Twitter’s board met for several hours Thursday afternoon to discuss Musk’s bid and reportedly consider various options to block the bid. A formal response can take several days. Responding to reports that the board was considering a “poison pill” plan that would prevent him from increasing his stake in Twitter, Musk wrote on Twitter: “If the current Twitter board takes action against the interests of shareholders , they will violate their duty of trust “. “The responsibility they would take would be titanic,” he added, apparently referring to possible shareholder lawsuits. Twitter CEO Parag Agrawal, who also holds a board position, insisted the company was not “held hostage” by Musk as he tried to reassure panicked employees at a plenary session on Thursday. Elon Musk warns Twitter’s board will face “titanic” legal liability if it’s in the interests of shareholders to reject its $ 43 billion hostile takeover

The Saudi prince claims to be a major shareholder in Twitter, but his true share is unclear

On Thursday, Saudi Prince Alwaleed bin Talal wrote on Twitter that he “rejected” Musk’s offer and claimed that he was one of the “biggest” shareholders of Twitter. Bin Talal attached a screenshot of a 2015 announcement that his investment company owned 5.2% of Twitter. But in 2016, Bin Talal reduced his stake below 5 percent and did not need to report further trading. It means that Saudi Arabia’s real share of Twitter is unclear – while it is certainly less than 5 percent, it could be up to zero. Board members of a public company are required to act in the best financial interests of their shareholders – however, this does not mean that Twitter’s board must accept Musk’s agreement. While it would be a clear breach of duty to reject a takeover bid and accept a lower bid, Twitter’s board could likely find legal cover to reject Musk’s bid, saying it devalues ​​the company. This is exactly the argument made by a alleged shareholder, Saudi Prince Alwaleed bin Talal, on Thursday, drawing a sharp response from Musk, who challenged “Saudi Arabia’s views on journalistic freedom of speech.” It is unknown at this time what he will do after leaving the post. If they reject Musk’s bid, Twitter’s board could also say it is not certain it will be able to secure funding for the deal – meaning questions about where the cash will come from could be central. next days. Although Musk is the richest man in the world, with a fortune of $ 273.6 billion according to the Forbes report, most of his fortune is tied to shares of Tesla and SpaceX and it is not clear how much cash he has. Musk has not said where he would get the cash for the deal, and his regulatory statement vaguely states that the takeover bid is subject to “completion of expected funding.” At a conference on Thursday, Musk claimed he had “sufficient assets” to buy Twitter out of his own pocket, but also suggested the deal could collapse.
“I think this will be a bit painful and I’m not sure I can really get it,” he said. Twitter CEO Parag Agrawal, who also holds a board position, insisted the company was not “held hostage” by Musk as he tried to reassure panicked employees. Dan Ives, an analyst at Wedbush Securities, estimates that Musk will need to raise about $ 15 billion to $ 20 billion in additional funding.
Musk owns about 17% of Tesla, a $ 17 trillion company, and could raise cash either by selling shares or using the stock as collateral for loans. However, Musk has previously stated that he wants to avoid reducing his stake in Tesla if possible. Although it sold huge stakes in Tesla last year, it was to pay taxes and actually ended up having a slightly larger stake in the company, due to the securing of the options. Musk would have to sell about 43 million Tesla shares to fund the deal with Twitter, which would likely offset Tesla’s share price and reduce his stake in Tesla to about 13%. Another option would be to use Tesla shares as collateral for loans. However, Tesla is restricting executives from using no more than 25 percent of their company stock as collateral for loans, and Musk has already pledged a portion of his stock to other loans, according to deposits. Traditional debt financing would be another possible option for Musk. Along the way, a bank would provide a purchase loan and the debt would be added to Twitter’s balance sheet and repaid with the company’s cash flows. However, Musk revealed in a statement that Morgan Stanley is his “financial advisor” for the deal and the investment bank is not known for raising the large-scale debt financing that the Twitter deal would require. Tesla shares fell 3.7% on Thursday amid fears that Musk would sell shares to buy Twitter Twitter’s share price remains below Musk’s $ 54.20 bid, suggesting the market is uncertain whether its bid will be accepted by the board Morgan Stanley could work with other big banks better known for such deals, but Musk has already burned some bridges in this area. JPMorgan Chase, for example, is currently involved in lawsuits and counterclaims with Tesla over Musk tweets and controversial bond deals. Another option for Musk would be to work with a private equity firm. That’s the way he thought in 2018, when he famously wrote on Twitter that he had “secured funding” to privatize Tesla at $ 420 a share. In that case, he consulted Silver Lake, a technology-focused private equity firm headed by Egon Durban – who would happen to have it on Twitter now. Durban joined Twitter in 2020 as part of a deal the company struck with another activist investor, Elliot Management, who wanted to shake up the company’s management. However, any possibility of Durban joining forces with Musk to finance the takeover seems to be ruled out by the deal it won to win a seat on the board, which limits Silver Lake from gaining more than 5 percent of the company. As for other private equity firms, Twitter seems unlikely to find Twitter an attractive target. Private equity firms typically target companies that discard large amounts of cash, using cash flows and spending cuts to pay off debts incurred to buy the company. Twitter, however, had negative cash flows of $ 370 million last year and does not appear to be a candidate for positive cash flow in the short term. Musk appeared at TED2022 on Thursday, saying he was seeking a hostile takeover of Twitter not for financial gain but for the “future of civilization.” Overall, all reservations are that Twitter’s board could well use funding concerns as a reason to reject Musk’s proposal. However, Musk claimed on Thursday that he had a “Plan B” if the Twitter council voted against his agreement. The board on Thursday reportedly considered looking for a “white knight” to make a competitive bid, as well as a “poison pill” to prevent Musk from increasing his stake. Also known as shareholder rights schemes, poison pills usually trigger an automatic stock dilution through a flood of new stocks if a corporate raider’s share of ownership grows too large. In the case of Twitter, the idea would be to prevent Musk from increasing his 9.2% stake in order to pressure the board to accept his deal. If the board does introduce a poison pill, Musk could continue to seek redemption through what is known as a bidding. An auction involves an immediate appeal to shareholders to buy their stock at a fixed price, usually above current market value, at a specific point in time. Usually the offer is activated only if a certain percentage of shareholders accept the offer. If Musk had won more than 50 percent of Twitter’s voting shares through such an auction, he would have effectively controlled the company. In separate tweets on Thursday, Musk said he “would be completely defenseless” not to allow shareholders to vote directly on his plan. “They are owned by the company, not the board,” he wrote.

Musk’s attempt to buy Twitter raises as many questions as it answers

Why is Musk interested in Twitter? Speaking at TED2022 in Vancouver on Thursday afternoon, Musk defended his takeover bid, saying he had an incentive to turn Twitter into a stronghold of free speech. “It’s not about finances,” Musk said. “My strong intuitive sense is that having a public platform that is as credible and broadly inclusive as is important for the future of civilization.”
How will Musk finance the offer? The richest man in the world is trying to buy all of Twitter, but has not revealed funding details in his purchase offer. Elon Musk, whose net worth is about $ 270 billion, offered to buy the social networking platform in a generous $ 41.39 billion deal. However, the businessman’s wealth is mostly held in shares of Tesla, a company that limits the amount Musk can borrow on its stock. Musk sold his stake in Tesla for more than $ 15 billion, about 10 percent of his stake in the electric vehicle company, late last year to settle a tax liability. The billionaire has also burned bridges with many major lenders, including JPMorgan Chase, so analysts say his choice of Morgan Stanley Investment Bank acting as a financial adviser for his bid is remarkable. What’s happening now? SpaceX boss Elon Musk has begun trying to take over Twitter, but the company’s board still has the right to reject his offer. The billionaire businessman issued an auction on Thursday morning to buy the entire Twitter share at $ 54.20 per share, …