Elon Musk reaches deal to buy Twitter
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The acquisition followed weeks of evangelizing on the necessity of “free speech,” as the Tesla CEO seized on Twitter’s role as the “de facto town square” and took umbrage with content moderation efforts he views as an escalation toward censorship. He said he sees Twitter as essential to the functioning of democracy and said the economics are not a concern.
Ownership of Twitter gives Musk power over hugely consequential societal and political issues, perhaps most significantly the ban on former president Donald Trump that the site enacted in response to the Jan. 6, 2021, Capitol riot.
Under the terms of the deal, Twitter will become a private company and shareholders will receive $54.20 per share, the company said in a news release. The deal is expected to close this year.
“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 said in the release. “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.”
“Twitter has tremendous potential — I look forward to working with the company and the community of users to unlock it,” he added.
Musk‘s Twitter deal further expands his portfolio beyond rocket company SpaceX, which has aspirations of landing on Mars, and carmaker Tesla, which pushed electric vehicles into the mainstream.
“He’s more powerful than countries now,” said Ross Gerber, a Tesla investor close to Musk who said he had bought Twitter shares last week in hopes the deal went through. “He has the most important technology asset in America … probably one of the most strategic military assets in the world … and now he has one of the most important communications tools in the world.”
Musk’s positions on free speech and how to police the site have put him relatively at odds with current Twitter leadership, raising questions about how he will seek to steer his changes through and whether they will affect Twitter’s current executive makeup.
That was a major topic at a town hall held by Twitter leadership Monday, during which employees questioned what Musk’s ownership might mean for the company, according to a record of the call obtained by The Washington Post. Employees expressed fears about everything from layoffs to the future of the business to whether Twitter will continue to make money from advertising.
Employees asked why CEO Parag Agrawal “trusted” Musk, and how Musk “would be held accountable” when, as a private company, Twitter would have no board of directors. Executives offered assurances but few direct answers, and said that business would continue as usual until the deal goes through within three to six months.
Twitter co-founder Jack Dorsey, who served as CEO until Agrawal succeeded him late last year, said of Musk, “Elon is the singular solution I trust” with regard to the “problem of [Twitter] being a company.” Dorsey was arguing that Twitter should in fact be a public good, but said clawing it back from Wall Street was the right initial step.
“I trust his mission to extend the light of consciousness,” he wrote.
Musk has said he would open up Twitter’s algorithm, putting content moderation decisions into clear view, although some researchers have said that would be difficult. He has also pushed for simple, broadly popular changes such as adding an edit button, as well as pledging to eliminate spam bots. And he has said he wants to open up Twitter’s verification process to more users, so the authenticity of accounts can be determined more easily.
While it is unclear how Musk might address the Trump ban, he said at a TED conference this month he would want to be “very cautious” with permanent bans, preferring timeouts instead.
He and Trump have found areas of agreement in the past. Musk thanked Trump on Twitter for his support when Musk defiantly reopened Tesla’s Fremont, Calif., manufacturing plant in May 2020, in violation of county-level coronavirus shelter-in-place orders.
Musk, an avid Twitter user with more than 83 million followers, earlier on Monday hinted that a deal was close, laying out his vision for the future of Twitter in a midday tweet. “I hope that even my worst critics remain on Twitter, because that is what free speech means,” he wrote.
I hope that even my worst critics remain on Twitter, because that is what free speech means
— Elon Musk (@elonmusk) April 25, 2022
The deal would rank among the largest activist takeovers of a publicly traded company, according to Dealogic, which tracks data on mergers.
“Twitter has a purpose and relevance that impacts the entire world,” CEO Agrawal said in the release. “Deeply proud of our teams and inspired by the work that has never been more important.”
Twitter board chair Bret Taylor said the decision came down to the economics of the deal. “The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders,” he said in the release.
Twitter’s board completed its review of Musk’s offer last week, including coming up with possible valuations of the company, according to a person briefed on the discussions who spoke on the condition of anonymity because they were not authorized to discuss them publicly.
Taylor spoke directly with Musk on Saturday to update him on the process, the person said. At the conclusion of Twitter’s board meeting on Sunday, the company notified Musk it was ready to proceed with a deal around his proposed price, said that person and another person briefed on the discussions who spoke on the condition of anonymity for the same reasons.
The saga of Musk’s Twitter ownership kicked off April 4 when Musk surprised investors by disclosing he had taken a more than 9 percent stake in Twitter.
Twitter responded by offering Musk a board seat, which it announced the next day. Musk turned the seat down a few days later. By April 13, according to financial filings, Musk expressed his intention to pursue a hostile takeover of the company.
Meanwhile, Twitter seemed poised to reject Musk’s bid. The board adopted a “poison pill” plan the day after Musk‘s offer became public that would make it much more difficult for the billionaire to buy the company.
The strategy, known as a shareholder rights plan, would let investors buy Twitter stock at a discounted price unavailable to Musk. The flood of new shares would potentially make it prohibitively expensive for Musk to buy the company.
Musk then publicly outlined his financing, saying last week that he had secured $46.5 billion through loans by banks, including Morgan Stanley, and his own equity.
The company’s board of directors met with Musk on Sunday, and negotiations went into the early hours of Monday, according one of the people familiar with the discussions. The two sides were focused on determining whether Musk had the financing to complete the acquisition, and they did not spend much time discussing Musk’s strategy for the future of the social network, said the people familiar with the discussions.
Almost all of the key events took place over video calls, the people said.
Musk had also met privately with several large Twitter shareholders in recent days, with some expressing their support for his bid, one of the people said. The two sides did not see regulatory issues, such as an antitrust review, as likely roadblocks to closing the deal, the person added.
It’s unclear whether Musk will retain other shareholders in the private company. Musk said previously that he would want to let the maximum allowable number of shareholders stay on.
One of the factors motivating the board’s decision was the recent challenging environment for tech stocks, which have experienced losses this year after riding high during the pandemic. The tech-heavy Nasdaq stock index, which nearly doubled from early 2020 to late 2021, has declined 18 percent this year. Growing Twitter’s value beyond Musk’s offering price would probably require bucking this trend and outperforming most of the tech sector, the person said.
Musk taking control will probably reignite the debate over whether social media companies should do a better job of policing content such as hate speech and violence, or if they should take a hands-off approach — a difficult balance for all social media. Twitter started with a hands-off approach but has instated more content moderation and policing, including its banning of Trump.
NAACP President Derrick Johnson said in a statement Monday that “lives are at risk, and so is American democracy.”
“Mr. Musk: free speech is wonderful, hate speech is unacceptable. Disinformation, misinformation and hate speech have NO PLACE on Twitter. Do not allow 45 to return to the platform,” he said, referring to Trump.
The Bloomberg Billionaire’s Index puts Musk’s worth at about $259 billion, but much of his wealth is tied up in stock.
Beyond the bank loans, it’s unclear how Musk intends to pay for more than $21 billion of the deal which he described as “equity financing” from himself. He could borrow against or sell Tesla shares, though that path would raise risks for the share price of the carmaker.
“If Elon Musk were forced to sell shares of our common stock that he has pledged to secure certain personal loan obligations, such sales could cause our stock price to decline,” Tesla warned in its annual filing.
As of Monday afternoon, the proposed deal did not include a “go shop” provision, a common term in large mergers that allows boards of directors to continue seeking a higher offer from other potential bidders, the person familiar with the deal said. The absence of this provision will probably speed the close of the deal.
Some Tesla investors have bristled at Musk’s bid because they say it distracts from his responsibilities as chief executive and could slow momentum at one of the world’s most valuable automakers. And internally, Twitter employees have raised concerns about Musk’s potential effect on the company’s culture.
Musk is very active on the platform, having tweeted more than 17,300 times. He averages 125,180 likes per tweet, according to Socialtracker. Musk has earned praise for his wide-ranging approach to the site: He toggles freely between crude memes targeting his rivals, polls on the state of free speech and critical business decisions.
His tweets have gotten him into trouble with the Securities and Exchange Commission. In 2018, he wrote that he had “Funding secured” to take Tesla private at $420 a share.
He said he chose $420 “because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend would find it funny, which admittedly is not a great reason to pick a price,” according to the federal complaint.
The deal could raise new regulatory issues for Musk, too.
Because of the deal’s size, Musk will be required under federal law to report his purchase of Twitter to the Federal Trade Commission and the Justice Department. Multiple legal experts said the deal does not present clear antitrust concerns because Twitter is not being purchased by a social media competitor. But given Democrats’ focus on concentration of power, especially in the tech sector, it’s possible that government regulators could open a review of the deal and slow it down.
“If you’re sitting in the agencies, you’re aware of that atmosphere,” said William E. Kovacic, a former Republican chair of the FTC.
Regulators could raise objections to Musk potentially collateralizing the purchase with Tesla stock, according to former SEC lawyer Tyler Gellasch, who now runs Healthy Markets, a nonprofit organization advocating market reforms.
“This is buying a lot of one company by borrowing against billions of dollars in shares of another company, and that very concentrated collateral carries risks,” Gellasch said. “If it leads the banks to say they’re going to need more and different collateral, that wouldn’t block Musk’s purchase per se, but it could make the logistics of the deal dicier.”
Reed Albergotti, Elizabeth Dwoskin, Cat Zakrzewski and Tory Newmyer contributed to this report.
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