The "Poison Pill Project" could not stop Musk's "banknote capacity", and Twitter accepted $44 billion in privatization

Four years ago, Tesla was not successfully privatized, and this time the privatization of Twitter, Musk was a great success.

In 2018, Musk tweeted that he planned to take Tesla private at $420 per share, a tweet that plunged him into a lawsuit by the SEC and Tesla shareholders. Despite a later settlement with the SEC, the shareholders' class action lawsuit continues, and the latest ruling in a U.S. court shows that Musk's tweet at the time was false information.

But Musk's "path to privatization" didn't end there, and this time he targeted Twitter.

On April 26, Beijing time, Twitter announced that the company's board of directors accepted Musk's acquisition plan, agreeing that Musk would take Twitter private at a bid of $54.2 per share and a total amount of $44 billion. The acquisition is expected to close within this year, when Twitter will become a private company.

Previously, Twitter had tried to block Musk's full acquisition with the "poison pill plan", but in a press release issued on April 26, Twitter said that after a comprehensive evaluation, the board of directors believed that the acquisition would bring a considerable cash premium, and it was in the interest of all shareholders to choose to accept Musk's acquisition plan.

After Twitter announced his acceptance of the acquisition, Musk said on Twitter that he hoped those who had been fiercely critical of him would also stay on Twitter, "because that's what free speech means." ”

After Musk's acquisition of Twitter, a series of new changes to the platform are expected. Earlier, Musk said in Twitter and interviews with the media that after he joined Twitter, he would open source Twitter's algorithm and launch an "edit button" to allow users to modify published tweets in a short period of time. Musk also plans to crack down on zombie accounts and spam, and possibly reopen former U.S. President Donald Trump's Twitter account, even though the latter has indicated that he will not return to Twitter.

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Twitter's "poison pill plan" is difficult to block Musk's "banknote ability"

Looking back at the whole process of Twitter's privatization, it can be seen that Musk is confident about this acquisition.

According to Musk's filing with the SEC, since January 31 this year, Musk has successively bought 9.1% of Twitter shares, once becoming the largest shareholder of Twitter.

To avoid a full takeover of the company by Musk, Twitter management invited Musk, who has become the company's largest shareholder, to join the board. The two sides agreed that if Musk chooses to become a member of Twitter's board, his stake will not exceed 14.9% during his tenure on the board.

But Musk refused to become a board member and immediately threw up the acquisition plan, hoping to buy Twitter for $54.20 per share. At the time, Musk said it was his best offer and his last — a price 38 percent higher than it was then, as calculated when Musk announced he became Twitter's majority shareholder on April 1.

When Musk was first quoted, The Twitter board did not agree, and although the offer was higher than the market price, Twitter's stock price reached a maximum of $80 per share a year ago, and the board believed that Musk's offer undervalue Twitter. As a result, Twitter's board of directors again obstructed and on April 19 approved a shareholder rights plan, the "Poison Pill Plan": When any individual or entity increases its shareholding to 15% without board approval, Twitter will allow existing shareholders other than 15% to buy Twitter's shares at a discount, thereby diluting the control of major shareholders.

But unlike most tech companies, Twitter's board members hold very low stakes, currently holding less than 3 percent of the company, and if former CEO Dorsey's 2.253 percent stake is excluded, the remaining directors have only 0.12 percent.

So if Musk can convince enough institutional investors to back it up, it can successfully acquire Twitter. It is understood that Twitter's shareholding is mainly controlled by major asset management companies, of which Vanguard Group is the largest shareholder of Twitter, and the company increased its stake in Twitter in the first quarter, with a shareholding ratio of 10.3%.

After Musk announced the financial guarantee of the acquisition plan, the board began to waver and eventually accepted the acquisition plan. This is largely due to Musk's "banknote capabilities." According to the 2022 Global Billionaire List released by The American Fortune Magazine Forbes, Musk became the world's richest man with a net worth of $219 billion.

Although he is the richest man in the world, musk's wealth comes mostly from his Tesla shares, and if he reduces his holdings, he will face a huge tax collection, which will also have a negative impact on Tesla's stock price, so the funds for the acquisition of Twitter will be provided by a consortium. On April 21, Musk unveiled a fundraising plan, and the syndicate, including Morgan Stanley, was willing to provide a total of about $46.5 billion to help Musk achieve the acquisition.

A April 26 Twitter press release revealed that Musk has secured $25.5 billion in debt and margin loan financing commitments and will provide about $21 billion in equity financing commitments.

Although the board of directors has approved the acquisition plan, it does not mean that the transaction has been completed, and Musk's acquisition still needs to be approved by the Twitter shareholders' meeting and regulatory authorities such as the SEC. Musk now owns 9.1 percent of Twitter and is the company's second-largest shareholder, but Saudi Prince Al Waleed bin Talal Al Saud, who holds a 5.2 percent stake in Twitter, has expressed opposition to Musk's takeover, arguing that the purchase price does not reflect Twitter's value.

After Musk takes charge, Twitter will usher in a number of reform measures

After Twitter issued a press release announcing the acceptance of the acquisition plan, Twitter immediately held a staff meeting inside, the company's CEO Parag Agrawal said that until the acquisition plan is completed, Twitter's operations will remain unchanged, as to whether to reopen the account of former US President Trump, he said that the company will discuss the direction of operation with Musk.

After announcing himself as Twitter's majority shareholder on April 1, Musk identified himself as an "absolutist" of free speech, and he has since repeatedly emphasized that free speech is the cornerstone of democratic operations, and Twitter is a virtual "town square" where issues vital to the future of humanity can be discussed.

After Twitter announced that he accepted the acquisition, Musk said he wanted those who were fiercely critical of him to stay on Twitter as well, "because that's what free speech means." ”

In addition, Musk also proposed in an interview with Chris Anderson, the head of TED, that he wanted to disclose Twitter's algorithm, hoping that Twitter's policies and algorithms would be more open and transparent, so that users could criticize and improve Twitter.

Synthesizing Musk's remarks on Twitter and TED, he will drive the company's transformation after the acquisition of Twitter, such as lowering the price of Twitter Blue. Twitter Blue is a membership service offered by Twitter that provides users with advanced features such as a dodo button that allows users to retract a Tweet before sending it. Musk believes that since Twitter Blue is a paid service, it should no longer show ads to these users. In addition, he has also proposed that Dogecoin should be accepted as a payment method for Twitter Blue — after Twitter announced that it accepted the acquisition plan, the price of Dogecoin soared by more than 20%.

In terms of improving the user experience, Musk said Twitter should roll out an "edit button" as soon as possible. Unlike other social media such as Facebook, Twitter doesn't allow users to modify their own tweets, and Musk believes that an "edit button" can help users modify tweets more conveniently. In addition, for the zombie accounts and spam on Twitter, Musk promised to launch a "war" to fight the water army and fake tweets, he said on Twitter, hoping to ensure that all users are used by real humans through verification.

These measures will play a key role in Twitter's transformation. In fact, Twitter's business performance in recent years has been poor, with $5.08 billion in revenue and a net loss of $220 million last year, and five of the last seven years of failing to make a profit.

Still, Twitter remains one of the most important social media platforms in the world, with 192 million daily active users, political celebrities such as former U.S. President Barack Obama being users of Twitter, and Musk has more than 80 million followers on Twitter.

On April 28, Twitter will announce the results of the first quarter of this year, but because the transaction with Musk has not yet been completed, the company will not hold an earnings conference call.

Beijing News shell financial reporter Lin Zi Editor Chen Li proofread liu jun