Elon Musk chokes up on bid to swallow Twitter

By Paul Hemsley

April 21 2022
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The battle of the bird has intensified over the last week, as Tesla and SpaceX founder Elon Musk has ramped up his aggressive campaign to buy the entirety of social media giant, Twitter.

But Twitter’s shareholders, having a gutful of Mr Musk’s increasingly apparent move of a potential hostile takeover, aren’t going to simply roll over and accept his bid to swallow up the company and transform it into his own vision of a privately owned free-speech utopia.

After Mr Musk’s landmark purchase of a 9.2 per cent stake in Twitter, valued at US$2.9 billion earlier this month, making him the company’s biggest shareholder, his pursuit of an even bigger slice of the company didn’t end there.

Last week he made an offer to buy Twitter outright in a filing with the United States Securities and Exchange Commission (SEC) for US$54.20 per share, in what would amount to a total of US$43 billion.

It’s an extraordinary figure for what is widely regarded as one of the most prominent and influential social media platforms presently operating, alongside Facebook and Instagram, but Mr Musk’s outspoken opposition to Twitter’s algorithm-based moderation practices has largely been the catalyst in his quest to take over the site and potentially overhaul its controversial moderation policies.

Influenced by Mr Musk’s takeover bid, US media reports have indicated that his move has attracted other interested parties, including private equity firm Apollo Global Management – its potential move is understood to involve offering ‘debt financing’ to other potential buyers.

But in a united front to block any potential acquisition bids, Twitter’s shareholders have adopted a so-called “poison pill” strategy, which the mark uses to prevent or discourage a potential hostile takeover by another entity to make itself look less attractive to a prospective buyer.

This strategy also prevents Mr Musk or any other shareholder from owning more than 15 per cent of the company, enabling Twitter more time to form other contingencies down the track in anticipation of further aggressive takeover moves from Mr Musk.

Twitter’s defensive response to fortify its shareholders’ positions was met with the first hints of doubt from Mr Musk in whether he would be able to acquire the company, speaking at a TED conference revealing a “Plan B” if his offer would be rejected.

Although he didn’t elaborate on what his stated back-up plan would encompass, his further statements could come as a relief to shareholders nervously tightening their defences, despite shares dropping by 1.7 per cent after his offer.

“If the deal doesn’t work, given that I don’t have the confidence in management, nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder,” Mr Musk said.

Although Mr Musk’s ambitious bid to take over Twitter has been met with a large amount of global publicity and is the most recent cautionary tale in the history of corporate acquisitions, governments have been active in monitoring the markets to ensure smooth resolutions between parties in takeover deals.

The Australian government presently uses its own statutory body called the Takeovers Panel, a peer review body created as the primary forum for resolving disputes over takeover bids, and has the power to declare whether certain takeover circumstances are acceptable or not.

However, in the United States, the playing field is different as takeover disputes are examined and resolved in the courts, which is a potential landing pad for the dispute between Mr Musk and Twitter should his takeover bid drag out.

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