Elon Musk has launched a hostile takeover bid for microblogging site Twitter, claiming that the company needs to be taken private in order to grow and become a platform for free speech. Musk’s $43 billion cash takeover offer came days after a regulatory filing had revealed that the Tesla Chief Executive Officer owned a 9.2 per cent stake in Twitter.
Musk made the bid on Wednesday in a letter to the board of Twitter and it was made public in a regulatory filing on Thursday.
“I think it’s very important for there to be an inclusive arena for free speech,” Musk, already San Francisco-based Twitter’s second-largest shareholder, said at a TED Talk in Vancouver when asked about his bid.
After his TED talk, Musk hinted at the possibility of a hostile bid in which he would bypass Twitter’s board and put the offer directly to its shareholders, tweeting: “It would be utterly indefensible not to put this offer to a shareholder vote.”
WHAT IS HOSTILE TAKEOVER?
In the corporate world, a hostile takeover bid denotes a situation wherein a company attempts to acquire another company against the wishes of the management of the targeted firm.
The hostile takeover can be achieved in two ways. The acquiring company can go directly to shareholders of the targeted company.
Secondly, the acquiring company can battle it out to replace the management of the targeted company.
WHAT MAY HAPPEN?
Twitter was evaluating the offer with guidance from Goldman Sachs and Wilson Sonsini Goodrich & Rosati, according to a source. The company was also preparing a poison pill as a protective measure against Musk raising his stake as early as Friday, Reuters reported.
However, Musk’s move has raised the question of whether other bidders might emerge for Twitter.
“It would be hard for any other bidders/consortium to emerge and the Twitter board will be forced likely to accept this bid and/or run an active process to sell Twitter,” Wedbush Securities analyst Daniel Ives wrote in a client note, as per a Reuters report.
Musk admitted at the conference that success was not assured but his intent was to retain as many shareholders as allowed by law in a private company. Asked if there was a “Plan B” if Twitter rejected the offer, Musk told the TED conference audience without elaborating: “There is,” Reuters reported.