Twitter’s board of directors has accepted billionaire Elon Musk’s offer to buy the social media company and take it private, the company announced on Monday.
After being halted for the news, the stock finished the day up 5.64 percent.
“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where critical issues affecting humanity’s future are debated,” Musk said in a statement included in the press release announcing the $44 billion deal. “I also want to make Twitter better than ever by adding new features, opening up the algorithms to increase trust, defeating spam bots, and authenticating all humans. Twitter has enormous potential, and I am excited to work with the company and the user community to realize it.”
According to the press release, the cash deal at $54.20 per share is worth around $44 billion. Once the transaction is completed, Twitter will become a private company.
The announcement brings an end to a weeks-long saga. Musk began by revealing a large stake in the company. Soon after, the company announced that he would join the board, only for Musk to backtrack several days later. Then he made his “best and final” offer to buy the company for $54.20 per share. This offer valued Twitter at approximately $43 billion.
If the deal is completed and Musk becomes the owner of Twitter, the company will be controlled by the world’s richest person and someone who has been a vocal critic of the platform while using it in legally questionable ways, most notably through sensitive posts about his car company, Tesla. Though Musk has stated that his primary interest in Twitter stems from what he sees as the company’s censorship of free speech, Musk critics are right to be concerned that the billionaire’s control over the platform will result in the silencing of their voices and the voices of others with whom he may disagree.
Twitter’s board of directors attempted to ward off a hostile takeover by enacting a so-called poison pill, or shareholder rights agreement, that would allow other shareholders to buy stock at a discount if Musk or another person or group acquired more than 15% of outstanding common stock. The plan would dilute that person’s holdings, which is a common strategy used to avoid unwanted acquisitions.
The board appeared to be considering rejecting the deal for two reasons. The first was that the offer, while priced significantly higher than Twitter’s current share price, was arguably too low given the company’s recent surge above that price.
The second issue was that it was initially unclear how Elon Musk planned to fund the transaction. Despite being the world’s richest person, much of his fortune is invested in Tesla stock, which means he would most likely have to borrow against his holdings to fund the transaction.
However, the offer became more concrete after Musk announced in a Securities and Exchange Commission filing that he had received $46.5 billion in commitments to help finance the potential deal. This included approximately $25.5 billion in debt financing from Morgan Stanley Senior Funding and other companies. He stated that he had committed approximately $21 billion in equity financing.
Musk stated in the same filing that he was considering making a tender offer to purchase Twitter shares directly from shareholders.
Musk’s fascination with Twitter stems from his own frequent use of the platform. Tesla and SpaceX CEO Elon Musk frequently uses his massive platform to share jokes, interact with his 83.6 million followers, and make business announcements.
The latter has landed him in hot water. He was investigated by the SEC after tweeting in 2018 that he had secured funding for Tesla to go private at $420 per share. As a result of those tweets, the SEC charged Musk with securities fraud. In 2019, Musk and Tesla reached a revised settlement agreement over those charges, which Musk is now attempting to terminate.
Elon Musk stated earlier this month at the TED2022 conference in Vancouver that he did have funding secured at the time of the tweet, adding that he was “forced to concede to the SEC unlawfully” in the settlement. At the time, the SEC declined to comment on Musk’s remarks.
A court filing from a class-action lawsuit filed by shareholders against Musk shortly after the conference revealed that the judge presiding over that case concluded Musk knowingly made false statements about funding at the time of the tweet.
Musk also discussed how he would like to see the platform change under his ownership at the TED2022 conference.
“I think it’s very important for there to be an inclusive arena for free speech,” he said at the time, admitting that some content moderation would be required to deal with explicit calls to violence and ensure the service complied with local laws.
He also stated that he prefers “time-outs” to permanent bans, which could pave the way for former President Donald Trump to return to the platform under Musk’s control. Following his tweets surrounding the Jan. 6 insurgency at the United States Capitol, Twitter banned Trump from the platform, citing “the risk of further incitement of violence.”
After years of complaining about what they claim is censorship of conservative voices by mainstream tech companies, some Republican lawmakers have expressed excitement at the prospect of Musk owning the company. Twitter and other social media platforms have stated that they do not censor speech based on ideology, but rather enforce their stated community guidelines.
Republicans on the House Judiciary Committee asked Twitter board members to preserve records related to Musk’s bid on Friday, setting the stage for a potential congressional investigation and subpoenas if Republicans retake control of the chamber after this year’s midterm elections.
Here’s Twitter’s full announcement:
“Twitter, Inc. (NYSE: TWTR) announced today that it has entered into a definitive agreement to be acquired by an entity wholly owned by Elon Musk for $54.20 per share in cash in a $44 billion transaction. Twitter will become a privately held company after the transaction is completed.
Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock they own upon the completion of the proposed transaction, according to the terms of the agreement. The purchase price is a 38% premium to Twitter’s closing stock price on April 1, 2022, the last trading day before Mr. Musk disclosed his approximately 9% stake in the company.
Twitter’s Independent Board Chair, Bret Taylor, stated, “The Twitter Board of Directors went through a deliberate and thorough process to evaluate Elon’s proposal, with a deliberate focus on value, certainty, and financing. The proposed transaction will result in a significant cash premium, and we believe it is the best way forward for Twitter stockholders.”
Twitter CEO Parag Agrawal stated, “Twitter serves a purpose and has an impact on the entire world. We are extremely proud of our teams and inspired by the work that has never been more critical.”
“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where issues critical to humanity’s future are debated,” Mr. Musk said. “I also want to make Twitter better than ever by adding new features, opening up the algorithms to increase trust, defeating spam bots, and authenticating all humans. Twitter has enormous potential, and I am excited to work with the company and the user community to realize it.”
Terms of Transaction and Financing
The transaction, which has been unanimously approved by the Twitter Board of Directors, is expected to close in 2022, subject to Twitter stockholder approval, receipt of applicable regulatory approvals, and fulfillment of other customary closing conditions.
Mr. Musk has secured $25.5 billion in fully committed debt and margin loan financing, as well as an equity commitment of approximately $21.0 billion. There are no financing requirements for the transaction to close.
Please see Twitter’s Current Report on Form 8-K, which will be filed in connection with the transaction, for more information on all terms and conditions contained in the definitive transaction agreement.
Earnings for the First Quarter of 2022
Twitter intends to release its fiscal year 2022 first-quarter results before the market opens on April 28, 2022. Twitter will not hold a corresponding conference call in light of the pending transaction announced today.
Twitter’s financial advisors are Goldman Sachs & Co. LLC, J.P. Morgan, and Allen & Co., and its legal counsel are Wilson Sonsini Goodrich & Rosati, Professional Corporation and Simpson Thacher & Bartlett LLP. Mr. Musk’s primary financial advisor is Morgan Stanley. Financial advisors include BofA Securities and Barclays. Legal counsel is Skadden, Arps, Slate, Meagher & Flom LLP.”