Billionaire provocateur Elon Musk has sealed his acquisition of Twitter, leaving a major social media platform in the hands of the impulsive head of two other companies, SpaceX and Tesla.
Musk and his backers are paying $54.20 per share in cash. Once the deal closes, Twitter will become a privately held company. Wall Street appeared to initially hail the news, with Twitter shares up almost 6% heading toward the closing bell. They have risen almost 30% since Musk formally came on the scene.
Terms were reached today less than two weeks after Musk revealed his initial $43 billion offer for the company. Although he described it as “best and final” bid, the parties reportedly convened for talks over the weekend, with Twitter’s board deciding the ultimate valuation was too great to resist.
The purchase raises a host of questions, and follows Twitter’s enacting of a “poison pill” provision, intended as a defense mechanism after Musk’s unsolicited offer surfaced. The measure is designed to flood the market with shares at the point that Musk’s stake rises past 15% of the company, a consequence that could dilute his control and keep existing Twitter shareholders and board members in control.
Beyond those details directly associated with the acquisition, there are also broader questions about Twitter’s strategy from here. Musk has described himself as a “free speech absolutist” and has voiced criticisms of Twitter’s content moderation practices. The platform famously ejected former President Donald Trump after affixing a spate of warnings to his tweet, for promoting violence and anti-democratic ideas in the wake of the January 6 attack on the U.S. Capitol.
Founded in 2006 as an early social media player focused initially on short text exchanges, Twitter has grown to 217 million daily active users. But its business model is under pressure. It has relied primarily on advertising for its growth, but has scaled less effectively than peers like Facebook (now Meta Platforms) or Snap Inc.
Musk, among his other grumblings on Twitter, has taken aim at the company’s ad-driven model, which he says has encouraged zombie accounts, bots and other undesirable content. As a private company, Twitter could presumably have more leeway to experiment with potential subscription models and also welcome back Trump and others booted off the platform for what they have tweeted.
“The Twitter board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing,” the company’s independent board chair said in the official announcement 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.”
Parag Agrawal, who took over as Twitter CEO several months ago after co-founder Jack Dorsey stepped away, pointed to the company’s “purpose and relevance” around the world. “Deeply proud of our teams and inspired by the work that has never been more important,” he said
“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. “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.”
While Musk has been rated the world’s richest person, much of his fortune is tied up in stock, so there have been a lot of backstage negotiations with financial backers able to help him fund the deal. 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 closing of the transaction.
Twitter said it will include more information about the deal’s terms and conditions in a forthcoming SEC filing. The company also noted that its report of first-quarter financial results will proceed as scheduled on Thursday. Given the Musk news, the company is ditching its usual conference call with Wall Street analysts.
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