The billionaire and Tesla owner, Elon musk has made a clear cut offer to purchase social media giant Twitter at $41 Billion. He believes that the iconic social media platform should be a source of people stating their opinions impactfully. In a letter to Twitter’s board, Musk mentioned, “Twitter has extraordinary potential. I will unlock it,” Musk’s bid price of $54.20 a share is a 38% premium to Twitter’s closing on April 1, the last trading day before his 9.1% holding in the social media network was made public.
Musk turned down an invitation to join Twitter’s board of directors this week after reporting his position, a move that analysts saw as indicating his takeover aspirations because a board member would have limited his holdings to just under 15%.
“Since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company,” Musk mentioned in his letter to Twitter. Musk, who describes himself as a “free-speech absolutist,” has been critical of the social media site and its restrictions, and recently conducted a Twitter poll asking people if they feel it upholds the idea of free expression.
Twitter’s stock jumped over 5% to $48.30 in pre-market trading in New York, where it was the most frequently traded, while Tesla’s stock declined around 2%. Twitter’s share price reaction reflected a 29% possibility of Musk completing a deal based on its Wednesday closing price of $45.85. According to Refinitiv statistics, the overall sale value of $41 billion was computed based on 763.58 million outstanding shares.
Musk claimed Morgan Stanley, a U.S. investment bank, was acting as his financial consultant for his offer. He did not, however, indicate how he would fund the deal if it goes through.
“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 $43B), 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, the world’s richest man, according to Forbes, sold more than $15 billion in Tesla stock late last year to pay off a tax debt. Even as it pursues huge ventures like audio chat rooms and newsletters, Twitter’s user additions have been fewer than predicted in recent months, raising worries about its growth prospects.
“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,” CMC Markets’ Michael Hewson said after Musk’s bid was announced.
Since joining Twitter in 2009, Musk has accumulated over 80 million followers and has used it to make various announcements, including dangling a Tesla go-private transaction that got him in hot water with authorities.
Former Twitter shareholders have sued him, claiming they missed out on the company’s recent stock price increase because he waited too long to declare his ownership.
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