What will happen, if Elon Musk buys out Twitter shares

The head of Tesla and SpaceX appreciated the social network in $42 billion, but the Twitter board of directors is against the takeover

Что будет, если Илон Маск выкупит акции Twitter

TwitterTWTR$46.86BuyService in partnership with Tinkoff Investments. Quotes are updated every 15 minutes

By March, Elon Musk bought 9,2% Twitter shares, and 14 April offered to completely buy out the social network. Tell me about the events, that occurred after that.

Since the end of January, the main owner of Tesla and SpaceX, and at the same time the richest man on the planet, Elon Musk, began to gradually buy shares in the social network Twitter. By March he had bought a total of 9,2% shares and became the largest shareholder of the company.

Musk spent $2.9 billion to buy shares. 4 April, he notified the Securities and Exchange Commission of this (SEC) US 13D. It means, that the shareholder wants to take an active part in the work of the company.

Twitter notified the SEC, that Musk will join the company's board of directors for two years - until the shareholders' meeting in 2024. “He passionately supports and at the same time actively criticizes the service, and that's exactly it, what do you need, to make the company stronger in the long run", Twitter CEO Parag Agrawal.

By agreement, while Musk takes a seat on the council, he can't own a share on Twitter anymore 14,9%. As a result, the entrepreneur refused a seat on the board of directors..

What happened in the last few days

After the news of Musk's purchase of Twitter shares, they rose by 28% per day — this was the largest intraday increase since Twitter's IPO in 2013. Quotes were at their peak 51,08 $.

Что будет, если Илон Маск выкупит акции Twitter

13 April Musk filed a purchase application with the US Securities and Exchange Commission 100% Twitter for the price 54,20 $ per share. He valued the company at about $43 billion - with a premium 18,12% to the share price at the close of previous trading 12 April. If we compare the offer with the share price before the April news about, that Musk is investing in Twitter, then the premium will be 54%.

In a letter to shareholders, Musk called the offer in 54,20 $ per share "best" and final". He promised to "reconsider his position as a shareholder", if he can't buy the company.

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Musk considers "completely unjustified", if Twitter doesn't put his proposal to a shareholder vote, and will only be considered by the board of directors. Twitter CEO Parag Agrawal said, that the company is still evaluating Musk's offer.

But Musk is already having trouble with some shareholders.. One of the largest shareholders of Twitter, Saudi Prince Al-Waleed bin Talal Al Saud, refused to sell shares to Musk. He calculated the price 54,20 $ per share that does not correspond to the real value, taking into account the company's growth prospects. In 2021, at its peak, the stock traded at 77 $.

To prevent Musk from redeeming 100% companies, Twitter's board of directors decided to use the tactics of the "poisoned pill". In this scheme, shareholders buy additional shares at a deep discount., blurring the share of a potential buyer. Now to someone, including Mask, it will be harder to buy more 15% companies.

Musk has already ceased to be the largest shareholder of Twitter. One of the investors, Vanguard Group, increased its stake to 10,3%.

Why Musk Needs Twitter

Followed by Musk on Twitter 82 million users. He explained, that believes in the potential of the social network to become a platform with freedom of speech around the world. "I think, that freedom of speech is a social necessity for a functioning democracy", Musk wrote in the SEC filing..

According to Musk, in its current state, Twitter cannot "thrive and serve free speech". Only by making the company private, you can "unlock the potential" of the social network.

At the same time, Musk does not want to be the sole owner of Twitter.. He promised to keep as many shareholders, as far as the law on private companies allows.

Musk hasn't bought Twitter yet, but already made some suggestions:

  • arranged a survey, should the Twitter office be turned into a shelter, after all, "no one cares [there] does not go". Nearly 92% supported this idea;
  • offered to make a special verification tick for holders of a paid Twitter Blue subscription;
  • Asked, do you want to add a tweet edit button;
  • drew attention to the fact, that some of the most popular authors, e.g. singer Taylor Swift and singer Justin Bieber, stop posting on social media;
  • proposed to remove the letter W from the name of the company, to get Titter, and arranged a survey with the answer options "Yes" and "Of course";
  • announced the need to open the Twitter algorithm and soften the moderation policy.
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Where will Musk get the money to buy Twitter?

unknown. Speaking at TED Talk, He said, that he has enough assets and has a backup plan, if the board of directors rejects his offer to buy the company.

Forbes estimates Musk's net worth at $219 billion. The main assets of the entrepreneur are shares in Tesla and the space company SpaceX, which is not traded on the stock exchange. He can sell shares in these companies, but then it will weaken his control.

Tesla rules also allow directors of the company to receive bank loans in the area. 25% the value of their shares. Musk owns 172.6 million shares, or 17% companies, - now this package is worth $ 170 billion.

Theoretically, Musk can get the necessary amount to buy Twitter: Tesla shares alone allow you to get $ 42.5 billion, with similar calculations, a stake in SpaceX will bring another $ 12 billion. But it is not yet clear, will banks approve loans?. According to Bloomberg, Musk has already borrowed $ 20 billion on the security of shares.

While the question of selling Twitter remains open, you can read our analysis of the latest Twitter report, to understand, what business wants to buy Musk. Here are a few key metrics from the Q4 2021 report:

  • revenue increased by 21,6% - to $1.567 billion and coincided with the market consensus forecast;
  • Adjusted EBITDA fell by 4% — from 0.509 to 0.489 billion dollars against the backdrop of an increase in general expenses, which completely offset the increase in revenue;
  • net earnings per share decreased by 23% with 0,27 to 0,21 $, but turned out to be on 0,05 $ higher than forecast. Adjusted up to 0,33 $ against market expectations in 0,34 $;
  • net debt increased by 38% — from 1.499 to 2.066 billion dollars.

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