Elon Musk has offered to buy Twitter at a valuation of approximately $43 billion. Here’s what will – or could happen next:
The board assesses the offer. The board will work with its advisers at Goldman Sachs to review Mr. Musk’s offer. Among other things, they will need to consider whether the deal fairly values the company, and whether Mr. Musk has the funding to cobble together a deal.
The board can’t simply decide that it doesn’t like Mr. Musk as a candidate, but they can think of “reasons why they don’t like the offer,” such as his ability to fund it, said Steven Davidoff Solomon, a professor at the United Nations. School of Law at the University of California, Berkeley.
The board announces its decision. The board will probably need a few days to assess the offer. If it turns down the offer, it could do so in several ways: It could bring in a defense mechanism known as a poison pill, which limits the ability of Mr. Musk and any other shareholder to buy up Twitter stock in the open market.
Once it does, it can still decide to sell itself, but without the pressure of Mr. Musk — or any other suitor — who threatens to acquire it by buying a significant number of shares on the open market.
There are reasons why Twitter may choose not to use a poison pill. It may be wary of possible criticism that a poison pill averts the worries of a very rowdy member of his community.
Similarly, Mr. Musk, whose last reported share in Twitter was just over 9 percent, has incentive to keep his share of Twitter stock below 10 percent. Once he hits that threshold, he’s limited in how quickly he can sell the business.
Assuming Twitter declines the offer, Mr. Musk could increase his offer — despite already saying it was best and last. He could also take the offer directly to other shareholders, through a so-called public offer, whereby he would buy shares of other shareholders.
At least one shareholder already said the offer undervalues the company.
The board may be looking for a white knight. “Twitter has essentially been for sale since they went public,” said Howard Berkenblit, head of the Capital Markets group at law firm Sullivan & Worcester.
Mr. Musk’s latest activity has most likely increased Twitter’s interest and receptivity to a deal. Some private equity firms may be put off by Twitter’s limited cash flow, but a number of tech firms could take a look, given the heightened interest in the social media giant’s power and reach.
There can be great suitors. Remember that Microsoft, which owns LinkedIn, and Oracle both vie for a deal with video sharing company TikTok. Still, potential antitrust concerns would likely be a major deterrent, given the Biden administration’s investigation into major tech deals.