Elon Musk has only just become a major shareholder in Twitter, and is attacking it from the back.According to the SEC (Securities and Exchange Commission)documentOn the 13th, Musk launched a takeover offer to Twitter’s board of directors, wanting to acquire Twitter wholly at $54 per share and privatize it.
In early April, Musk bought a 9.2% stake in Twitter for $2.89 billion and became the largest shareholder. In fact, he started to increase his holdings of Twitter shares in mid-March, but only announced on April 4, which caught the Twitter board by surprise.
And Musk is not satisfied with just being a shareholder: the wholly-owned acquisition being discussed now means that Musk plans to take over the company in its entirety.
“I invested in this company because I believed in its prospects…but I now realize that as it stands, this company cannot grow and serve society as a whole.” In a letter to Twitter chairman Bret Taylor, Musk said “Twitter privatization reform is needed.” It is exactly the same as his strong takeover of Tesla.
Musk decided to buy the entire stake at $54.2 per share, which is expected to cost a total of $43 billion. This price is as high as 54% higher than the premium rate of Musk’s low-key acquisition of Twitter shares, and also 38% higher than the share price officially announced when the shares were acquired. Musk believes that a $54 full takeover is the best outcome for the company’s board and other investors. “This is my final offer. If I don’t accept it, I will re-evaluate my shareholder status.”
Former SEC Chairman Robert Jackson Jr. told the New York Times that Musk’s acquisition was again delayed in disclosure. According to U.S. acquisition laws, Musk may be involved in a hostile takeover (hostile takeover), that is, investors secretly hoard a company’s stock, and then deal with it. The company filed for acquisition.
But according to Musk’s logic, he feels that it is not a hostile acquisition, but a “reform of Twitter.”
Other investors also made moves: on the afternoon of the 14th U.S. time, Vanguard suddenly increased its holdings, with a stake of 10.3%, temporarily surpassing Musk and regaining the throne of the largest shareholder.
No one outside knows what Musk meant by “re-evaluating shareholder status.” Another SEC filing, however, records a call between Musk and Twitter chairman Bret Taylor.
Musk:
- This is a serious acquisition, and there is absolutely no idea of playing Tai Chi with the board of directors, and there is no other means available.
- The price is very reasonable and shareholders will be satisfied. (Subtext: Don’t shame your face?)
- There is absolutely no confidence in Twitter’s current management.
- The acquisition is only Plan A, and if rejected, there is also Plan B.
- This is not a threat. I really think that if you invest, you must see this company develop better. However, the current situation (including listed companies) cannot be achieved, so it must be privatized and listed.
“Twitter has a lot of potential and I will unlock it,” Musk wrote.
Although caught by surprise by Musk’s sudden increase in holdings, Twitter’s board and management welcomed it in public. Twitter CEO Parag Agrawal also invited him to join the board, but Musk refused.
Since Musk suddenly announced the results of his holdings half a month ago, the battle for control of Twitter and him has begun. Undercurrents are surging under the surface peace, and many large and small events occur, which are quite dramatic. Let’s review how Musk’s “series” for control of Twitter went.
Keep a low profile and start acting
Musk started buying Twitter stock on March 14. For ease of understanding, this acquisition of 9.2% of the shares is called “the first investment”.
The lawyer filed an application with the SEC on the same day to increase his holdings, indicating that he plans to passively acquire 9.2% of Twitter’s shares. Passive investing, also known as static investing, refers to maximizing returns by minimizing buying and selling.
According to the definition of passive investment, the first investment means: I am optimistic about this company, and I want to add its stocks to my asset allocation portfolio strategy. I have no intention of observing and controlling the management of this company for a long time. I just want to Shareholding and financial management. Of course, according to the current plot, the first investment is really not a “pure” static investment.
According to public information, Twitter’s largest institutional shareholders are Vanguard Group (8.39%), Black Rock Fund (4.56%), SSgA Fund (4.54%), Aristotle Asset Management (2.51%) and ARK Investment Company (2.15%).
Co-founder and former CEO Jack Dorsey has only a 2.25% stake. The company’s financing, listing and later cash outs are constantly diluted, and there is no similar dual-share/triple-share mechanism protection. He has lost decision-making power, and has “run” twice at the request of the board of directors.
Musk, who is also a member of the “PayPal gang” and has a good relationship with Jack Dorsey, suddenly held 9.2% of his shares after the first investment, and directly became the largest shareholder worthy of the name. On the afternoon of the 14th US time, Vanguard also increased its holdings of shares, holding about 10.3% of the shares, and Musk temporarily ranked second.
What makes people laugh and cry is that top well-known institutions such as Vanguard and Black Rock, which manage hundreds of billions of assets, were suddenly put together by Musk; I also think that Jack Dorsey has been very low-key recently, and he basically didn’t say much to Musk and Twitter. The drama has publicly expressed its opinion – Musk’s play seems to be a bit like avenging his brother?
Speaking of Musk himself, he started to overweight in mid-March, and only announced it in early April. The first investment was kept secret for half a month. According to Musk’s character, how could he hold back? In fact, if he thinks about some of his actions on Twitter in the past two weeks, he can only say “no wonder”.
On March 25, he launched a poll on his personal Twitter: Please vote, do you think Twitter follows the principle of “Free Speech”? As a result, with more than 2 million voters participating, 70 percent thought Twitter was unqualified at this point.
Free speech is essential to a functioning democracy.
Do you believe Twitter rigorously adheres to this principle?
— Elon Musk (@elonmusk) March 25, 2022
Before that, Musk’s various public remarks foreshadowed his desire to do something with the social network. So after he posted the following tweet, many people once thought he was going to start a business.
Is a new platform needed?
— Elon Musk (@elonmusk) March 26, 2022
After the vote, Musk also pretended to ask: Since Twitter is doing such a bad job, what should we do?
Given that Twitter serves as the de facto public town square, failing to adhere to free speech principles fundamentally undermines democracy.
What should be done? https://t.co/aPS9ycji37
— Elon Musk (@elonmusk) March 26, 2022
Who would have thought that just a week after this March 26 tweet, Musk himself would become Twitter’s largest shareholder…
Board seats, no matter what!
Now that the incident has been revealed, Twitter can only give three points to the new major shareholder who can be mad at itself.
Twitter CEO Parag Agrawal congratulated Musk on joining the company on his personal account and invited him to join the company’s board of directors. “I am very excited to share that we will be appointing Elon Musk to the board! In our conversations with him in recent weeks, we have grown more confident that he will bring tremendous value to the board.” Subsequently, the company also submitted appointment documents to the SEC.
（Source：Parag Agrawal）
It’s worth noting that being on a board of directors is beyond the definition of “passive investing.” This is also why many observers believe that Musk had used the name of passive investment before, just to minimize his own shareholding plan (and further “conspiracy”) from being detected by Twitter’s board and management in advance.
He didn’t want to be in a “passive” position at all. If the story of taking over Tesla has taught us anything, it’s that this man has to take the initiative no matter what, and he’s not going to be a mere investor.
Regarding some media’s questions about whether Musk himself will receive special treatment on the platform, Twitter also publicly stated afterward that he will not receive any special treatment, whether as a member of the board of directors or as an ordinary user. Twitter really does what it says.
After the first investment, Musk continued to make a variety of opinions and discussions (including some confusing ones). As a result, it was not more than a week before he deleted all the content.
At the same time, Twitter also made a sudden announcement that Musk did not want to be a director of the company. “His appointment was due to take effect on April 9. On the same day he told us that he would not be joining the company’s board. I believe this is the best outcome,” Agrawal wrote.
That last sentence is so interesting: “I believe this is the best outcome” – the best outcome for whom? Certainly not Musk. After all, he has long been complaining about Twitter, and he has long wanted to have a vote that belongs to him, otherwise he would not suddenly increase his shareholding and suddenly launch a wholly-owned acquisition of the company on the 13th. Perhaps, this “best outcome” is for Twitter’s board of directors, other shareholders and management.
Agrawal on Musk’s official statement not to be a director: “The board and I and Elon himself have had a lot of discussions about his joining. We are very excited to work together and clearly understand the risks. We also believed that if Elon As the company’s trustee (one of the directors with financial oversight responsibility), he will protect the interests of the company and all shareholders like all other board members.”
Judging from these statements, it is rumored that Musk deleted many tweets related to Twitter after the first investment because he received a gag order from the Twitter board of directors, which is more credible. After all, as a major shareholder of the company, or even as a future board member, he really should not make unfavorable remarks against shareholders’ rights and interests.
Although he deleted the tweets, his likes list was a treasure: in those days, some of the tweets he liked seemed to imply that he was sincere for Twitter’s good, and the board of directors took him as a jerk.
it’s not over yet
On April 11, after “declining” to join the board of directors, Musk’s lawyers updated the shareholding paperwork with the SEC. This time the document adds a sentence that is far-reaching in today’s opinion: “In addition to the previous arrangement… The filer will reserve the right to modify the shareholding plan at any time…” This sentence is in the context of Musk, It means “I may continue to increase my holdings in the future”.
Sure enough, on April 13, Musk launched a general attack on Twitter.
His price of $54 per share is indeed higher than Twitter’s stock price in recent times, so on the face of it, if the deal goes through, Twitter’s other shareholders will indeed get more out of it.
However, board members and other influential big shareholders don’t think so. On the 14th, Twitter’s board of directors issued an announcement saying that it had received an “uninvited, non-binding takeover and privatization offer” from Musk, and said it would specifically deal with the matter.
At the same time, some shareholders have started their own “anti-Malaysia” actions.
As mentioned just now, Vanguard has completed the increase in its holdings on the afternoon of the 14th, reaching a shareholding ratio of 10.3%, temporarily regaining the seat of the largest shareholder.
On the same day, the company’s long-term investor, Saudi Prince Alwaleed bin Talal, also said through his personal Twitter that, considering Twitter’s long-term prospects, Musk’s offer of $54 was not in line with the company’s “intrinsic value”. ). Moreover, he and the Saudi royal family holding company KHC he represents directly rejected Musk’s acquisition offer.
（Source：Alwaleed bin Talal）
In addition, several shareholders have jointly launched a lawsuit against Musk, alleging that his delayed disclosure violated securities trading laws and caused losses to Twitter shareholders. U.S. law stipulates that public disclosure must be made within 10 days if the shareholder of a listed company increases their holdings by more than 5%, and Musk is half a month late.
In addition to the suspicious delay in disclosure, legal experts have analyzed that Musk’s acquisition may constitute a hostile takeover and violate the Williams Act. The bill is one of the amendments to the U.S. Securities and Exchange Act designed to protect investors from actions like Musk’s.
A typical definition of a hostile takeover is a secret hoarding of stock like Musk’s, which is used to launch a forced takeover of a company after the fact. This kind of behavior makes it impossible for other investors to accurately understand the changes in the company’s shareholding situation, resulting in the inability to protect their investments in a timely manner. According to the legal definition, it is indeed illegal, and generally well-intentioned acquirers will avoid it. However, considering the particularity of the situation, similar acquisitions have also occurred in the past.
Although everyone is not optimistic about this deal, Musk has made up his mind to go all the way to the dark.
Musk happened to be one of the guests at the April 14 TED annual conference in Vancouver, Canada. On stage, he shouted directly to investors: “I definitely want to keep other existing investors, but (if investors don’t buy it) I theoretically have the money to buy out all their shares.”
Asked what he would do if the takeover offer was ultimately rejected by Twitter, Musk said there was no way to answer that question. But he made it clear that he still has Plan B.
“I don’t like to fail,” he said.
(This article is written by play Reprinted with permission; source of the first image: shutterstock)