With the $44 billion acquisition of Twitter, what is Musk playing in the next game?

Musk, the world's richest man, has added another media tycoon! Just last night, he bought Twitter for $44 billion! Interestingly, Musk has been holding high the banner of free speech during this Twitter privatization campaign.

It is understood that Twitter is a social media, similar to China's Weibo, which can publish and reprint Tweets, and also has information classification modules such as hot searches. As of 2020, Twitter has 187 million daily active users. It can be said that Twitter has a huge influence in information transmission and community operations.

Musk, a loyal twitter user with more than 82 million followers on the platform, has long pushed his views on various fields such as space travel and cryptocurrencies.

Musk began buying Twitter stock in January, and by April, he was Twitter's largest individual shareholder, holding more than 9 percent of the shares. When Musk first proposed the acquisition on the 14th, Twitter explicitly refused, and even proposed the so-called "poison pill plan" to boycott the acquisition.

The specifics of the plan: If Musk buys more than 15% of Twitter stock, other shareholders will be able to buy additional new shares at a discounted price. That would make Musk's acquisition more expensive. However, Twitter's attitude towards the acquisition has changed now.

On April 25, local time, social media platform Twitter accepted Elon Musk's acquisition agreement. Under the deal, Musk will buy Twitter for $54.20 per share, totaling about $44 billion. For now, the transaction is still subject to shareholder votes and regulatory approvals and is expected to close in 2022.

Upon completion of the transaction, Twitter will become a privately held company. According to data compiled by financial market platform Deepogic, it will also be the largest transaction to take the company private in at least 20 years.

After the news of the acquisition, Twitter shares rose 5.7% on Monday (25th) to close at $51.70, nearly 40% higher than the closing price of the last trading day before Musk announced that he was the largest shareholder, lower than the purchase price proposed by Musk.

This suggests that Wall Street believes Musk's purchase price tag is too high. But when Twitter announced its goal of doubling revenue last year, its stock price rose to more than $70 a share at one point, and the purchase price was still below that range.

In terms of acquisition funding, Twitter's board said Musk has secured $25.5 billion in debt and margin loan financing commitments and will provide about $21 billion in equity financing commitments. Analysts believe the loans could cost Twitter up to $1 billion a year in service fees, or about 20 percent of the company's annual revenue.

According to reports, according to the agreement, if Musk terminates the acquisition transaction, Twitter will receive compensation from Musk. In addition, the agreement does not include a solicitation clause, which means that Twitter cannot attract other potential buyers to bid.

Regarding the acquisition, which is expected to close later this year, Twitter's shares will be delisted and privatized as part of the acquisition. Musk said it would give him the freedom to make the changes he wanted to the company, and he didn't care about the economics of the acquisition.

Musk also said on Twitter on the same day that he hopes the company can continue to provide a platform for people to express different opinions. In addition, Musk also said that he hopes to make Twitter's algorithm public to clarify the specific logic of content recommendation and blocking.

Former President Donald Trump was silenced last year for violating Twitter rules, a move that drew outrage from Trump and many conservative politicians. Musk has made it clear that he doesn't like what he sees as the company's censorship policy. So, will Trump come back?

As of now, Musk has not publicly stated whether he will restore former President Trump's Twitter account after the acquisition of Twitter. Trump, however, said that even if the Twitter account is restored, it will not use the platform.

At the moment, the biggest question facing Twitter should be who Musk will appoint as the new CEO? Twitter founder Jack Dorsey abruptly resigned as CEO last November and was replaced by Parag Agrawal, who had served as CTO. Musk himself is a supporter of Dorsey, and after Aglarawal was named CEO, he also tweeted that Agurawal was a dictator.

In addition, if Twitter CEO Agrawal is fired within 12 months of the change of control of the company after the Musk deal is completed, he will receive a huge compensation of about $42 million.

Under great uncertainty, twitter has seen "civil unrest." Many employees questioned the company's top management how to preserve the company's culture once Twitter was acquired. Some employees suspect that Twitter will completely violate its own values and even become a "prisoner" of Musk.

Twitter said it had no intention of laying off employees and would temporarily freeze the recruitment plan, saying that the company would continue to operate normally until Musk completed the acquisition transaction, and the employee stock ownership incentive program would continue to advance.

After becoming a delisted private company, Musk needed to restructure the payroll system for Twitter employees. The current stock rewards program is meaningless. Will past stock rewards be replaced by new Twitter's equity, so that if Twitter goes public for the second time, employees still have a chance to get rich.

In addition, Musk has previously said harshly that if the acquisition is successful, the salary of Twitter's board members will be reduced to 0. Twitter's directors earn $250,000 to $300,000 a year, and Musk said that if he successfully acquires Twitter, he will no longer need the board of directors and save $3 million a year.

Previously, on the issue of Twitter's functionality, Musk has posted many times in the past, using a "crowdsourcing" method to collect opinions, such as he asked his 83 million followers whether they wanted a post edit button. In the future, will he make Twitter decisions based on the opinions of fans?

Musk's entry into Twitter the dust has settled, and Twitter's change has just begun. For Twitter, will Musk learn from Bezos, having an independent management team run the privately acquired Washington Post, and will he be a hands-off boss?

Disclaimer: The views of any article of ESheng Securities are for learning and exchange, and are not investment advice.