"If I were a rich man…"
Once upon a time, the World’s richest man, had the craziest of dreams and bought one of the World’s largest social media platforms. The man, Elon Musk, has more than 80 million followers on Twitter and a controversial history on the platform himself. His offer to buy the platform is about 'the future of civilisation,' not making money. He succeeded as the news came overnight that shareholders will now receive $54.20 in cash for each share of Twitter common stock upon closing of the transaction. The purchase price represents a 38% premium to the company’s closing price on April 1, the day before Musk revealed he had built a 9% stake in the company.
My colleague Tom Flynn wrote a piece for our newsletter two weeks ago, about why Twitter should refuse an offer from Elon Musk. He argues a new ownership would bring “chaos for investors, employees, advertisers and, of course, for users”. I agree, although - Twitter investors, for sure, will come out well in this chaos following the news today that the Board of Twitter have unanimously recommended the deal put forward by Musk to shareholders.
Tesla shareholders perhaps will be less happy. Tesla’s share price went back a bit because the debt component of the financial structure of the Twitter deal includes $12.5bn of Tesla shares, which are owned by Musk. However, they have themselves made a lot of money over the years in backing the Tesla story. They have invested in the ‘Man’ himself, his creativity, and his vision and now more than ever, that will be supporting him.
Today’s mood on the deal is very interesting. It was definitely a shocking morning. Musk’s intention was announced a few weeks ago but many completely dismissed it. Even coming from the richest person in the world, the announcement felt like a bit of a joke - was he just trying to have a bit of fun or cause a stir? It seems the Board wanted to ensure he was serious about it. It may have taken its time in responding, trying to check if it could secure a White Knight to trump Musk’s offer. However, it seems Board members had no other choice than to accept. Twitter’s largest shareholders have been pushing for the Board to accept the offer – this highlights, in my view, that shareholders had very little confidence in the share price rising beyond Musk’s offer. This, combined with the fact that Twitter will be reporting its results on Thursday, may have also twisted the Board’s arm a bit. I don’t think market expectations were very high.
Today marks a monumental deal, not because of the size of the transaction, but because whilst Twitter is much smaller than its peers, it has always been larger from a social and cultural impact perspective. It is not lost on people how big a moment this is for the tech and social media industry.
At a TED conference last week, Musk said that having a public platform “that is maximally trusted and broadly inclusive is extremely important for the future of civilisation”. He uses all the right words. He said he wanted to make Twitter “better than ever” by introducing new features, making its algorithms open source, stamping out bots and authenticating “all humans”. He wants to leave an imprint on free speech.
What is certain though, is that there aren’t many of us who can really see a business case in Musk buying Twitter. But after all, he is the world’s richest man, so he can spend $44bn on a platform that he loves and feel passionate about.