Elon Musk launches $43-bn hostile takeover of Twitter

Musk's offer price of $54.20 per share represents a 38% premium to Twitter's April 1 close, the last trading day before the Tesla CEO's more than 9% stake in the company was made public

Elon Musk has made a “best and final” offer to buy Twitter Inc., saying the company has extraordinary potential and he will unlock it.

The world’s richest man will pay $54.20 per share in cash, representing a 54% premium over the Jan 28. closing price and a value of about $43 billion.

Twitter's shares jumped 12% in premarket trading.

"Since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company," Musk said in a letter to Twitter Chairman Bret Taylor.

"My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder," Musk said.

Musk, 50, announced the offer in a filing with the U.S. Securities and Exchange Commission on Thursday. The billionaire, who also controls Tesla Inc., first disclosed a stake of about 9% on April 4.

The executive is one of Twitter’s most-watched firebrands, often tweeting out memes and taunts to @elonmusk’s more than 80 million followers. He has been outspoken about changes he’d like to consider imposing at the social media platform, and the company offered him a seat on the board following the announcement of his stake, which made him the largest individual shareholder. Musk said he had abandoned a plan to join Twitter's board, just as his tenure was about to start. Taking the board seat would have prevented him from a possible takeover of the company.

After his stake became public, Musk immediately began appealing to fellow users about prospective moves, from turning Twitter’s San Francisco headquarters into a homeless shelter and adding an edit button for tweets to granting automatic verification marks to premium users. One tweet suggested Twitter might be dying, given that several celebrities with high numbers of followers rarely tweet. 

Musk can afford it. He’s currently worth about $260 billion according to the Bloomberg Billionaire’s Index, compared with Twitter’s market valuation of about $37 billion.

Twitter's lower-than-expected user additions in recent months have raised doubts about its growth prospects, even as it pursues big projects such as audio chat rooms and newsletters to end long-running stagnation.

"It would be hard for any other bidders/consortium to emerge and the Twitter board will be forced likely to accept this bid and/or run an active process to sell Twitter," Wedbush Securities analyst Daniel Ives wrote in a client note.

"There will be host of questions around financing, regulatory, balancing Musk's time (Tesla, SpaceX) in the coming days but ultimately based on this filing it is a now or never bid for Twitter to accept," Ives said. Musk said Morgan Stanley was the financial adviser for the offer.

"Twitter has extraordinary potential. I will unlock it," Musk said in his letter.

The $54.20 per share offer is “too low” for shareholders or the board to accept, said Vital Knowledge’s Adam Crisafulli in a report, adding that the company’s shares hit $70 less than a year ago.

Although Musk is the world’s richest person, how he will find $43 billion in cash has yet to be revealed.
 

“This becomes a hostile takeover offer which is going to cost a serious amount of cash,” said Neil Campling, head of TMT research at Mirabaud Equity Research. “He will have to sell a decent piece of Tesla stock to fund it, or a massive loan against it.”

The offer price also includes the number 420, widely recognized as a coded reference to marijuana. He also picked $420 as the share price for possibly taking Tesla private in 2018, a move that brought him scrutiny from the SEC.