Elon Musk is reportedly talking with potential partners about joining him in a bid to wrestle control of Twitter, after the board poured cold water on his $43 billion offer and instead opted to take ‘a poison pill’.
Musk, 50, told the board on Wednesday he wanted to buy the social media company, in which he has a 9.1 percent share.
On Thursday, the CEO, Parag Agrawal, told staff that they were still weighing up Musk’s offer.
But on Friday, Twitter’s board announced the dramatic ‘poison pill plan’ to prevent Musk from further increasing his stake in the company.
Also known as a shareholder rights provision, the plan announced on Friday would trigger a dilution of company shares if any shareholder builds up a 15 percent stake without the board’s approval.
The plan does not prevent Twitter from accepting Musk’s offer or entering negotiations with him or other potential buyers – but it will stop the billionaire from putting pressure on the board by buying up ever more shares on the open market.
Musk, in response, is now said to be recruiting others to join his bid, the New York Post reported Friday night.
Musk, the world’s richest man, currently owns a 9.1 percent stake in Twitter and is seeking to take the company private with an unsolicited bid of $54.20 per share, well above Friday’s closing price of $45.08.
Elon Musk is pictured on Thursday, hours after making his bid for control of Twitter. On Friday it was reported that he was considering finding partners for his bid after the board opted for a ‘poison pill’ plan – among them Egon Durban (right), co-CEO of investment firm Silver Lake
Musk appeared at the TED2022 Conference on Thursday, saying that he is pursuing a hostile takeover of Twitter not for financial gain, but for the ‘future of civilization’
Twitter’s shares closed down on Friday at $45.08 – significantly less than Musk’s offer
The Tesla CEO said on Thursday he could ‘technically afford’ the $43 billion price tag – Musk’s fortune is estimated by Forbes at $264 billion. Much of his wealth, however, is tied up in SpaceX and the electric vehicle company.
Musk currently has about $3 billion in cash or other somewhat liquid assets after spending $2.6 billion buying his 9.1% stake in Twitter in recent months, according to Bloomberg calculations.
The Post said sources close to the deal told them Musk was mulling partnering with private-equity firm Silver Lake Partners, which was planning to co-invest with him in 2018 when he was considering taking Tesla private.
The co-CEO of Silver Lake, Egon Durban, is a Twitter board member and led Musk’s deal team during the 2018 failed effort to take Tesla private, sources said.
Durban was described by The Financial Times in 2020 as ‘the first phone call for Silicon Valley companies in need of cash.’
An American citizen who was born in Germany and grew up in Texas, Durban lives with his wife, daughters and dog in the Silicon Valley suburb of Atherton – where neighbors include former Google chief executive Eric Schmidt and Golden State Warriors basketball star Steph Curry.
It is unclear if Musk and Durban are talking about sticking to Musk’s original takeover plan, or coming up with a new one.
Egon Durban, pictured on January 7 at a professional bull riding event in Madison Square Garden in New York City, has been described as a go-to investor for Silicon Valley firms
Poison pill plans use the threat of dilution to dissuade takeovers
Also known as shareholder rights plans, poison pills typically trigger an automatic stock dilution through a flood of new shares if a corporate raider’s ownership stake grows too large.
For instance, if a single shareholder hits 15% ownership, a poison pill could be designed to allow every other shareholder to buy a new issue of shares at a discount.
Knowing such a plan could be triggered, raising the cost of a takeover astronomically, the bidder would be disinclined to pursue a takeover without the board’s approval.
In Twitter’s case, the idea of such a plan would be to prevent Musk from increasing his 9.1 percent stake in order to pressure the board to accept his deal.
Musk said that, if the Twitter board reject his offer, they will be doing their shareholders a ‘titanic’ disservice.
He says he wants to own the platform ‘not to make money’, but rather to bolster free speech.
‘This is not about the economics,’ Musk said, speaking at a TED conference in Vancouver on Thursday.
‘My strong intuitive sense is having a public platform that is maximally trusted and broadly inclusive is important to the future of civilization.
‘Twitter has become kind of the de facto town square, so it’s really important that people have both the reality and perception that they are able to speak freely, in the bounds of the law.’
He added that he was not sure he would be able to accomplish it – but said he had a Plan B if the board rejected his offer. He refused to elaborate on what that might entail.
Billionaire entrepreneur Mark Cuban – who has previously spoken of his admiration for the 50-year-old maverick – was unconvinced that Musk was acting to protect free speech, and instead thought he was ‘f****** with the SEC’.
Cuban said he believed it was all part of an amusing, lucrative game for Musk.
‘Elon may have started this, but his threat to sell his shares, if twitter says no, opened the door for those tech giants to walk in for relatively ‘little’ money and grab huge influence at Twitter or possibly a direct path to acquisition,’ said Cuban on Thursday.
‘Elon will smile all the way to the bank.’
Cuban said he thought Twitter’s board would try everything in their power to stop Musk taking over the company.
‘I think Twitter will do everything possible not to sell the company,’ he said.
‘They will try to get a friendly to come in and buy Elon’s shares and get him out.’
He added: ‘Want to see the whole world lose their s***? Get Peter Thiel to partner with Elon and raise the bid for Twitter.’
Cuban, owner of the Dallas Mavericks, is worth an estimated $4.7 billion
Musk himself does appear amused by the drama.
On Friday, he mocked Twitter’s board of directors for their attempt to block him from the $43 billion hostile takeover.
A Twitter user tweeted a version of the classic ‘Distracted Boyfriend’ meme, mocking Twitter’s board.
The imaged depicted ‘Twitter’s board’ looking wistfully at the option to ‘keep that easy gig that gives me shares’ as ‘Twitter investors’ look on with disgust because they are ‘happy with $54.20 a share’ – the amount of Musk’s unsolicited bid.
Musk responded to the meme with a laughing emoji.
Elon Musk responded with a laughing emoji to a version of the classic ‘Distracted Boyfriend’ meme mocking Twitter’s board
Musk also responded to another account’s poll showing a majority of respondents in favor of his plan to take Twitter private, writing: ‘Thanks for the support!’
Twitter said in a statement that its poison pill plan is ‘similar to other plans adopted by publicly held companies in comparable circumstances’.
‘The Rights Plan will reduce the likelihood that any entity, person or group gains control of Twitter through open market accumulation without paying all shareholders an appropriate control premium,’ Twitter said.
According to Twitter’s plan, if Musk or any other person or group acquires at least 15 percent of Twitter’s stock, the poison pill will trigger.
At that point, every other shareholder aside from Musk would be allowed to purchase new shares of Twitter at half the going market price, which stood at $45.08 at the closing bell on Thursday.
The flood of half-price shares would effectively dilute Musk’s ownership stake, making it massively more expensive for him to build up a controlling position.
Twitter said that its board had voted unanimously in favor of the plan, which will remain in effect until April 14, 2023.
Twitter’s board is led by chairman Bret Taylor, who is the co-CEO of business software giant Salesforce.
Twitter CEO Parag Agrawal and co-founder Jack Dorsey also hold board seats, as does Durban.
Twitter’s board is led by chairman Bret Taylor, who is also the co-CEO of business software giant Salesforce
Twitter CEO Parag Agrawal (left) and co-founder Jack Dorsey (right) also hold board seats
Rounding out the board are: MasterCard executive Mimi Alemayehou, karaoke tycoon Martha Lane Fox, former Google exec Omid Kordestani, Stanford professor Fei-Fei Li, venture capitalist Patrick Pichette, 1stDibs CEO David Rosenblatt, and former banker and diplomat Robert Zoellick.
Despite Twitter’s latest move, Musk could still defy the board and take over the company in a proxy fight by voting out the current directors – though this strategy could take years to play out.
Musk previously responded to reports that the board was mulling a ‘poison pill’ plan by tweeting: ‘If the current Twitter board takes actions contrary to shareholder interests, they would be breaching their fiduciary duty.’
‘The liability they would thereby assume would be titanic in scale,’ he added, apparently referring to potential shareholder lawsuits.
Musk sent shockwaves through the tech world on Thursday with an unsolicited bid to buy the company, stating the promotion of freedom of speech on Twitter as a key reason for what he called his ‘best and final offer.’