The blue checks over at twitter went crazy when Elon Musk announced that he purchased nearly 10% of TWTR and was offered a seat on the board. Now they have gone completely apoplectic that he has just filed a 13D form and put in an offer to buy the company. He has offered $54.20/share as his “best and final offer”. That is roughly 17% over the current bid/ask. You can see the whole filing in the link here. I find this whole process to be very intriguing. The prospects for Musk to purchase twitter could be in his favor. This is largely due to the sheer volume of shares held by institutions.
When a company gets an offer to sell, three things typically happen. First there is an official announcement of the offer posted to the SEC’s EDGAR website. Second, the board of the company that received the offer (the target company) convenes to discuss the offer. At this stage, legal counsel and advisers are brought in to help the board make a decision about the offer. Advisers usually involve one or more Wall Street banks like Goldman. That board meeting for twitter is happening today. They’ve declared an emergency meeting to discuss Elon’s offer. I expect that they will do everything they can to reject this offer. They’ll search for any kind of loophole that might allow them to wiggle out.
At that point, when the board says “NO”, Elon could form a group of like-minded investors or he could forge ahead alone and begin the process of a hostile takeover. This could put the ball in the court of the current shareholders. They would then hold a vote on whether to accept the buyout offer or decline. Nearly 84% of the current shareholders are institutions. Here is the top 10:
Insiders in the company hold a total of 12%. You can count on their “NO” vote. However, since the shareholder makeup of the company is primarily institutions, they’ll follow each other to whatever path chosen by the major holders.
Most of these guys have been sitting on twitter for a long time. There will be a tremendous amount of pressure on them to accept the offer so that they can get paid and put that money to use in more productive investments. Interest rates are coming up and that is going to crush the tech companies. These guys aren’t dummies. They know what is going on.
So if Vanguard, Morgan Stanley, and State Street jump on board of the idea. That is over 22%. Add in Elon and it gets pushed up to 31%. If Blackrock comes out against the deal, I would expect this vote to go down to the wire but if Blackrock wants to get paid, this is a done deal. Everyone down the line will follow Blackrock’s lead. They are the biggest of big fish and no one wants to go up against the big fish.
I don’t have any Twitter (TWTR) holdings. I’m unsure if I would want to participate in this M&A deal. I’ll have to stew on it for a while. 17% is a nice return and Musk could make another run at it if his first offer gets rejected. Also, you can’t discount that other companies or investment groups would put in a counter-offer. The problem is, if this deal goes south, you could end up being a TWTR stock bagholder. I don’t think TWTR has great prospects and I don’t do deep analysis of tech companies. In addition, who knows how long it will take for this deal to come together. It could as short as a few months or just as easily be a year plus.
The bigger question for me is, what does Twitter’s platform look-like if Musk is able to take it private? Does he reinstate Donald Trump? Would those voices who have been silenced, shadowbanned, or permanently banned be welcomed back? Would they even come back? Would the current employees attempt to disrupt the transition process? Would Musk be able to grow the user base?
I am hopeful that this is the beginning of more conservative minded leaders taking a stand and doing something about protecting free speech.
I predict that Musk does end up owning Twitter and taking it private. Then at some point in the not so distant future, he makes it public again and makes a ton of money. That is of course if DC doesn't derail the deal somehow.
I think TWTR as an investment is pure speculation on the actions of the board and the feds and won't touch it for now. He has a plan B, so this whole situation is a win-win for us on what is becoming one of the most important battle for liberty in the future: free speech, censorship, cancel culture, etc. Open source algorithms, not having permanent bans (mentioned at today's TED talk), along with superficial things like editing are all very good. I imagine much more creative things are up his sleeve.
Thanks for the explanation!
I am hopeful that this is the beginning of more conservative minded leaders taking a stand and doing something about protecting free speech.
I predict that Musk does end up owning Twitter and taking it private. Then at some point in the not so distant future, he makes it public again and makes a ton of money. That is of course if DC doesn't derail the deal somehow.
I think TWTR as an investment is pure speculation on the actions of the board and the feds and won't touch it for now. He has a plan B, so this whole situation is a win-win for us on what is becoming one of the most important battle for liberty in the future: free speech, censorship, cancel culture, etc. Open source algorithms, not having permanent bans (mentioned at today's TED talk), along with superficial things like editing are all very good. I imagine much more creative things are up his sleeve.