But not completely. While Twitter’s board of directors has endorsed his offer, Musk now needs the approval of a majority of Twitter shareholders and US regulators.
Before we get into the details of these remaining hurdles, let’s recap the tumultuous events that have brought us to this point.
In early April, it was announced that Musk – an avid Twitter user – acquired 9.2% of the company’s stock, making him the largest shareholder. There were rumors that he would join the Twitter board, but Musk objected†
About a week later, on April 14Musk launched a full takeover bid, offering US$54.20 per share – about 38% more than the company’s stock price on April 1.
Twitter’s board responded with a “poison pill” provision. This would allow other shareholders to buy new shares issued by the board at a discount if Musk acquires a 15% stake (more than 15% is considered a majority stake). This would have diluted Musk’s stake and thwarted his takeover ambitions.
Musk responded by marking a Hostile take-over† This involved circumventing the board of directors with a “tender offer” directly to shareholders, asking them to put their shares up for sale, despite the board’s opposition.
With no competing bidder and no alternative plan to create value for shareholders, Twitter’s board is finally here this week accepted Musk’s offer of $54.20 per share in cash.
Musk plans to fund the bid using equity and debt, according to its filings with the United States Securities and Exchange Commission. He has secured approximately $25.5 billion in loans. He has also raised his equity, totaling approximately $21 billion, including through margin loans against Tesla stock.
How might regulators respond?
The acquisition still requires regulatory and shareholder approval. While these are unlikely to sink the deal, they’re not trivial.
There are two major regulatory approvals here. First, the Securities and Exchange Commission – similar to a financial watchdog – must approve the acquisition. Then the Federal Trade Commission and Department of Justice will assess whether the acquisition could reduce competition.
Musk has had negative interactions with the SEC in the past. In 2018, it accused him of fraud for tweeting that he had money to take his electric car company Tesla private. Musk finally regularlypaying $20 million fine and stepping down as chairman of the Tesla board. Some shareholders are to sue him for losses suffered as a result of his tweet.
Musk’s behavior during his Twitter bid could also affect regulators. There are questions about whether he will own his 9.2% stake in a . has announced timely enough way† Usually a shareholder has to disclose his share as soon as he owns it 5% of a company† Musk appears to have acquired more than 5% of Twitter on March 11, 2022 but filed with regulators on April 4†
Furthermore, Musk appears to be a “short formfiling with the SEC, reserved for passive shareholders. However, his later behavior suggests that he is an activist investor.
Given Musk’s disclosure record, the SEC will likely be particularly careful to ensure Twitter’s shareholders are properly informed. If it finds that Musk has broken laws, it could impose sanctions or demand commitments about Musk’s role at Twitter after the acquisition. However, the deal is unlikely to be halted.
The other US antitrust and competition regulators are also likely to investigate the offer, given its high profile and twin concerns about the power of Big Tech.
But they’re also unlikely to block Musk’s offer, as he has few other financial interests in tech companies to clearly suggest his acquisition is anti-competitive.
Shareholders must approve the deal through a shareholder vote, which has yet to be scheduled. Like a majority approve the offer, then all shareholders must sell.
When casting their vote, some shareholders may consider non-financial matters, such as their view of Musk and what — if possible — the acquisition means for free speech.
But for the most price is the key.
Some shareholders have complained that Musk’s $54.20 offer… too low† Twitter briefly traded above $70 in July 2021 — in line with the rally in technology stocks in general in 2021, but then declined steadily to $32.42. In February 2022, Goldman Sachs appreciated Twitter shares US$30 over the next 12 months based on most recent earnings.
Twitter’s share price
Twitter’s earnings are mixed and under constant pressure. While revenues have risen, Twitter is unprofitable, partly due to a litigation costs†
Other technology companies signal continued pressure on advertising revenues. Google’s parent company, Alphabet, reported YouTube ad revenue decline in the first quarter of 2022, compared to the end of 2021.
These facts should influence how most shareholders vote. Musk’s $54.20 offer price offers a solid takeover premium: 18% above the pre-bid price, 38% above the April 1 price, and about 50% above the price before Musk amassed shares on January 31, 2022† This is at the higher end of the takeover premiums reported by Boston Consulting Group†
So what now
Musk is therefore very likely to complete the acquisition for Twitter. Regulators can impose conditions, but are unlikely to block the deal.
The big questions now are how Musk will enable “free speech” without turning Twitter into a cesspool, how he will deal with censorship countries in which his other companies (Tesla, SpaceX, Starlink and others) do business, and whether he will make money. from Twitter.
But this headache will only belong to Musk, not the former shareholders.