Over Easter weekend, Twitter’s board of directors implemented a provision of “poison pills” in an attempt to block Elon Musk, who wants to buy the social networking platform.
The move, which would make it more difficult and expensive for Musk to acquire shares without board approval, will give Twitter’s management time to evaluate the offer and possibly invite other buyers through a sale process.
At least one private equity firm, Thoma Bravo, is interested, although it’s unclear whether this will result in a formal offer. There are also other steps Musk could take to circumvent Twitter’s reluctant advice. The company’s shares were up more than 2% premarket before the first trading session since the poison pill was announced.
Meanwhile, The New York Times’ DealBook newsletter discussed some of the key questions that remain about the Twitter hunt for Musk:
Will Musk turn hostile?
He seems to be threatening; at least that’s what his tweet quoting Elvis Presley’s song “Love Me Tender” seems to imply. In a takeover bid, also known as a hostile bid, Musk would go directly to shareholders, asking them to “bid” their shares at a certain price (his bid is $54.20, or R$253.33, per action, for now). That would require him to fill out a form with the Securities and Exchange Commission that, among other things, give details about the funding behind his offer. This is important because questions remain about how Musk would get the money to pay for a Twitter deal.
It has to be remembered that Musk is still dealing with the legal fallout from the allegations he made about funding his failed attempt to take Tesla private in 2018.
Could a hostile offer nullify Twitter’s ‘poison pill’?
No, but it could pressure Twitter’s board to remove the defense if enough shareholders support Musk’s offer. In 2012, for example, CVR Energy removed a poison pill it had adopted to thwart activist investor Carl Icahn after his public offering gained widespread support.
How much is Twitter worth?
Several analysts said they thought Musk’s offer was too low and that the board would likely only accept an offer of $60 a share or more. But that’s partly based on Twitter’s ability to hit big financial goals in 2023: 315 million users and $7.5 billion in revenue, versus 217 million users and $5.1 billion. billion (R$23.8 billion) in revenue in 2021.
Twitter shares rose above $70 a share when it announced those targets last year, but have since fallen to around $45 a share, with investors questioning the company’s ability to achieve its goals and fend off competition from other social networking sites. Management remains confident: “Our strategy and our 2023 goals that we released about a year ago have not changed,” Parag Agrawal, Twitter’s chief executive officer, said in February.
How much is an “uncensored” Twitter worth?
That’s even harder to say. Musk suggested he would promote more “freedom of speech” on the platform, but Twitter insiders point to stagnant user growth in 2016 as a warning, before the company beefed up content moderation.
“They’ve significantly increased users over the last few years,” said Rich Greenfield, media industry analyst at LightShed Partners. “Making the platform chaos will make users go in the wrong direction, I think.”
Will other buyers intervene?
Perhaps. Antitrust concerns would likely make life difficult for many corporate buyers, especially in the tech sector. It’s a sizeable check for private equity, far surpassing Medline’s $30 billion last year, the biggest leveraged buyout in more than a decade. Twitter’s limited free cash flow also makes high-debt financing less attractive.
Translated by Luiz Roberto Goncalves
I have over 8 years of experience in the news industry. I have worked for various news websites and have also written for a few news agencies. I mostly cover healthcare news, but I am also interested in other topics such as politics, business, and entertainment. In my free time, I enjoy writing fiction and spending time with my family and friends.
