Twitter's acceptance of Elon Musk's roughly $44 billion takeover bid brings the billionaire Tesla CEO one step closer to owning the social media platform.
The deal is expected to close sometime this year. But before that, shareholders still have to weigh in, as well as regulators in the US and in countries where Twitter does business, before the deal is completed.
Offer accepted, now what?
The process is off to a good start for Musk, given that Twitter's board has unanimously approved his offer and is recommending shareholders do the same.
Upon announcing the deal Monday, Twitter noted that the bid, which represents a 38% premium to the company's closing stock price on April 1, is a “substantial cash premium'' and would be “the best path forward for Twitter's stockholders.''
When Twitter's board adopted an anti-takeover provision known as a “poison pill'' just 10 days ago, the move was widely seen as a telltale sign that the directors were gearing up to rebuff Musk's opening offer or perhaps seek another suitor willing to pay more.
But the battleground shifted dramatically late last week when Musk disclosed he had lined up $46.5 billion _ including $21 billion of his personal fortune _ to pay for the purchase. Musk said other investors could contribute to the financing.
The locked-in financing not only underscored the seriousness of Musk's pursuit, but also appeared to open the door to other large Twitter shareholders interested in hearing more about his plans for the San Francisco company.
The details of those conversations aren't known, but Musk could point to a more than 20-year history building and running several businesses _ most notably as the longtime CEO of Tesla. The electric car maker is currently valued at $1 trillion -- roughly 25 times more than Twitter.
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“I think there is nothing better for Twitter than Elon Musk buying it and ideally replacing the board, and also doubling down on investments into products and new revenue-generating sources," said John Meyer, a technology entrepreneur and investor. “Musk has the track record that he can do the impossible."
It would be easy to see why other Twitter shareholders might welcome a shake-up, as well as an opportunity to cash out of their investment. Before Musk disclosed his 9% stake in Twitter earlier this month, the shares were trading below $40 _ not that much more it its $26 price when Twitter went public in November 2013. Since then, the tech-driven Nasdaq has more than tripled, even after a recent downturn. Twitter has been a laggard because the company has struggled to consistently post profits while generating lackluster revenue growth compared to the two dominant forces in digital advertising, Google and Facebook.
Meanwhile, Tesla's stock is now worth nearly 300 times more than when it went public in 2010. And after struggling to make money for more than a decade, the automaker is now extremely profitable with net income of $3.3 billion during the first three months of this year alone.
What happens next?
As is customary once a company agrees to be acquired, the buyer gets to take a closer look at its books to make sure there aren't any red flags that haven't come up via the company's public filings.
This step in the process isn't likely to cause any obstacles for the deal, said Angelo Zino, tech analyst at CFRA.
“He's acquiring this company, not from a financial perspective,'' Zino said. “He's going to do what he wants with it and he's probably going to look to make significant changes to the business model of the company.''
What say could regulators have?
Last year, Twitter generated $5 billion in revenue, with $2.8 billion from the US and the rest earned overseas, Zino said. The Federal Trade Commission in the US, or the European Commission in the EU, are among regulatory agencies that may review the proposed Twitter buyout.
The main issues the agencies generally focus on are how the sale of a company could affect competition in an industry, or whether it violates antitrust laws.
These reviews can take months, or longer, but generally represent more of a potential hurdle when two companies in the same industry are combining, or in the case of a single buyer, whether ownership already has a large stake in companies within the same industry.
Neither Tesla, nor Musk's other company, Space Exploration Technologies, or SpaceX, are social media platforms, so antitrust concerns are not expected to arise when regulators review the deal, analysts said.
“We do not expect any major regulatory hurdles to the deal getting done as this soap opera now ends with Musk owning Twitter,'' Wedbush analyst Daniel Ives wrote in a research note Monday.
When do shareholders get to vote?
The deal is expected to close in 2022, subject to the approval of Twitter shareholders. Twitter hasn't announced the timing of a shareholder vote, though the company's annual meeting is set for May 25, which could offer a convenient time to poll shareholders.
A company can elect to hold a shareholder vote at any time, even before regulators have finished reviewing a proposed takeover.
What about twitter leadership?
At this early stage, it's unclear what will happen to Twitter's current board or management team if the deal is completed, but Musk has made it abundantly clear that he believes the company has been poorly run. That assessment is a strong indication that Musk's makeover will also include a purge of Twitter's top ranks.
A timeline of Elon Musk's takeover of Twitter
Twitter users woke up April 4 and found the words "Elon" and "Elon Musk" trending on the site "- not because the world's richest, most-followed businessman had caused a stir with his futuristic companies, but because he'd disclosed a major stake in Twitter Inc.
Suddenly, Musk was Twitter's largest individual shareholder, with more than 9% of the company, and speculation swirled about how he would influence the network's future. He'd been frequently tweeting ideas for revamping the social media platform. Over the next week, Musk would accept an offer to join Twitter's board of directors and, in a sudden reversal, reject that offer five days later, leaving the company's management, employees, investors and interested observers guessing about his plans.
On April 25, Twitter and Musk said they'd reached an agreement for the billionaire to acquire the company and take it private. They expect the deal to close by the end of the year, and a lot could happen before then. As the news develops, here's a look at what's happened so far:
January 31: Musk starts building his stake
Musk started quietly buying Twitter shares on Jan. 31. By March 14, Musk had accumulated an over 5% stake, the point after which he was supposed to disclose the activity to the Securities and Exchange Commission, and by extension, the public. Musk missed the deadline to inform the SEC by 10 days. Because Twitter's share price rose the second his stake was revealed, he was able to accumulate more on the cheap by not disclosing "- a misstep that would later trigger a shareholder lawsuit.
March 24: Musk starts critiquing Twitter, on Twitter
His stake still secret, Musk began tweeting criticisms of the company in late March.
"Worried about de facto bias in the Twitter algorithm having a major effect on public; Twitter algorithm should be open source," Musk tweeted on March 24.
"Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?" Musk asked his Twitter followers in a poll posted on March 25.
"Is a new platform needed?" Musk asked in a tweet on March 26. "Am giving serious thought to this."
Several users commenting on the Tesla Inc. chief executive officer's tweet recommended he look into buying Twitter instead. Soon they would find out he was already acquiring shares.
April 4: Musk's stake becomes public, and he's invited to join Twitter's board
Musk's filing listed him as a passive investor, and yet, shortly after it became public, he started tweeting out business propositions for the social media company. Musk posted another poll on Twitter asking users to vote on whether they wanted the company to add an edit button that would allow people to change tweets after they've been published. Twitter CEO Parag Agrawal urged users to "vote carefully" on the poll. "The consequences of this poll will be important."
By the end of the day, Twitter invited Musk to join the board. Musk signaled that he would sign an agreement stipulating that he could not own more than 14.9% of the company's stock.
April 5: Musk becomes an active investor
In the morning, several of Twitter's board members took to the platform to congratulate Musk on his decision to join their ranks. Agrawal tweeted that the company and Musk had been chatting for weeks. Agrawal's tweet led people to question why someone engaged in discussions to become a director would file as a passive investor.
Later that day, Musk refiled the disclosure of his stake to classify himself as an active investor, making the change only after indicating that he would accept a seat on the social media company's board.
April 9: Musk rejects the board seat
The day that Musk was set to officially join Twitter's board, Musk informed the company that he would be rejecting its offer. But, Twitter sat on the news for roughly 36 hours while waiting to see whether Musk would change his mind. Twitter's investor relations website listed Musk as a board member throughout the weekend.
During that time, while the public still thought Musk was set to join Twitter's board, Musk tweeted several veiled criticisms and suggestions for the company. Musk asked his followers, "Is Twitter dying?"
Musk suggested that everyone who signs up for Twitter Blue, a subscription version for power users, should get an authentication checkmark. He suggested Twitter should convert its San Francisco headquarters into a homeless shelter "since no one shows up anyway." And he made some crass jokes, suggesting removal of the "w" in Twitter.
April 10: Twitter makes the news public
On Sunday, Agrawal sends out a note to employees, and later tweets it publicly. Neither Agrawal or Musk give a reason for the reversal.
April 11: Speculation abounds
Musk files an amended disclosure with the SEC. He can now purchase as many shares as he wants. Without a board seat, he no longer has to act in the best interest of Twitter shareholders. At Twitter, which doesn't have a founder with majority control like other tech giants, employees are " super stressed," concerned that this is only the beginning of the whiplash.
April 14: Musk offers to buy the whole company
In an SEC filing and accompanying tweet, Musk said he would buy out stockholders in a cash deal valued at $43 billion and take Twitter private. The offer is $54.20 a share, a 54% premium over the price when he started building his stake in January. The number is also an apparent (and not-very-subtle) reference to Musk's failed bid to take Tesla private in 2018 for $420 a share "- and, of course, to a special number in pot culture. Morgan Stanley is brought in to advise on the bid, which Musk describes as his "best and final" one.
April 15: Twitter adopts 'poison pill' to ward off Musk takeover
To thwart Musk, Twitter launched a so-called poison pill, which is a rights plan that allows shareholders to purchase shares at a discount if any shareholder exceeds 15% ownership. This would effectively dilute the billionaire's stake. The company said in a statement that the intention of the plan is to ensure that anyone taking control through open-market accumulation pay all shareholders an appropriate premium. Twitter has been fielding interest from other parties, including private equity firm Thoma Bravo, according to a person familiar. The company is being advised by Goldman Sachs Group Inc. and JPMorgan Chase & Co. Twitter founder Jack Dorsey, a friend of Musk, acknowledged in a tweet that as a public company Twitter has always been for sale.
April 16: 'Twitter's board owns almost no shares'
In a flurry of tweets about the potential deal, Musk said, "With Jack departing, the Twitter board collectively owns almost no shares," so its economic interests are not aligned with shareholders. Dorsey replied, "It's consistently been the dysfunction of the company." Dorsey is scheduled to leave the board once his term expires at the next shareholder meeting on May 25.
Vanguard's April 8 disclosure that it owns 82.4 million shares or 10.3% of the company fuels tweets that Musk is no longer the top Twitter shareholder.
April 19: Musk retains Morgan Stanley to consider leveraged buyout
The New York Post reports that Musk is willing to invest up to $15 billion of his own cash and borrow against his Twitter stake to push through a deal. April 21: Musk lines up $46.5 billion in funding
Musk explores a tender offer for Twitter, saying he's secured $46.5 in funding. A filing with the SEC shows that he has $25.5 billion in debt financing from Morgan Stanley and other financial institutions, including margin loans backed by his equity stake in Tesla and $21 billion in equity financing from himself. But whether the billionaire will sell part of his stake in one of his prized companies to acquire Twitter remains to be seen.
April 24: The board holds discussions with Musk
Talks between Twitter's board and Musk took place Sunday and continued into the next day. The board began to take Musk's offer more seriously once he presented details of his financing.
April 25: Musk will buy Twitter
Twitter agreed to sell to Musk for his original offer of $54.20 a share. The transaction, valued at about $44 billion, will take the company private. Musk said he will prioritize free speech on the site, open-source its algorithms, eliminate spam and add new features. Twitter said it expects the deal to close in 2022.