Billionaire entrepreneur Elon Musk took aim at Twitter Inc with a US$43 billion cash takeover offer on Thursday (Apr 14), with the Tesla CEO saying the social media company needs to be taken private to grow and become a platform for free speech.
"I think it's very important for there to be an inclusive arena for free speech," Musk said at a TED Talk in Vancouver when asked about why he made the bid.
Musk, already the San Francisco-based company's second-largest shareholder, made the bid in a letter to Twitter's board on Wednesday. The offer was made public in a regulatory filing on Thursday.
He also told the TED Talk audience that he was not sure he will actually be able to acquire Twitter. Even so, Musk said, he had sufficient assets to make the purchase.
"Having a public platform that is massively trusted, and broadly inclusive, is extremely important to the future of civilization," Musk added.
His offer price of US$54.20 per share represents a 38 per cent premium to Twitter's April 1 close, the last trading day before his 9.1 per cent stake in the social media platform was made public.
Musk - the world's richest person with a US$273.6 billion fortune according to a Forbes tally - rejected an invitation to join Twitter's board this week after disclosing his stake, a move analysts said signalled his takeover intentions as a board seat would have limited his shareholding to just under 15 per cent.
Investors were not immediately convinced. Shares of Twitter about were flat in afternoon trading. Some argued Musk's bid undervalued the micro-blogging platform that has become a global means of communication for individuals and world leaders.
Saudi Arabia's prince Alwaleed bin Talal tweeted from his verified account about the deal. Describing himself as one of the "largest & long-term shareholders of Twitter," he said Musk's offer undervalued the company and he rejected it.
Musk, for his part, told Twitter it was his "best and final offer" and said he would reconsider his investment if the board rejects it.
"Since making my investment I now realise the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company," Musk said in his letter to Twitter Chairman Bret Taylor.
Musk, a self-described "free speech absolutist," has been critical of the social media platform and its policies, and recently ran a poll on Twitter asking users if they believed it adheres to the principle of free speech.
After Twitter banned former President Donald Trump over concerns around incitement of violence following last year's US Capitol attack by his supporters, Musk tweeted: "A lot of people are going to be super unhappy with West Coast high tech as the de facto arbiter of free speech."
In an interview with Sirius XM's Americano Media on Wednesday - before Musk's announcement - Trump said he "probably wouldn't have any interest" in returning Twitter, where he had more than 88 million followers.
White House spokesperson Karine Jean-Pierre declined to comment on Musk's offer for Twitter, saying that market regulators operate independently from political leadership.
Company employees, some of whom were panicked over Musk's impact on its ability to moderate content, were expected to attend a Twitter all-hands meeting later on Thursday to discuss the news, one source told Reuters.
Twitter will review the offer with advice from Goldman Sachs and Wilson Sonsini Goodrich & Rosati, a source told Reuters.
Musk said US investment bank Morgan Stanley was acting as financial adviser for his offer. He did not say how he would finance the transaction if it goes ahead.
"We think Musk could look to fund the transaction, if approved, through a combination of debt financing and potentially Tesla shares. Given the size of the transaction (about US$43 billion), we think it is conceivable that some Tesla shares could be sold given much of his wealth is tied to the company," CFRA Research analyst Angelo Zino said.
Musk sold more than US$15 billion worth of his Tesla shares, about 10% of his stake in the electric vehicle maker, last year to settle a tax obligation.
Twitter's lower-than-expected user additions in recent months have raised doubts about its growth prospects, even as it pursues big projects such as audio chat rooms and newsletters.
"The big question for the Twitter board now is whether to accept a very generous offer for a business that has been a serial underperformer and tends to treat its users with indifference," said Michael Hewson, chief market analyst at CMC Markets.
Twitter will not decide on the fate of Musk's bid on Thursday, according to a source familiar with the situation. What the board is discussing is the parameters of the valuation process and it would then ask its advisers to review the bid and await for the results, the source said.
Musk has amassed more than 80 million followers since joining Twitter in 2009 and has used it to make several announcements, including teasing a go-private deal for Tesla that landed him in hot water with regulators.
Musk is bound by a 2018 settlement with the US Securities and Exchange Commision requiring him to obtain pre-approval on some of his Twitter posts after he tweeted that he had "funding secured" to take Tesla private.
"If he really wants to take Twitter private his past run-ins with regulators might not pose an obstacle - but it might make potential financing sources leery of providing the cash for the deal - unless he is willing to pledge a large portion of his Tesla holdings to collateralise the debt," said Howard Fischer, a partner at law firm Moses & Singer and former senior trial counsel at the US Securities and Exchange Commission (SEC).
Musk's move also raises 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.