more than sufficient personal resources to acquire Twitter. However, much of his wealth is in Tesla stock. As a result, he probably will have to sell Tesla shares or borrow to raise the $43 billion he is bidding for Twitter. Additionally, the board may consider the offer — which equals $54.20 per share — too low. The platform has traded as high as $73.34 in the past 52 weeks. However, his proposed price is higher than Twitter’s current stock value, and the platform has seen lower-than-expected user growth in the past few months, raising some questions about its long-term prospects. Musk has also threatened the possibility of a hostile bid, where he would make the takeover offer directly to shareholders, bypassing the board of directors.
On Friday, Twitter’s board of directors voted unanimously to activate a “poison pill” policy if Musk buys more than 15% of the company. Essentially the move would dilute shares by allowing others to purchase more stock at a discount, making it more expensive for Musk to buy out the platform. This measure is formally called a “limited duration shareholder rights plan” and is a common tactic to prevent a hostile takeover. Musk said that he would have to “reconsider his position as a shareholder” if Twitter fails to accept his offer and has previously suggested he might create a rival social media platform.