Elon Musk wants to buy Twitter, make it ‘maximally trusted’

Musk’s bid price of $54.2/share represents a 38% premium over Twitter’s April 1 shutdown

Musk’s bid price of $54.2/share represents a 38% premium over Twitter’s April 1 shutdown

In just ten days, Tesla CEO Elon Musk has gone from popular Twitter contributor and critic to the company’s largest individual shareholder to a potential owner of the social platform — a whirlwind of activity that could dramatically change the service given the world’s leading edge. sometimes erratic billionaires self-identify as an acquittal absolutist.

Twitter revealed in a securities filing Thursday that Mr. Musk has offered to buy the company for more than $43 billion, saying the social media platform “needs to be transformed as a private company” to build trust with its users.

“I believe that freedom of speech is a social necessity for a functioning democracy,” Musk said in the dossier. “I now realize that the company in its current form will not thrive or serve this societal need.”

Later in the day, during an interview onstage at the TED 2022 conference, he went even broader: “Having a public platform that is maximally trusted and broadly inclusive is extremely important for the future of civilization.”

Since Twitter came on the scene in 2006, Twitter has been home to thriving social and political commentary, shared news, scandal gossip, cat memes, and clothing color arguments. But it has also provided a platform for viral disinformation and lies, bullying and hate speech and gangs of trolls who can shout posters they disagree with by unleashing tidal waves of despicable imagery, threats and similar acts of online aggression.

Twitter has put a significant amount of effort into countering the latter while preserving the former, though not always in a way that pleases most users. Like other platforms, it has put restrictions on tweets that threaten violence, incite hatred, bully others and spread misinformation. Such rules prompted Twitter’s decision to ban former President Donald Trump after the 2021 Capitol uprising.

Twitter has also become a destination for brands and advertisers, many of whom prefer stricter content restrictions, and a megaphone for high-profile figures such as Mr. Trump and Mr. Musk, who have used it to rally supporters and promote business ventures.

Mr. Musk, who described Twitter as a “de facto city square,” outlined some specific potential changes on Thursday — such as favoring temporary bans over permanent bans — but he’s mostly described his goal in broad and abstract terms.

He said he wanted to open the “black box” of artificial intelligence technology that powers Twitter’s feed so that people would have more transparency about why some tweets might go viral and others disappear. “I personally wouldn’t be there to edit tweets,” he said, “but you would know if anything was being done to promote, demote or otherwise influence a tweet.”

The billionaire has been an outspoken critic of Twitter, mainly because of his stated belief that it does not adhere to the principles of free speech. The social media platform has angered followers of Mr. Trump and other right-wing political figures whose accounts have been suspended for violating content standards of violence, hatred or harmful misinformation. Mr. Musk has described himself as an “absolute free speech,” but is also known for blocking other Twitter users from asking him questions or disagreeing with him.

While Twitter’s user base remains much smaller than rivals like Facebook and TikTok, the service is popular with celebrities, world leaders, journalists and intellectuals. Mr. Musk himself has more than 81 million followers, rivaling pop stars like Lady Gaga.

Elon Musk’s ‘Last’ Offer

Twitter shares closed at $45.08, down just under 2%, well below Mr. Musk’s bid of $54.20 a share. That’s generally a sign that some investors are unsure whether the deal will go through. The stock remains below its 52-week high of about $73.

Mr. Musk called that price his latest offer, although he did not provide details on the financing. The offer is without obligation and subject to financing and other conditions.

Twitter said it will decide whether accepting the offer is in the best interests of shareholders. However, it’s unclear how Twitter’s board will react after evaluating the offer. It will likely negotiate, seeking a higher price per share, or want provisions to ensure its board remains independent of Mr. Musk, said John Coffee, a law professor at Columbia University and head of corporate governance. -Centre.

‘Poison pill’ provisions

The board could pass “poison pills” provisions to offer more stock and dilute the value of Mr. Musk’s stock, if Mr. Musk’s stake grows to 10% or 15%, Mr. Coffee said. Even then, Mr. Musk was still able to take over the company in a proxy battle by voting out the current directors.

At the TED conference, Mr. Musk said he has the money. “Technically I could afford it,” he said with a laugh.

Should Mr. Musk go through with his takeover bid, he could likely raise the roughly $43 billion he needs, possibly by borrowing billions with his stakes in Tesla and SpaceX as collateral.

Most of Mr. Musk’s fortune, estimated by Forbes at nearly $265 billion, is tied up in Tesla stock. The company allows executive officers to use stock as collateral for loans, but limits borrowing to 25% of the value of the pledged stock.

Data provider FactSet says Mr. Musk owns 172.6 million shares worth $176.47 billion. Just over 51% of its stake has already been pledged, according to a power of attorney statement from Tesla. That means Mr. Musk could use the remaining stake to borrow about $21.5 billion. He could also borrow on his stake in privately owned SpaceX.

Twitter shares bought in daily batches

Mr. Musk revealed in regulatory filings in recent weeks that he had been buying Twitter shares in near-daily batches as of Jan. 31, ending up with a stake of about 9%. Only Vanguard Group manages more Twitter shares. A lawsuit filed Tuesday in New York federal court alleged that Mr. Musk illegally delayed disclosing his stake in the social media company so that he could buy more shares at lower prices.

The US Securities and Exchange Commission could punish Mr. Musk for hurting other investors by taking too long to announce his buyout of Twitter shares, but it’s unlikely to do anything to stop a takeover said Chester Spatt, a former SEC chief economist. †

“This is going to happen fairly quickly,” said Mr. Spatt, now a professor of finance at Carnegie Mellon University.

Jacob Frenkel, a former SEC enforcement attorney who now works at the Dickinson Wright law firm in Washington, said it is difficult to prove an investor’s intent in disclosure cases. “The mere fact of the violation surrounding the disclosure does not mean that fraud has been committed,” said Mr. frenkel.

However, there is “much fodder for an investigation” into whether anyone with knowledge of Mr. Musk’s stock purchases traded the stock before Mr. Musk’s public disclosures, Mr. Frenkel said.

‘Distractions ahead’

After Mr. Musk announced his stake, Twitter was quick to offer him a seat on the board on the condition that he own no more than 14.9% of the company’s outstanding shares. But the company said five days later it had declined. The decision coincided with a barrage of now-deleted and not always serious tweets from Mr. Musk proposing major changes to the company, such as dropping advertising – its main source of revenue – and transforming its headquarters in San Francisco in a homeless shelter.

The turnaround prompted CEO Parag Agrawal to warn employees earlier this week that “there will be distractions” and to “mute the noise and stay focused on work.”

Twitter has not fared as well as its social media rivals, losing money last year. The company reported a net loss of $221 million for 2021, largely linked to the settlement of a lawsuit by shareholders who said the company misled investors about how much its user base was growing and how many users were interacting with its platform. Co-founder Jack Dorsey resigned as CEO in late November and was replaced by Mr Agrawal.

“I’m not saying I have all the answers here, but I do think we want to be very reluctant to take things down and be very careful about permanent bans,” Mr Musk said. “It won’t be perfect,” he said, but there must be a perception and reality that speech is “as free as reasonably possible”.

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