Breakingviews: Twitter’s board hastily grabs $44 bln bird in hand
NEW YORK, April 25 (Reuters Breakingviews) - You have to hand it to Elon Musk: He gets things done. Not only did he pull together funding for a $44 billion personal acquisition of Twitter in days, he has persuaded the company to accept his offer in short order. Just 10 days after the social media firm enacted a so-called poison pill to buy time, its directors have accepted the deal offered by the world’s richest man at its original value.
When the Tesla chief executive popped up with a stake of more than 9% in Twitter early in April, Musk agreed to join the board of directors and not raise his ownership beyond 14.9%. Days later he bailed on that accord. Shortly after that, he made an offer for the whole company. Musk lacked financing and had wrongly claimed in 2018 to have secured cash for a Tesla buyout. Moreover, Twitter stock was trading more than 25% above the offer price just last summer. So the board had reasons to proceed cautiously.
The norm would be to demand a higher price from Musk, seek bids from others, or make the case for the company being worth more on its own. Perhaps the board just did a poor job of selling. Co-founder, board member and former chief executive Jack Dorsey has tweeted that the board “has consistently been the dysfunction of this company.” That’s a fair criticism considering the company has failed to take advantage of its high profile. A clear business strategy has been hard to discern.
In the meantime Musk beefed up his offer with a financing package led by Morgan Stanley. And it could be that the board, along with big Twitter shareholders, realized there were no other birds read more in the bush. Musk's likely return on investment is low read more according to a Breakingviews analysis. And at least to date, the company run by Parag Agrawal has not received other offers, according to Reuters’ sources.
Yet the speed of the board's capitulation is curious. Another factor could be that Twitter’s quarterly earnings, scheduled for Thursday this week, will be disappointing. Strong results would justify demanding a higher price or pushing for an independent path. But Facebook owner Meta Platforms lost about a quarter of its market value following the disclosure of unexpectedly weak growth earlier this year and, just last week, Netflix shares tumbled even more. Twitter’s quick sale may simply mean Musk is paying far more than anyone else would.
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(The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Refiles to remove extraneous word in second paragraph.)
- Twitter said on April 25 that it had agreed to sell itself to an entity wholly owned by Elon Musk for $54.20 a share in a transaction valued at $44 billion. The price represents a 38% premium to where Twitter shares closed on April 1, the last trading day before Musk disclosed his more than 9% stake in the social media company.
- Musk, the chief executive of electric-car maker Tesla, has secured $25.5 billion of committed debt and other financing secured by his Tesla stock. He has also committed to provide equity of approximately $21 billion.
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