Elon Musk offers to buy Twitter

Elon Musk offers to buy Twitter

According to an SEC filing, Musk has offered to buy all of Twitter he doesn’t own for $54.20 per share, valuing the company at $41.4 billion. That represents a 38% premium from the close on April 1, the last day of trading before Musk announced that he had become Twitter’s largest shareholder, and an 18% premium from Wednesday’s close.

Musk said the cash offer was his “best and final offer,” according to the SEC filing, adding that if it is not accepted, he will have to reconsider his position as a shareholder.

The Tesla CEO sent the company an offer letter on Wednesday evening, the filing said.

“I invested in Twitter because I believe in its potential to be the platform for free speech around the world, and I believe that free speech is a societal imperative for a functioning democracy,” he said in a letter to the public he sent to Twitter. “However, since making my investment, I have come to realize that the company will not thrive in its current form, nor will it serve this societal imperative. Twitter needs to be turned into a private company.”

The letter was addressed to Bret Taylor, Twitter’s chairman of the board, not CEO Parag Agrawal, who assumed the title last fall. It concludes: “Twitter has exceptional potential. I will unlock it.”

Twitter issued a statement on Thursday confirming it had received the offer. The company said its board will carefully review the proposal “to determine what course of action it believes is in the best interests of the company and all Twitter shareholders.”

Shares of Twitter (TWTR) shot up as much as 13% in premarket trading on Thursday, but soon retreated. Shares traded up about 6% after the market opened, suggesting investors had doubts the offer would be accepted.

But it will be difficult for Twitter to turn down Musk’s offer at the price he’s offering, said Dan Ives, a tech analyst at Wedbush Securities.

“Musk has his back on the Twitter board,” Ives said. “The premium is at a level that is difficult to see in other bids.”

But to generate a return on such a high bid, Twitter would need to do more to generate subscriber revenue and cut costs, Ives said. Musk’s commitment to using the company to promote more freedom of speech doesn’t do much, if anything, to boost its profitability.

“Musk making this about free speech is the complete opposite of what any other corporate predator would do to monetize the value of the company,” Ives said. “It’s historical and bizarre at the same time.”

Musk has far more Twitter followers than any other CEO at 81.6 million and is a far more prolific tweeter than the handful of celebrities who have more followers.

While other critics of Twitter complain that the social media platform hasn’t done enough to control the spread of misinformation, Musk has expressed more concern about efforts to limit what users can tweet. Last month he said he was “seriously thinking” about creating a new social media platform. “Given that Twitter serves as a de facto public marketplace, failure to uphold the principles of free speech fundamentally undermines democracy,” Musk said tweeted Last month. “What is to be done?”

Last week, Musk announced that he’d bought shares of Twitter since late January and spent $2.6 billion to amass 73.1 million shares, which at the time accounted for 9.1% as of the company’s stock at that time Time announced the number of shares held by investors.

But in February, Twitter announced it would buy back $2 billion worth of stock to boost its share price. And on Thursday, the company said it had 37 million fewer shares outstanding than previously reported.

This reduction in the total number of shares increased Musk’s holding to 9.6% without requiring him to purchase a single additional share. And it reduced the company’s overall value by $2 billion, based on Musk’s asking price of $54.20.

After the disclosure of Musk’s stock purchase, he first accepted an offer for a seat on the board, an agreement that capped his total investment in the company at 14.9%.

On Sunday, Twitter CEO Parag Agrawal announced that Musk had decided not to join the board, removing that limit.

Musk has been unusually silent about his plans for Twitter in the days since.

Musk did not reveal how he intends to finance his purchase. He said he had hired Wall Street giant Morgan Stanley (MS) as his financial advisor on the transaction. Despite Musk being the richest person on earth, most of his $274 billion net worth is tied up in his holdings in publicly traded Tesla and privately held SpaceX, and he’s been reluctant to sell shares of Tesla beyond what he’s fine with needed to pay taxes. Shares of Tesla (TSLA) are down 3% in early trading Thursday, possibly on concerns that Musk would sell shares to raise cash or that his recent interest in Twitter will distract him from his duties at Tesla could.

It’s very possible that Musk doesn’t need to sell Tesla stock and can instead use it as collateral to borrow the money he needs to buy Twitter, Ives said. Musk’s Tesla shares are worth around $177 billion, even with Thursday’s modest drop in premarket trading.

“Banks will be lining up to be part of the consortium of lenders for the world’s richest person,” Ives said.

Musk isn’t a fan of his companies being publicly traded. While other private space exploration companies such as Virgin Galactic (SPCE) have gone public, SpaceX has remained privately held despite speculation that it is ripe for an IPO. And in August 2018, he announced — on Twitter — that he was considering taking Tesla private, saying that he thought it was the best way forward.

Musk’s tweet about the Tesla privatization, saying he had secured funding for the deal when he hadn’t, landed him in trouble with the SEC. He was eventually forced to resign as Tesla CEO and agree to have his tweets containing material information about Tesla reviewed by other company executives.

Privatizing a company or keeping it private reduces the oversight that the regulator has over its operations.

The price he was then proposing for Tesla, $420 per share, was seen to mark April 20, the unofficial holiday of marijuana enthusiasts. The $54.20 per share offer for Twitter also includes “4.20.”

— Brian Fung and Brian Stelter contributed to this article.