Twitter in Talks to Strike a Deal With Elon Musk

Twitter Inc.

TWTR 3.93%

is in talks to sell himself to Elon Musk and could close a deal this week, people familiar with the matter said, a dramatic turn of events just 10 days after the billionaire revealed his $43 billion bid for the social media company.

The two sides met on Sunday to discuss Mr Musk’s proposal and made progress, although there were still issues to be resolved, the people said. There is no guarantee that they will come to a deal.

Twitter was expected to decline the offer, which Mr. Musk made on April 14 without saying how he would pay for it, and introduce a so-called poison pill to prevent him from raising his bet. But after the Tesla Inc.

TSLA -0.37%

Chief revealed he has $46.5 billion in funding and the stock market swooned, Twitter changed stance and opened the door for negotiations, The Wall Street Journal reported earlier on Sunday.

Mr. Musk has said from the outset that his $54.20 a share offer is his “best and last,” and he has reiterated to Twitter chairman Bret Taylor in recent days that he will not budge on the price, some said. people . Talks between the two sides were expected to focus on issues, including what Mr Musk would pay if an agreed deal falls apart before it is completed.

Twitter is scheduled to report its first quarter results on Thursday and was expected to factor in the bid then, if not sooner.

The potential turnaround on Twitter’s side comes after Mr. Musk held a private meeting with several company shareholders on Friday to praise the virtues of his proposal, while reiterating the board’s decision to take a “yes-or-no” decision. should take, according to people familiar with the matter. He also pledged to resolve the free speech issues he believes are plaguing the platform and the country at large, whether his bid succeeds or not, they said.

Mr. Musk delivered his pitch to select shareholders in a series of video calls, with a focus on actively managed funds, the people said, hoping they could influence the company’s decision.

Mr. Musk said he sees no way Twitter management can get the stock at its bid price alone, given the problems in the company and the continued inability to correct them. It couldn’t be learned if he took specific steps he would take, though he has tweeted that he wanted to reduce the platform’s reliance on ads and make simpler changes like allowing longer tweets.

Elon Musk has already said he is considering taking his offer directly to shareholders by making a public offer.


Photo:

Miguel Roberts/The Brownsville Herald/Associated Press

Several shareholders rallied behind him after the meetings. Lauri Brunner, who manages Thrivent Asset Management LLC’s large-cap growth fund, sees Mr. Musk as a proficient operator. “He has a proven track record at Tesla,” she said. “He is the catalyst to deliver strong operational performance at Twitter.” Minneapolis-based Thrivent has an approximately 0.4% stake in Twitter worth $160 million and is also a Tesla shareholder.

Mr. Musk has already said that he is considering taking his offer directly to shareholders by making a public offer. Even if he got significant shareholder support in a takeover bid — which is far from guaranteed — he’d still need a way around the company’s poison pill, a legal maneuver he used that effectively kept him from his to build up interest to 15% or more .

A common bid tactic, to gain control of the target’s board, is out of reach for now. Twitter’s directors have staggered terms, meaning it takes a dissident shareholder several years to gain control rather than a single shareholder vote. Twitter tried last year to phase out the staggered board terms as they are frowned upon by the corporate governance community, but not enough shareholders voted on the measure. The company will try to do this again at this year’s annual meeting on May 25. Only two directors are up for re-election and it is too late for Mr. Musk to nominate his own directors.

As Elon Musk tries to buy Twitter, WSJ looks back at Twitter’s past suitors such as Salesforce, Disney and Alphabet. Tech reporter Tim Higgins explains why those previous talks fell through and what’s different this time around. Illustration: Nikki Walker

Twitter’s shares have been trading below its offer price since he made the offer on April 14, usually a sign that shareholders are skeptical about a deal, though they closed about 4% Friday at $48.93, the day after he secured funding for the deal. deal revealed. Mr. Musk has indicated that if the current offer fails, he could sell his stake, which totals more than 9%.

The financing included more than $25 billion in debt coming from nearly every global blue-chip investment bank, aside from the two Twitter advised. The rest was $21 billion in equity that Mr. Musk would provide for himself, likely by selling existing stakes in his other companies, such as Tesla. The pace of financing and the market sell-off in recent days — making the cash offer seem relatively more attractive — likely contributed to Twitter’s greater willingness to act on Mr. Musk’s proposal.

The Twitter board should contact Mr. Musk, as the shares have “gone nowhere” since the company went public eight years ago, said Jeff Gramm, a portfolio manager at Bandera Partners LLC, a New York hedge fund with about $385 million under management, previously. † The company last bought Twitter stock in February and holds a total of about 950,000 shares, which makes up about 11% of its portfolio.

Mr Gramm said Twitter’s board cannot walk away from Mr Musk’s offer without offering an alternative that delivers real value to shareholders. “I’m not sure what that could be at this stage other than finding a higher bid,” he said.

write to Cara Lombardo at cara.lombardo@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

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