Elon Musk’s shocking Twitter buyout offer follows his rejection of a seat on the company’s board mere days ago. It also reveals the entrepreneur's deeper intentions of reconfiguring Twitter's operations, policies — and possibly its very ethos. Industry experts spell out the reasons for the unsolicited bid, the likelihood that it will be entertained seriously or accepted, as well as what may come next.
The internet’s favorite eccentric billionaire Elon Musk this morning made an unsolicited bid to purchase Twitter at $54.20 per share. The offer values the company at around $43bn — representing a 54% leap above the social platform’s valuation just over two months ago, when Musk began investing in the company.
The offer comes on the heels of a widely publicized back-and-forth between the Tesla chief exec and the social network. Following an April 4 regulatory filing that revealed Musk as the largest investor in Twitter — holding a 9.2% stake — the company offered Musk a seat on its board of directors, on the condition that he cap his ownership at 14.9%. Though the entrepreneur initially accepted the offer, he backed out last Saturday, April 9, the morning the deal was meant to be made official. Now, less than a week later, he’s forcing Twitter’s board of directors to consider a buyout.
"[Musk’s] large purchase of Twitter stock was most likely intended to get him a seat inside the organization, in order to create change from within. It was quickly apparent to him that this would not happen — hence the reversal of the… board seat [decision],” says Paul Roberts, founder and chief executive officer at adtech firm Kubient.
Roberts predicts that Musk’s new offer is likely “very troubling” for Twitter executives and board members. “They have a fiduciary responsibility to consider any and all legitimate offers that would benefit the shareholders — this would appear to fit that category."
However, as of this afternoon, Twitter's board is considering a so-called "poison pill" plan to derail Musk's takeover plans, according to reports by The New York Times. Earlier today, Twitter's chief executive officer Parag Agrawal met with employees and tried to quell their frustrations and concerns while keeping specifics of the board's decisionmaking process under wraps.
Musk has been a very outspoken critic of Twitter (while also being a prolific user of the tool, with some 80.5m followers) and has on various occasions derided the company’s content moderation policies. As recently as last weekend, prior to the announcement that he had turned down the offer for a seat on the company’s board, Musk fired off a string of since-deleted tweets musing about how he’d like to see the platform change. “Everyone who signs up for Twitter Blue (ie pays $3/month) should get an authentication checkmark,” he wrote in one tweet. “And no ads. The power of corporations to dictate policy is greatly enhanced if Twitter depends on advertising money to survive.”
As it stands, it’s estimated that close to 90% of the company’s revenue is generated from advertising. Were Musk’s takeover bid to be accepted, it’s likely that the platform would see major changes in everything from its business model to its terms and conditions of use.
“[The] valuation [of Musk’s offer is] vastly inflated, even for a company of Twitter’s stature. Musk is essentially saying, ‘I'll massively over-pay because this isn't about making money; it's about free speech.’ He's probably the only person on earth who would be willing and able to do this,” says Sami McCabe, the founder and chief executive officer at Clarity, a New York-based public relations firm.
‘No back-and-forth game’
Musk’s approach to making the offer was itself a strategic move.
Parts of Musk’s correspondence with company executives were made public in a securities filing today. The filing included text messages from Musk as well as transcripts of what appears to be a voice message or voicemail documenting the billionaire’s intentions to acquire the platform and take it private — with somewhat aggressive undertones. “I am not playing the back-and-forth game,” Musk said in the voice message. “I have moved straight to the end. It’s a high price and your shareholders will love it. If the deal doesn’t work — given that I don’t have 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.”
The apparent threat of selling his shares would almost certainly shock Twitter’s executives and board members into action. “Though he has already placed most of his cards on the table, the threat to sell his stock is genius, because he's the largest shareholder and that inevitably would have a significant adverse effect on Twitter's share price,” McCabe says. He points out that another card he’s yet to play is to threaten leaving the platform. Considering he is among the network’s most popular users, driving traffic to the platform en masse, the move might also force Twitter’s hand.
In any case, McCabe says, his aggressive approach is all part of the plan. “As a hostile takeover, shock and awe is a focal point of Musk's negotiating tactic for this bid. He is no stranger to the benefit of extending a news cycle, and an unsolicited offer, following the media coverage of Twitter the past few weeks, is only to his benefit.”
Are Clubhouse and Substack next on Musk’s shopping list?
Other industry experts are in agreement with McCabe’s evaluation. “Like so much of what Musk does publicly, we can be sure it’s a highly calculated move; he’s likely thinking several steps ahead, [with] contingencies in place,” says Nadav Shoval, the founder and chief exec at social engagement platform OpenWeb. Shoval, like McCabe, predicts that Musk knows the influence that a media storm could have in creating pressure for Twitter’s decisionmakers.
Although it’s clear that Musk has taken a strong position, it’s too soon to say whether it will pan out in his favor. Regardless of the outcome, however, the potential value that Twitter-like platforms offer to audiences, media sellers and media buyers make them an attractive draw to someone like Musk, who has the money and cultural cache to not only make a splash but possibly reconfigure entire industries.
“While the world’s richest people buying media companies is nothing new, Musk’s interest in Twitter as opposed to a traditional publisher reflects a world where social media still serves as the most powerful intermediary between audiences and publishers,” says Shoval. “Should Musk be motivated to find another social property to acquire, younger platforms with considerable name recognition and high growth potential — think Clubhouse or SubStack — may be next on his list.”