Elon Musk at the gate.
Elon Musk at the gate.
Elon offers to take Twitter private at $54.20 per share!
Elon Musk has made a “best and final” offer to buy Twitter Inc., saying the company has extraordinary potential and he will unlock it.
The founder of Tesla and world famous crazy billionaire has offered to take Twitter private for $43 billion. Speculation has been rampant the past 10 days since Elon filed a 9.2% Twitter ownership on April 4th.
Elon was going to join the Twitter BoD (Board of Directors) until things took a U turn.
Little did we know that this was because he was going to launch a public offer to buy the whole company…
From the SEC filing:
On April 13, 2022, the Reporting Person delivered a letter to the Issuer (the “Letter”) which contained a non-binding proposal (the “Proposal”) to acquire all of the outstanding Common Stock of the Issuer not owned by the Reporting Person for all cash consideration valuing the Common Stock at $54.20 per share (the “Proposed Transaction”). This represents a 54% premium over the closing price of the Common Stock on January 28, 2022, the trading day before the Reporting Person began investing in the Issuer, and a 38% premium over the closing price of the Common Stock on April 1, 2022, the trading day before the Reporting Person’s investment in the Issuer was publicly announced.
The Proposal is non-binding and, once structured and agreed upon, would be conditioned upon, among other things, the (i) receipt of any required governmental approvals; (ii) confirmatory legal, business, regulatory, accounting and tax due diligence; (iii) the negotiation and execution of definitive agreements providing for the Proposed Transaction; and (iv) completion of anticipated financing.
Letter from Elon Musk to Twitter (THE END GAME).
Exhibit B
Bret Taylor
Chairman of the Board,
I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy.
However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.
As a result, 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 would need to reconsider my position as a shareholder.
Twitter has extraordinary potential. I will unlock it.
/s/ Elon Musk
Elon Musk
Script
[SEND VIA TEXT]
As I indicated this weekend, I believe that the company should be private to go through the changes that need to be made.
After the past several days of thinking this over, I have decided I want to acquire the company and take it private.
I am going to send you an offer letter tonight, it will be public in the morning.
Are you available to chat?
[VOICE SCRIPT]
1.Best and Final:
a.I am not playing the back-and-forth game.
b.I have moved straight to the end.
c.It's a high price and your shareholders will love it.
d.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.
i.This is not a threat, it's simply not a good investment without the changes that need to be made.
ii.And those changes won't happen without taking the company private.
2.My advisors and my team are available after you get the letter to answer any questions
a.There will be more detail in our public filings. After you receive the letter and review the public filings, your team can call my family office with any questions.
THE GIST
Elon started out as a 9.9% shareholder. He was planning to join the BoD until he changed his mind. During this time he was waxing political and talking about fighting for “free speech” and social imperatives.
Then he states that he realised this cannot happen in its current form and must be taken private. Elon then launches his offer.
In his communications with the BoD chairman he explains that he does not trust management and if this bid were to fail, he would have to review his position as a shareholder.
Then he says that Twitter has “extraordinary potential” and that he will “unlock it”.
OUR TAKE
Elon should stay focused on Tesla. The path is not as clear and easy as many people think. Competition is coming.
Elon sold ~$16 billion in Tesla shares in 2021 and this cash is burning his pocket. He feel that he needs to do something with it. Use it to control media assets? Buy some clout and influence? Make some money? Who knows.
I believe the BoD will reject Elon’s offer and move to create value in Twitter even faster. The shareholders are now out for blood. They have had enough of Twitter’s lingering share price while Facebook has been killing it for the past 10 years.
Twitter’s share price has gone nowhere since November 2013 when it IPO’d.
Staff Count at y/e 2021 was 7,500 employees! See below for changes since 2008 until 2020.
I wrote a small thread last month on how Twitter is pushing on monetisation.
BUT FIRST! Twitter has to reduce its head count. They have to shrink, trim the fat and rationalise costs.
Increasing sales is not an excuse to keep increasing costs and not making any money. They are no longer a startup.
Gross Margins are >60% - the company should have been printing money.
Look at all those revenues. $5 billion last year.
Facebook achieves EBIT margins of >30%.
Twitter achieves EBIT margins of 0% to 10%.
WIN WIN for Elon
If any big tech player decides he wants to own Twitter he just puts in a higher bid and Elon reaps a big profit on his existing share on Twitter.
If the Twitter BoD accept Elon’s offer he gets to own Twitter at a very good price. He starts making the company profitable and reaps the benefits. At some point he can re-IPO it like a private equity player and make big money.
If the Twitter BoD rejects Elon’s offer he can dump his shares and possibly make a few hundred million on the trade too.
P.S. Elon still got managed to get sued by Twitter investors because he failed to promptly file his Schedule 13G filing disclosing the 9.2% stake.