Elon Musk negotiates takeover offer with Twitter; deal is close, according to reports
Twitter wants to know about any active investigation by regulators of Musk, including by the U.S. Securities and Exchange Commission, that poses a risk to the deal going through, one of the sources said.
Securities lawyers say Musk, who settled charges of misleading investors by suggesting four years ago he had secured financing to take Tesla private, may have violated SEC disclosure rules by acquiring a stake in Twitter earlier this year.
Twitter is also considering whether regulators in one of the major markets it operates would object to Musk owning the company, the source added. If Twitter establishes that a sale to Musk would be risky, it could charge a significant break fee, the sources say.
The social media company has adopted a poison pill after Musk made his bid to stop it from increasing its more than 9% stake in the company above 15% without negotiating a deal with its board. . In response, Musk threatened to launch a takeover bid which he could use to register Twitter shareholder support for his bid.
One concern Twitter’s board weighed was that unless it seeks to negotiate a deal with Musk, many shareholders could back him in a takeover bid, the sources said.
While the poison pill would prevent Twitter shareholders from tendering their shares, the company fears its negotiating hand could weaken significantly if it turns out to go against the wishes of many of its shareholders. investors, the sources added.
Representatives for Twitter and Musk did not immediately respond to requests for comment.
The Wall Street Journal reported earlier Sunday that Musk and Twitter would meet to discuss the acquisition offer.
Pricing expectations among Twitter shareholders for the deal diverge largely based on their investment strategy, the sources said.
Long-term active shareholders, who along with index funds own the bulk of Twitter shares, have higher price expectations, some in the $60 per share, the sources said. They are also more inclined to give Parag Agrawal, who became Twitter’s CEO in November, more time to increase the company’s stock value, the sources added.
“I don’t believe Elon Musk’s offer ($54.20 per share) comes close to Twitter’s intrinsic value given its growth prospects,” Saudi Prince Alwaleed bin Talal tweeted on April 14. shareholder of Twitter.
Short-term investors such as hedge funds want Twitter to accept Musk’s offer or ask for only a small raise, the sources said. Some of them worry that a recent plunge in the value of tech stocks amid worries about inflation and an economic slowdown makes Twitter unlikely to pick up more value anytime soon, the sources added.
“I would say, take the $54.20 a share and get it over with,” said Sahm Adrangi, portfolio manager at Kerrisdale Capital Management, a hedge fund that owns 1.13 million shares of Twitter, or 0.15 % of the company, and has been an investor since early 2020.
A silver lining from Twitter’s board is that Musk’s bid doesn’t appear to have converted much of his army of 83 million Twitter followers into new shareholders in the San Francisco-based company who might back his bid. , the sources said.
Twitter’s retail investor base has grown from around 20% before Musk unveiled his stake on April 4 to around 22%, the sources said.