Tesla CEO Elon Musk reportedly offered to buy Twitter for $54.20 per share in cash, and the transaction amount will reach $43 billion. Not so long ago he was a high-profile shareholder, but now he may become the future owner of Twitter. If he successfully buys Twitter, Musk's own tendencies will have a great impact on Twitter's future development.
Elon Musk
On Thursday, a confidential document on Twitter showed Musk's bid exceeded $43 billion. Musk believes Twitter "needs to be transformed into a private company" to build trust with platform users.
"I believe free speech is necessary for a functioning democracy. I now realize that if this company continues its current state, it will neither prosper nor fulfill this social need well. Musk said in the document.
Since Twitter's birth in 2006, the platform has hosted the ability to post all sorts of speeches, news, celebrity scandals and gossip, all kinds of memes. On the other hand, it has become a hotbed of false information, lies, bullying, hate speech, and online violence.
Twitter has been putting a lot of effort into discouraging negative behavior while keeping the former running properly. But Twitter's efforts don't always satisfy users. Like other platforms, Twitter has issued restrictions on threats of violence, incitement to hatred, bullying others, and spreading false information. The rules also prompted Twitter to decide to ban the accounts of former U.S. President Donald Trump after the 2021 Capitol Hill riots.
Elon Musk
Business practices are also influencing Twitter, and it is also an important focus for advertisers and brands of all kinds, many of whom want Twitter to have stronger content control. High-profile members of the public, such as Trump and Musk, see it as a megaphone to rally supporters and reap business benefits.
Musk hopes to open the "black box" of AI-powered recommendations and give people a better understanding of why some content becomes popular and others obscure. "I'm not going to stay there and edit Twitter," Musk said, "but if there's promotion, restrictions, or other factors that affect a tweet, you'll know." ”
He has been outspoken critics of Twitter, mostly about his lack of "freedom of speech." The social platform has previously angered fans and banned people on banned accounts, most of which involve posting violence, hatred or harmful misinformation.
Musk describes himself as a "free-speech absolutist," but he has also blocked other Twitter users who question or disagree with him. Musk himself has more than 81 million followers on Twitter, about the same magnitude as stars like Lady Gaga.
Twitter previously banned Trump's account
Twitter's shares recently closed at $45.08, down 2 percent, below Musk's bid of $54.20 per share. This could be a signal that many investors don't expect the deal to be successful. The price is currently holding low, while it had been at a high of $73 for 52 consecutive weeks.
The bid, which Musk called the final bid, did not touch on the details of the financing. The Offer is non-binding and is subject to financing and other factors.
Twitter said it would consider whether the bid was in the best interests of shareholders. It's unclear how Twitter's board will react. According to John Coffee, a professor at Columbia Law School and head of Columbia's Center for Corporate Governance, Twitter's board is likely to discuss again to see if it can get a higher price, or it may want to ensure that the board is independent of Musk.
Coffey said that if Musk's stake grows to 10 or 15 percent, the board may adopt a "poison pill" clause to offer more shares and dilute the value of Musk's stake. Even so, Musk can still take over the company by voting to remove incumbent directors and take over the company through a proxy battle.
At the TED conference, Musk laughed and said, "I have money and can theoretically afford it." If Musk continues with his acquisition plans, he could probably raise the roughly $43 billion needed, possibly borrowing billions of dollars in collateral from his stakes in Tesla and SpaceX.
According to Forbes estimates, musk's vast majority of assets total about $265 billion, but that's tied to Tesla's stake. The company allows executives to use stock as collateral for loans, but the borrowing is capped at 25 percent of the value of the collateralized stock.
According to data, Musk owns 172.6 million shares of Tesla, worth about 176.47 billion. A power of attorney from Tesla shows that about 51 percent of his stake has been used as collateral. That means Musk can borrow about $21.5 billion with the remaining stake. In addition, you can use SpaceX shares to borrow money.
Musk revealed in filings to regulators in recent weeks that he has been buying Twitter stock in batches almost daily since Jan. 31 and currently holds about 9 percent of the shares. Only Vanguard Group has more twitter shares than Musk. On Tuesday, a lawsuit filed in federal court in New York said Musk illegally delayed disclosing his shares in Twitter in order to buy more shares at a lower price.
The U.S. Securities and Exchange Commission (SEC) could punish Musk for delaying the disclosure of Twitter shares for too long, hurting the interests of other investors. But Chester Spatt, a finance professor at Carnegie Mellon University and a former chief economist at the SEC, believes the SEC is unlikely to block the acquisition.
Jacob Frenkel, a former executive lawyer at the SEC, said it was difficult to prove that an investor deliberately delayed disclosure. "Existing violations disclosing facts about them does not mean that this is fraud."
Twitter's current CEO, Parag Agravar
Earlier, after Musk announced his Twitter holdings, Twitter offered to let him join the board, but Musk refused. Musk has published a series of ideas on Twitter to transform Twitter, such as reducing advertising and converting the Los Angeles headquarters into a homeless shelter, and these half-serious, half-joking tweets have been deleted.
Current Twitter CEO Parag Agrawal told employees earlier this week that "there will be some disruption in the future" to "ignore the noise and focus on work."
Last year, Twitter didn't do as well relative to its competitors, losing $221 million. This is related to a settled shareholder lawsuit in which some shareholders believe Twitter misled investors about user growth and user engagement. After Twitter's co-founder and CEO Jack Dorsey resigned last November, Agraval took over as CEO.
Nine Pai News Intern Reporter Yuan Jiabei