The news fell like a bomb on Thursday, April 14, 2022: Elon Musk, the richest man in the world, proposes to buy the entire capital of Twitter at a price per share higher than the current price. Indeed, his offer stands at $54.20 per share against a current price of $46.73.
The purchase of 100% of the shares would represent a total valuation of about $43 billion. However, Elon Musk says he can make this purchase in cash, offering a significant premium to shareholders.
The goal of the billionaire behind the proposal is to turn Twitter into a private company. Elon Musk has already expressed himself several times about the freedom of expression that he considers largely limited on most social networks, including Twitter.
In the case of a public company (listed on the stock exchange) like Twitter, the purchase of 51% of the shares is not enough to make the company private. Indeed, federal law limits the number of shareholders of a private company to a maximum of 2,000 (compared to 500 before the JOBS Act)
The offer could be communicated to the SEC (Securities and Exchanges Commission) during the day:
“I invested in Twitter because I believe in its potential as a platform for free speech around the world, and I believe that free speech is a societal imperative for a functioning democracy.
However, since that investment, I realize that the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be turned into a private company.”Elon Musk
The founder of SpaceX proposes a price per share well above the previous price of his first purchase of 9% of shares. He also insists that this potential transition to a private company is essential for the validity of his investment. Leaving the implication that he could sell his shares in the event of refusal.
“I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I will have to reconsider my position as a shareholder.”source: SEC
Is the purchase of twitter by Elon Musk theoretically and concretely possible?
In theory, Elon Musk could well buy the whole of Twitter by paying nearly 43 billion dollars and taking the company private. With an estimated fortune of over $210 billion, money won’t be a concern for the entrepreneur. Liquidity could be an issue, although the majority of his wealth is in the form of shares in his various companies, including Tesla.
For this Twitter purchase to take place, the selling party must find an interest and the above-market price Musk is offering seems to go directly in that direction. Since the billionaire started buying Twitter shares, the price has risen impressively, and this additional premium of +10% is far from negligible. Shareholders should also keep in mind that in case of refusal, Elon Musk would be ready to resell his shares, certainly causing the share price to fall.
The proposal may seem attractive from a financial point of view, but it is not the best of the day…
Twitter shareholders could have been satisfied with this news for the day, but another billionaire decided to outbid and propose $60 per share against Elon Musk’s $54.20.
This is Justin Sun, the Chinese entrepreneur and founder of TRON (TRX) who made his proposal directly on the social network Twitter.
Sun adds that he supports the initiative of Elon Musk, but wants to insist on a Web 3 and open source reform of Twitter.
Many Internet users suspect that the billionaire has set up a plan of forced takeover. The objective is to become the largest shareholder of the company, to propose himself to the board before refusing and finally threaten to sell his shares, making their price fall if Twitter would refuse a total buyout.