Vijay Sambamurthi
April 27, 2022
Elon Musk Tweets his Way to Buy Twitter!
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Elon Musk has done it! He’s signed definitive agreements to acquire Twitter for USD 44 billion in cash! I have been closely watching this space with much interest over the past several days, and as takeover battles go, I must say, this one turned out to be a virtual “walk-over”, to put it in cricketing terms! Of course, the Twitter board did try and incorporate a poison pill to fight Musk, but clearly, that pill wasn’t poisonous enough for Elon Musk, who responded by flashing his arsenal to the world – a mix of equity and debt capital of around USD 45 billion – thereby pressuring the Twitter Board.

As often happens in these takeover situations, the Twitter Board felt compelled to respond to Musk’s offer by adopting a limited duration shareholder rights plan (i.e., a poison pill) that would be triggered if any person’s ownership of Twitter crossed 15%, which would have made the “acquisition” a dead duck one for any unauthorized buyer. The Twitter board may have hoped that with the pill in place, it could possibly receive, or even actively solicit, competing offers from other bidders at a valuation that would be in their view, more reflective of Twitter’s intrinsic worth. Unfortunately for Twitter shareholders and the Board, NO competing offer surfaced, let alone a white knight, and therefore, they had no option but to take Musk’s offer! But WHY??? Is Musk the only one who thinks Twitter is worth owning? Surely, that can’t be true?

Almost certainly, ALL the mega tech corporations – Meta (FB), Microsoft, Google, Apple – would have very seriously considered making an offer, and may have arguably, even offered a better valuation than Musk’s offer did, but that did not happen. Not a peep from any of them. I think all of them may have talked to their antitrust lawyers and concluded that the deal wouldn’t get approved by the antitrust regulators. Musk as a buyer, on the other hand, faced no such antitrust hurdles.

There also wasn’t a SINGLE PE bidder for Twitter. Obviously, USD 44 billion is not a small deal, but surely, a couple of PE shops could have gotten together to put up a consortium bid? Surprising that not even one such competing PE offer turned up. While obviously, there were numerous issues with Twitter’s business, there’s nothing that is beyond the ability of an experienced PE consortium to fix after a “take private” deal.

Anyway, whatever the reasons, Elon Musk now is on the verge of becoming the private owner of Twitter, for a steal of a valuation – let’s not forget that just 6-7 months ago, Twitter was trading at USD 70 a share, compared to the USD 54 that Musk is now buying the company at!

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