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Acquisition of Twitter by Elon Musk

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On April 14, 2022, American entrepreneur Elon Musk proposed to buy out social media company Twitter, Inc., after previously acquiring 9.1% of the company's stock for $2.64 billion, becoming its largest single shareholder. Twitter then invited Musk to join their board of directors, which Musk accepted before changing his mind. In response to Musk's proposal, Twitter announced a "poison pill" strategy to allow shareholders to purchase additional stock in the event a buyout should occur. On April 25, 2022, Twitter's board of directors unanimously accepted Musk's buyout offer of $44 billion, with the company set to become privatized. As of April 2022, the acquisition is pending approval from regulators and shareholders.

Background

See also: Elon Musk § Twitter

Elon Musk published his first post (tweet) on his personal Twitter account in June 2010,[1] and had more than 80 million followers at the time of the purchase.[2] In December 2017, in response to a tweet suggesting Musk buy Twitter, he replied, "How much is it?"[3]

On March 20, 2022, the Twitter account of the conservative satire website The Babylon Bee was suspended for referring to U.S. Assistant Secretary for Health Rachel Levine, a transgender woman, as their "Man of The Year", which Twitter stated violated its policy on "hateful conduct".[4] The Babylon Bee refused to delete the tweet in order to regain access to the account, and Twitter rejected their appeal.[5][6] According to Babylon Bee CEO Seth Dillon, the website was contacted by Musk shortly after the suspension to confirm whether they had been suspended, who mused that he "might need to buy Twitter".[7] On March 24, 2022, Musk began tweeting statements critical of Twitter,[8] polling his followers on whether Twitter adhered to the principle that "free speech is essential to a functioning democracy".[9]

Plans and specifications

Musk has stated that his first plan is to make the algorithm that ranks tweets in the content feed open source, in order to increase transparency. He has stated his intention to remove spam bots, and to "authenticate all real humans".[10] He also proposes an "edit button", and provocatively suggests converting the San Francisco headquarters into a homeless shelter, "... since no one shows up anyways".[11] Former Twitter CEO Jack Dorsey tweeted his support for the acquisition, stating "Elon is the singular solution I trust".[12] Musk has stated that he does not have confidence in the management.[13]

Prelude

Early developments

Musk had begun to buy Twitter shares on January 31, 2022.[8] On April 4, Musk announced that he had acquired 9.1 percent of Twitter's stock for $2.64 billion on March 14,[14] making him the company's largest shareholder.[15] Following the announcement, Twitter's stock experienced its largest intraday surge since the company's initial public offering (IPO) in 2013, rising by as much as 27 percent.[16] On April 5, Twitter invited Musk to join the company's board of directors,[17] which Musk accepted.[18] The position would have prohibited Musk from going beyond a 14.9-percent ownership stake.[19] Four days later, before Musk's appointment was set to take effect, Musk reversed his decision to join the board after publishing several tweets critical of the company. One of the reasons Musk was believed to have not joined the board is because board members are limited to a 15% stake in Twitter each.[20]

Takeover bid

On April 14, Musk made an unsolicited and non-binding offer to purchase the company for $43 billion, or $54.20 per share, and take it private.[21] The bid was described as a hostile takeover attempt,[22][23] with the company responding that the board would "carefully review the proposal to determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders".[24] Musk stated that he believed in the company's "potential to be the platform for free speech around the globe", calling free speech a "societal imperative for a functioning democracy" and insisting that he had not made the offer to increase his wealth.[25][26] The price of $54.20 per share is believed to be a reference to 420, a slang term in cannabis culture for marijuana consumption.[27]

On April 15, Twitter's board of directors announced a "poison pill" strategy, which would allow shareholders to purchase additional stock in the event a hostile takeover should occur; the plan will expire on April 14, 2023.[28] On April 20, Musk disclosed that he had secured $46.5 billion in funding, including from Morgan Stanley, Bank of America, Barclays, MUFG, Société Générale, Mizuho Bank, and BNP Paribas, for a potential tender offer to acquire the company.[29] The loans are estimated to cost Twitter approximately $1 billion in servicing fees.[30] Two days later, Musk registered three holding companies under the name "X Holdings" in preparation for his takeover.[31]

Buyout

On April 24, multiple outlets reported that Twitter was in final negotiations to accept Musk's offer,[32][33] with a deal expected to be reached by the next day.[34] However, Reuters cautioned that the deal could still fall apart at the last minute.[35] Twitter's board publicly and unanimously accepted the buyout offer on April 25 for $44 billion, and Twitter will become a private company once the transaction is completed sometime in 2022.[36] Musk reemphasized his future plans for Twitter after the acceptance, including introducing new features, making algorithms open source, reducing spam bots, and authenticating all humans.[37] The deal will require shareholder and regulatory approval before it can be finalized,[38] though analysts believed it was unlikely to be challenged by regulators.[39] It was reported that Twitter CEO Parag Agrawal will receive $39 million from the buyout while Twitter's co-founder Jack Dorsey will receive $978 million.[40]

Reactions

Following Musk's induction to Twitter's board of directors on April 5, Agrawal wrote that he believed Musk's appointment would bring long-term value to the company, while Dorsey wrote that Musk "cares deeply about our world and Twitter's role in it".[18] On April 11, Agrawal stated that he believed Musk's withdrawal from the board was "for the best", observing that the company would "remain open to his input".[20] The next day, Twitter shareholders sued Musk for allegedly manipulating the company's stock price and violating SEC rules.[41]

On April 14, Twitter employees expressed concern with Musk's views on free speech,[42][43] which was echoed by other technologists.[44] Many conservative commentators and politicians expressed enthusiasm for changes to Twitter proposed by Musk.[45] On April 19, the National Urban League urged Twitter to turn down Musk's takeover bid, warning of potentially negative consequences on users' civil rights.[46] On April 22, House Republicans in the U.S. demanded that Twitter's board preserve all records pertaining to Musk's takeover proposal, which sets the stage for a potential congressional probe following the 2022 midterms.[47] According to a poll conducted by Harvard University's Center for American Political Studies (CAPS) and the Harris Poll, 57 percent of American voters approved of Musk's purchase of Twitter.[48] Jimmy Patronis, the Chief Financial Officer of the state of Florida, praised Musk's offer and was critical of Twitter's "poison pill" strategy.[49]

On April 25, following reports that Twitter was poised to accept Musk's offer, Twitter's shares rose by 5 percent.[50] Agrawal applauded the purchase, saying that he was "deeply proud of" Twitter's work,[51] and assured employees that no layoffs were planned.[52] Similarly, Dorsey endorsed the sale, saying that "taking [Twitter] back from Wall Street is the correct first step".[53]

Republican lawmakers in the U.S. Congress such as Jim Jordan, Yvette Herrell, Marsha Blackburn, and Ted Cruz praised the deal, calling it a restoration of free speech. On the contrary, Democratic lawmakers such as Pramila Jayapal, Jesús García, Marie Newman, and Mark Pocan criticized Musk and the buyout.[54] Former President Donald Trump expressed approval with the deal but stated that he would not rejoin the platform, even if unbanned.[55] Henrik Fisker, an electric vehicle designer and a rival of Musk's, left Twitter shortly after the acquisition announcement.[56] Jeff Bezos questioned whether Tesla's business interest in China would give the Chinese government leverage over Twitter via Musk, before answering that it would "probably not".[57][58] Some LGBTQ users and activists have expressed apprehension of the deal, fearing that the re-platforming of suspended Twitter accounts will lead to a rise in opinions they dsagree with that they mis-label hate speech.[59]

The European Commissioner for Internal Market, Thierry Breton said, "Be it cars or social media, any company operating in Europe needs to comply with our rules – regardless of their shareholding." The European Union stated new online rules will "overhaul" the digital market, together with tech giants.[60]

References

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  60. ^ Elon Musk warned he must protect Twitter users BBC

Further reading

External links

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