In what is certainly a historic turn of events for not only Twitter but the tech industry in general, Elon Musk has officially purchased Twitter for $44 billion today. The company has accepted Musk’s buyout offer, giving him total control and ownership of the company once the deal closes. Elon Musk will also take the company private as soon as the transaction is complete.
Every shareholder will be paid $54.20 for each of their shares in Twitter. That price is 38% more than the closing price on April 1, the last business day before Elon secured his shocking stake in the company. As far as upper management goes, it really is anyone’s guess at this point. Elon can replace Parag Agrawal as the company’s new CEO to effectively lead the team, who has been feeling lost in this recent exchange of wealth.
The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders – Bret Taylor, Twitter board chairman.
The history leading up
After initially becoming the company’s largest shareholder with 9.1% of all shares in early April, Elon Musk soon made a surprising offer to take over Twitter for around $44 billion USD. This happened a couple of days after Musk had acquired his sizable stake in the social-media company, but by then holdings company Vanguard Group actually purchased a 10.3% stake in the company, dethroning Elon as Twitter’s largest shareholder.
At the time, this was more of a cautionary measure to avoid mounting public/shareholder pressure pertaining to how shareholders should have more of a say in running the company than the board members. Elon, being the largest one back then, would benefit most from this as the board would then have to listen to his proposals regardless of his position. Legally, that’s not things work per se, therefore Twitter invited Elon Musk to join the board of members, so that he would have actually decision-making power within the company.
Taking Twitter private at $54.20 should be up to shareholders, not the board
— Elon Musk (@elonmusk) April 14, 2022
However this was more of a façade by the Twitter board as board members cannot own more than 14.9% of the company’s shares which would obviously prevent Musk from his ultimate goal of a full buyout. Therefore, Elon himself chose against joining the board a few day later, and instead shocked the world with an offer of a 100% takeover of the company, buying each share at $54.20 USD, for a total evaluation of $44 billion.
The board members and shareholders were indifferent to this offer, as per multiple sources, and were considering other options, including other buyouts with possibly higher bids (though that did not pan out). The shareholders were definitely warmer to Musk’s proposal than the board, though. In fact, after Elon secured his initial stake in the company, the board adopted a “poison-pill” strategy incentivizing existing shareholders to purchase more stock at discounted rates in hopes of discouraging Musk and evading a hostile takeover.
However, after Elon Musk came to them with a proper offer of $44 billion, with over $25.5 billion in loans and $21 billion in personal equity, the shareholders asked board members to seriously consider the offer. After all, the company’s primary goal is to work in the best interest of the shareholders and by deciding against the offer, the board was essentially deciding against the shareholders themselves. Thus, the board and Musk started to discuss eventuality from Sunday and set down today to listen to his proposal for the future of the company.
Apparently, Mr. Musk worked his magic as the board was wooed so much that Twitter has chosen to accept Elon Musk’s buyout offer today. Once the transaction is complete, Elon Musk will now own 100% of the company. Twitter will also go private as a consequence of this buyout. While Elon Musk could’ve retained Twitter’s previous joint-stock nature, this is more than just about money for the world’s richest man.
Why Elon Musk wants Twitter
The whole idea of Musk wanting to buy Twitter in the first place stems from his claims of Twitter not advocating for free speech. Musk is a big proponent of free speech and has vocally expressed his concern about how social media is alarmingly moving towards a more and more echo-chamber-ish precedent, and Twitter is at the forefront of it. Being arguably the world’s most important form of new media today, Musk wants Twitter to be utilized to its fullest potential, something he actually mentions in the SEC filing for this buyout.
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. I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans. – Elon Musk
Taking the company private along with absolute control of the entire Twitter resource cabinet gives Elon Musk the power and the means to make significant changes at Twitter. Despite his high ambitions, for Musk, maximizing shareholder value is still a priority. Musk even polled his followers on Twitter asking whether the decision on the buyout offer should be left up to the shareholders or the board members, as seen in the aforementioned tweet.
Perhaps, and this might seem more ironic than authentic (but then again, isn’t irony poetic for Elon Musk?), the addition of a long-awaited edit button might be the first major change Twitter goes through under Musk’s leadership. While it’s not certain that Twitter would add an edit button per Elon’s demands, after all it didn’t do so in the wake of public outcry, he would still act as a catalyst in the process.
Do you want an edit button?
— Elon Musk (@elonmusk) April 5, 2022
Elon Musk has also made remarks suggesting that extremism of both extremes is what constitutes true democracy, a by-product of free speech. That fancy jargon means when both the far-left and the far-light political ideologists are equally unhappy, that’s when a social media platform’s policies are “good”. In other words, both ends of the spectrum should be at equal odds in a functioning democracy.
A social media platform’s policies are good if the most extreme 10% on left and right are equally unhappy
— Elon Musk (@elonmusk) April 19, 2022
Somehow, owning Twitter will enable Elon to do that exact thing; make everyone equally unhappy. Whether that plan works out in the long run before Musk’s advocates and ill-wishers fight to death remains to be seen. Elon’s end-goal here is to make Twitter the best public platform for free speech, one that the public actually trusts. “I think broadly, the civilizational risk is decreased the more we can increase the trust of Twitter as a public platform”, said Elon in his TED 2022 interview.