Producer / Sina Technology(ID:techsina)
From meticulous preparation to single-handed attack, to pressure, to complete the hunt, Musk spent three months turning the world's most influential social media tweet into his own private asset.
Twitter eventually agreed to sell
On Monday, US time, Twitter's board of directors announced that it had reached an agreement with Musk to accept an all-cash offer of $54.2 per share. The offer is a 38% premium to the share price before Musk announced his own holding of Twitter, valuing Twitter as a whole at $44 billion.
The hostile takeover war around the world's most influential social media has come to an end for the time being that Musk has fulfilled his long-cherished wishes. Barring a follow-up unforeseen circumstance, Twitter will delist after the acquisition is complete and become Musk's personal asset. It is worth mentioning that there are no financial conditions set for this transaction.
Twitter's board unanimously approved the sale. The deal is expected to close in 2022, but is subject to Twitter shareholder approval, regulatory approval and completion of other conditions. It is also currently the world's largest privatization deal.
After the two sides reached an agreement, Musk issued a statement saying that freedom of speech is the cornerstone of the operation of democratic institutions, and Twitter is a civic square in the digital age, which is crucial for discussion on the future of mankind. I've also improved products with new features, opened up platform algorithms to enhance trust, combated fake trolls, verified all human users, and helped make the Twitter platform better.
Bret Tylor, Twitter's independent chairman and co-CEO of Salesforce, said the board conducted a detailed and comprehensive assessment of Musk's acquisition offer, especially in terms of value, certainty and financing. The deal could result in a substantial cash premium, which the board believes is the best way for Twitter shareholders.
Twitter CEO Parag Agrawal said in a company statement that Twitter has a purpose and relevance to impact the entire world. We are proud of our team and inspired by the incomparable importance of our work.
Three months of hunting Twitter
On April 14, Musk filed a filing with the U.S. Securities and Exchange Commission (SEC) announcing his proposed $43 billion acquisition of Twitter and turning Twitter into an unlisted company. He has publicly stated that he does not believe Twitter can complete the necessary changes under its current structure and must take twitter private.
Prior to this, Musk had accumulated 73.5 million shares of Twitter's common stock since the end of January, with a shareholding ratio of 9.2%, becoming Twitter's largest shareholder. After refusing to join Twitter's board, Musk's plans to buy Twitter are well known. Because the condition for joining the board is that Musk agrees not to hold more than 15% of the shares and will not buy the company.
In the face of Musk's $43 billion hostile takeover offer, Twitter's board had already shown its rejection with the "poison pill plan". According to the poison pill plan, if there is a foreign investor whose shareholding ratio exceeds a certain proportion, the board of directors will issue preferred shares to existing shareholders, greatly diluting the acquirer's shareholding ratio and voting rights.
Despite encountering the poison pill plan, Musk did not give up. In the past week, Musk has come up with $46.5 billion in financing credentials, proving his determination and financial strength to wholly acquire Twitter. He won support by shouting at Twitter investors on public platforms to pressure the board and meeting with several of Twitter's major institutional investors.
On Friday, he unveiled his specific acquisition financing arrangements: Morgan Stanley and others would provide $13 billion in loans, $12.5 billion in collateral with Tesla stakes and $21 billion in cash. This is undoubtedly amazing, because even the hundred-billionaire super-rich have very few people who can come up with tens of billions of dollars in cash.
As Musk came up with proof of financing and enlisted the support of Twitter's institutionalists, Twitter's board had to make major concessions, change its previous resistance, and decide to seriously consider Musk's offer. According to US media reports, Twitter's board of directors negotiated directly with Musk late Sunday night, and finally reached an agreement on Monday.
The board eventually gave in
It's unclear why the board suddenly changed its previous staunch stance, but perhaps the core problem is that Twitter's board lacks sufficient voting power. The combined holdings of the 11 members of Twitter's board of directors are less than 2.5 percent, and if you don't count the 2.253 percent of co-founder Dorsey, the remaining 10 people have less than 0.1 percent of the shares combined.
Unlike other internet companies, Twitter is a company with a very fragmented ownership structure. In addition to Musk's 9.2% stake, Twitter's top shareholders Vanguard, Morgan Stanley, Blackstone and State Street are all institutional investors, holding 8.8%, 8.4%, 6.5% and 4.5% respectively. After Musk announced his shareholding, vanGuard, the original largest shareholder, increased his stake to 10.3%, once again becoming Twitter's largest shareholder.
It is worth noting that Morgan Stanley is not only Twitter's third largest shareholder, but also the financial adviser and financing institution for Musk's acquisition of Twitter. They are the main backers of Musk's acquisition of Twitter. Musk looked like he was bound to win. He made it clear in the offer that he would not bargain back and forth, and that this was the highest and final offer he could make. If the acquisition fails, he will reconsider his status as the largest shareholder (meaning a sharp sell-off of his shares, which could trigger a sharp drop in Twitter's stock price).
Dan Ives, an analyst at brokerage Wedbush, wrote in the report that unless Twitter's board can find a second offer, (that is, bring in new investors to buy Twitter), Musk looks like it is heading in the direction of acquiring Twitter. Previously, many people believed that unless Musk raised the offer to $60, the Twitter board could seriously consider it.
Musk not only made an offer, but also launched a "heart-attack war". Over the past month, Musk has repeatedly publicly criticized Twitter's many current drawbacks, from feature development to paid packages, to public algorithms and freedom of speech, and he promised that after he became the owner, he would make major changes to Twitter, but must take Twitter private, which is the direct reason for his acquisition of Twitter. Musk bluntly criticized Twitter's management, "Twitter's existing management can't push the stock price to his offer." Under the existing structure, Twitter cannot prosper or fulfill its social responsibilities. ”
Twitter shares have fallen 10 percent since Twitter's new CEO, Agravar, took office last December. While Twitter is on track to meet this year's performance targets, investors remain uncertain about Twitter's growth prospects under its new CEO. Perhaps some institutional investors are willing to accept Musk's offer, while pressure on Twitter's board to accept the offer.
There are no super voting rights
The root cause of Twitter's inability to resist hostile takeovers was laid eight years ago. When Twitter went public in 2013, it did not set up a dual shareholding structure of AB shares like Meta or Google, giving the company's founders and executives super voting rights, but strictly distributed voting rights in a one-share-one-vote manner.
Zuckerberg, for example, owns less than 20 percent of Meta's Class A shares and 88 percent of Class B shares, while a small number of Class B stocks have 1-10 super voting rights. Thanks to this structure, Zuckerberg actually holds more than 70 percent of Meta's voting rights, even though he owns less than 20 percent of Meta's shares, and if combined with his allies' stakes, Zuckerberg actually holds more than 70 percent of Meta's voting rights.
Even Internet companies that are already listed can also split their shares at a later stage. Although Google was listed and traded as early as 2004, it also carried out a dual system reform in 2014. Google's stake setup is even more complex, including ordinary 1:1 Class A shares, 1:10 super voting Class B shares, and non-voting Class C shares. This complex shareholding structure is set up to ensure that the two founders, Page and Brin, have a firm grip on the company.
Thanks to this super-voting structure, unless Zuckerberg and Page Brin themselves let go, no matter how high the price paid and controlled no matter how much common stock, they could not take control of Meta and Google, nor could they launch a hostile takeover.
Unfortunately, Twitter's founders don't have much say. Of Twitter's three co-founders, only Dorsey is still on the board and is leaving next month. In fact, Dorsey himself left Twitter by activist investors, and he could not even keep his position.
For the past few years, Dorsey has held both the CEO positions of Twitter and Square (which has been renamed Block), and he is also a co-founder of both companies. However, the stock prices and performance of the two listings are significantly different, and Twitter's stock price continues to be depressed and growth has stagnated, which has put Dorsey's dual CEO position in many questions. Investors complained that Dorsey could not focus on leading Twitter to boost shareholder value, arguing that there was a conflict of interest in his "two boats".
In March 2020, activist Elliott Funds (a U.S. private equity giant and AC Milan holder) bought a $1 billion stake in Twitter (4% at the time), pressuring Dorsey to resign as CEO of Twitter. While Dorsey promised to increase board seats to temporarily stabilize disgruntled institutional investors, he eventually stepped down as CEO at the end of November.
If the Elliott Fund is only intended to push for a change in Twitter's management, then Musk, the world's richest man, directly privatized Twitter to satisfy his idea of a comprehensive change in Twitter. Twitter, which did not have super voting rights, ultimately succumbed to pressure from Musk and institutional investors.
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