Before focusing on buying Twitter, Tesla CEO Elon Musk considered launching his own social network.
From the start, Elon Musk wanted to buy Twitter, and not just sit on its board of directors or remain a significant shareholder, yes, but silent. However, before focusing on buying the social network, the billionaire considered launching a competing service before abandoning this project, according to new details of the takeover proposal mentioned in a document filed with the Securities and Exchange Commission (SEC) of the United States.
This document, namely a proxy statement from the board of directors of Twitter and inviting shareholders to approve the takeover of the social network by Elon Musk, sheds light on the initial quest of the billionaire: Elon Musk really wanted to buy Twitter! And he had been thinking about it for a long time. Like much of the other information in this file, the revelations of this power of attorney only complicate the situation a little more, Elon Musk having put on hold the takeover of Twitter. The billionaire claims the deal is void unless the social network can prove its claims about spam and “bots” (in the sense of automated accounts). For its part, Twitter insists that the deal must continue at the agreed price of 54,20 dollars par action.
What else do we learn from this power of attorney filed with the SEC? After beginning to accumulate what would be a stake of more than 9% in the company, Elon Musk met with the CEO of Twitter, Parag Agrawaland the Chairman of the Board of Directors, Bret Taylor, March 27. The billionaire told them that he had collected a large stake in the company. He then added that he was considering a number of options for the future: launch a competing service, join Twitter’s board of directors or simply buy the social network. Elon Musk quickly dropped the idea of a competing app, and he didn’t want to join the board either. He accepted a director position, then turned it down a few days later, telling Twitter that he intended to buy the company.
So far, it is unclear exactly when Elon Musk decided to proceed with the unsolicited takeover of Twitter. However, the power of attorney clearly states how long he has been thinking about it. For its part, Twitter has leaked almost no information on Elon Musk’s plans. In a public statement about the billionaire and his seat on Twitter’s board, Parag Agrawal warned employees and shareholders about “coming distractions”. However, the message makes no mention of the fact that Elon Musk had already informed the CEO of Twitter, as well as the board of directors, of his intention to buy the company. Internally, however, the specter of a takeover by Elon Musk has captured the attention of the board of directors and seems to have been a determining factor in the way this same board has dealt with the billionaire from the start, in particular in him. offering a seat on the board and trying to limit how much Twitter stock the billionaire could keep buying.
Elon has decided not to join our board. I sent a brief note to the company, sharing with you all here. pic.twitter.com/lfrXACavvk
– Parag Agrawal (@paraga) April 11, 2022
The power of attorney also informs us that Elon Musk and the co-founder of Twitter, Jack Dorsey, have been close confidants throughout this affair. They’re friends, and no, that’s not a charming exaggeration. The power of attorney clearly shows the closeness between the two men. On page 43, regarding an April 3 Twitter board meeting, it reads: “Mr. Dorsey informed the Twitter board that he and Mr. Musk were friends.” Their relationship has been a source of complication for Twitter throughout this process, with Jack Dorsey publicly advocating for Elon Musk to privatize Twitter and criticizing the board (of which he is still a part). It turns out that Jack Dorsey was the first person Elon Musk contacted about Twitter (March 26) and, in another conversation, the billionaire asked the co-founder of the social network to reconsider his intention to step down from the board in May. Jack Dorsey refused and, at the same time, told Elon Musk that Twitter would be better off as a private company. Four days later, Elon Musk informed the board of directors of his intention to take Twitter private.
In summary, Elon Musk and Jack Dorsey are friends and their friendship is, at least in part, the origin of the billionaire’s interest in Twitter.
The power of attorney also contains other valuable information:
- Elon Musk passed his background check. Some slight speculation on the internet seemed to indicate that there would be a problem during the verifications carried out by Twitter, as the company believed that the billionaire would join its board of directors.
- Twitter didn’t invest much effort in finding a ‘white knight’. On April 14, a day after Elon Musk publicly revealed his intention to buy Twitter, the company’s board met with its bankers from Goldman Sachs and decided not to pursue “strategic alternatives” to a sale. In other words, the board of directors did not seek to “find another buyer with whom we can live more easily. Why hasn’t Twitter formally solicited other offers? On Twitter’s business prospects, the bankers and board concluded, “It is unlikely that other parties will have the interest or ability to buy Twitter.” In other words, no one but Elon Musk would be willing to buy Twitter right now.
- By the time Elon Musk’s offer came up, Twitter already knew that the set goals would not be met, namely to grow revenue to $7.5 billion by 2023.. According to internal projections, the company should reach the 7.2 billion turnoverwhich would represent a substantial growth over the $5.1 billion in revenue by 2021. Twitter expects revenue to reach 10 billion dollars in 2025 et $12.9 billion in 2027. Elon Musk would have presented much more ambitious objectives to potential co-investors. According to New York Timesthe billionaire thinks he can increase the turnover of Twitter to $28 billion by 2028, including $12 billion in ads and $10 billion in subscriptions. Currently, Twitter’s revenue comes almost exclusively from .
- The proxy contains a section “Twitter Board Recommendation and Reasons for Merger”. In this section, the board of directors lists the reasons why it believes shareholders should approve the transaction, such as the difficulties Twitter has had in the past to simultaneously increase the number of users and revenue, the conclusion of the bankers that $54.20 per share is a good price, the lack of interest from other buyers and the reasonable likelihood of the transaction occurring.
It’s funny how the phrase “reasonable likelihood of completion of the deal” is in there since the deal looks a lot less likely to close today (at least at $54.20 per share).
Hours before Twitter released the document on Tuesday morning (May 17), Elon Musk said the deal couldn’t be done until the company provided him with proof that less than 5% of accounts on the social network are spam. The billionaire has made the fight against spam one of his favorite topics of conversation and on Friday, May 13, he said he was suspending the operation until he analyzed the estimates of spam in more detail. the company regarding spam.
During a technology conference on Monday, May 16, Elon Musk said he thought the rate of fake accounts on Twitter could reach 20%. For his part, Parag Agrawal published a long message on Twitter describing the actions of the social network against the bots and reaffirmed that the rate was lower than 5%. Elon Musk replied to this tweet with a poo emoji.
Yes, Elon Musk, the billionaire who has been thinking about buying or competing with Twitter for a long time, may be backtracking. He appears to be using the bots as a pretext to back out of the deal, though he would be liable for a billion dollar severance fee if both sides agree to call off the deal, or as a pretext to force Twitter to renegotiate the price to $54.20 per share.
Twitter could choose a completely different option and sue Elon Musk in court to force him to respect the agreement he signed with the board of directors to buy the company. While the board considered $54.20 a share a bargain in April, that deal is much more attractive in May as social media stock prices plummet. In a press release, Twitter said it was committed to “completing the transaction at the agreed price and terms as quickly as possible. »
Twitter investors are not thrilled by this situation. The company’s stock still has down 0.6% in early trading on Tuesday May 17, after falling almost 7% on Monday May 16. The growing gap between the stock price and Elon Musk’s offer indicates that investors are increasingly worried that the deal will fall through.
This is all quite ironic. A few weeks ago, Elon Musk really wanted this transaction to go through, unlike Twitter. Today, the billionaire is somewhat cautious and seems less involved, while Twitter really wants to finalize this takeover, and the power of attorney explains the reason: “If the merger is not completed, and depending on the circumstances of this not -merger, the price of our common stock may decline significantly”.
Article translated from Forbes US – Author: Abram Brown
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