A billionaire proponent has secured his acquisition of a major social media platform, leaving spaceX and Tesla in the hands of the impulsive head of two other companies.
Musk and his supporters are paying $54.20 per share in cash. After the deal closes, Twitter will become a private company. Wall Street seemed to initially hail the news, with Twitter shares plummeting about 6% towards the closing bell. They have increased by 30% since Musk formally arrived on the scene.
The terms of the transaction were reached today less than two weeks after Musk revealed his initial $43 billion offer for the company. Despite his initial commitment, the parties reportedly convened for discussions over the weekend, with Twitter's board deciding the ultimate valuation was too substantial to standby.
The purchase raises a host of concerns, followed by Twitter's enactment of a "poison pill" provision, which was used as a defense mechanism after Musk's unintentional offer. The measure is designed to flood the market with shares at the point that Musk's stake rises above 15% of the company, a consequence that he might underheave his control and keep existing Twitter shareholders and board members in charge.
Beyond those details directly related to the acquisition, there are also concerns about Twitter's strategy from here. Musk has described himself as a "free speech contradiction" and has expressed concern about Twitter's content moderation practices. In the wake of the January 6 attack on the US Capitol, the platform famously ejected President Donald Trump.
Twitter has grown to 217 million daily active users, primarily because it was focused on advertising for its growth, but has improved less effectively than its peers like Facebook (now Meta Platforms) or Snap Inc.
Musk, among others on Twitter, has taken aim at the company's ad-driven model, which he claims has encouraged zombie accounts, bots, and other undesirable content. As a private organization, Twitter may presumably have more latitude to experiment with potential subscription approaches and to welcome back Trump and others off the platform for what they have tweeted.
Elon's proposal was evaluated by the Twitter board in a deliberate effort to value, certainty, and financing, according to the chairman. The transaction will provide a substantial cash premium, and we believe it is the best route forward for Twitter's stockholders.
Parag Agrawal, the founder of Twitter, took over as CEO a few months ago. He highlighted the company's "purpose and relevance" around the world. He was "deeply proud of our teams and inspired by the work that has never been more important."
Free speech is the foundation of a functioning democracy, and Twitter is the digital town square in which debates about issues crucial to humanitys future, Musk said. I also want to make Twitter better than ever by adding additional features, making the algorithms open source to increase trust, defeating spam bots, and authenticating all humans. Twitter has enormous potential I look forward to working with the company and the community of users to unlock it.
Although Musk has been rated as the world's richest person, much of his fortune is tied up in stock, thus there have been a tumultuous backstage discussions with financial supporters able to help him fund the transaction. In the end, he secured $25.5 billion of fully committed debt and margin loan financing and is making an equity commitment of $21 billion. According to the official announcement, no financing conditions are attached to the transaction.
In a future SEC filing, Twitter said it would include additional information about the agreement's terms and conditions. The company also noted that its preliminary financial results will proceed as scheduled on Thursday. It is now using its usual conference call with Wall Street analysts.