Twitter, under pressure from shareholders, begins negotiations with Musk

April 24 (Reuters) – Twitter Inc (TWTR.N) launched negotiations with Elon Musk on Sunday after courting numerous shareholders of the social media company with details of the financing of its $43 billion takeover bid , said people familiar with the matter.

The company’s decision to engage with Musk, made earlier on Sunday, does not mean it will accept his $54.20 per share offer, the sources said. It does mean, however, that Twitter is now investigating whether a sale of the company to Musk is possible on attractive terms, the sources added.

Musk, chief executive of electric car giant Tesla Inc (TSLA.O), met with Twitter shareholders in recent days seeking support for his bid. He said Twitter needed to go private to grow into a true free speech platform. Read more

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Many Twitter shareholders contacted the company after Musk presented a detailed financing plan for its bid on Thursday and urged it not to pass up the opportunity for a deal, Reuters reported earlier on Sunday. Read more

Musk’s insistence that his offer for Twitter is his “best and final” has emerged as a stumbling block in the deal negotiations, the sources said. Nonetheless, Twitter’s board decided to engage with Musk to gather more information about his ability to close the deal and potentially secure better terms, the sources added.

Twitter has yet to decide whether it will explore a sale to pressure Musk to increase its offer, the sources say. People familiar with the matter declined to be identified because talks about the deal are confidential.

Twitter wants to know about any active investigation by regulators of Musk, including by the U.S. Securities and Exchange Commission (SEC), that poses a risk to the deal going through, one of the sources said.

Securities lawyers say Musk, who settled charges of misleading investors by suggesting four years ago he had secured financing to take Tesla private, may have violated SEC disclosure rules by acquiring a stake in Twitter earlier this year. Read more

Twitter is also considering whether regulators in one of the major markets it operates would object to Musk owning the company, the source added. If Twitter determines that a sale to Musk would be risky, it could charge a significant break fee, the sources say.

The social media company adopted a poison pill after Musk made his bid to stop him from increasing his more than 9% stake in the company above 15% without negotiating a deal with his board. . In response, Musk threatened to launch a takeover bid which he could use to register Twitter shareholder support for his bid.

One concern Twitter’s board weighed was that unless it seeks to negotiate a deal with Musk, many shareholders could back him in a takeover bid, the sources said.

Elon Musk’s Twitter account is seen on a smartphone in this photo illustration taken April 15, 2022. REUTERS/Dado Ruvic/Illustration

While the poison pill would prevent Twitter shareholders from tendering their shares, the company fears its negotiating hand could weaken significantly if it turns out to go against the wishes of many of its shareholders. investors, the sources added.

Representatives for Twitter and Musk did not immediately respond to requests for comment.

The Wall Street Journal reported earlier Sunday that Musk and Twitter would meet to discuss the acquisition offer.

Pricing expectations among Twitter shareholders for the deal diverge largely based on their investment strategy, the sources said.

Long-term active shareholders, who along with index funds own the bulk of Twitter shares, have higher price expectations, some in the $60 per share, the sources said. They are also more inclined to give Parag Agrawal, who became Twitter’s chief executive in November, more time to increase the company’s stock value, the sources added.

“I don’t believe Elon Musk’s offer ($54.20 per share) comes close to Twitter’s intrinsic value given its growth prospects,” Saudi Prince Alwaleed bin Talal tweeted on April 14. shareholder of Twitter.

Short-term investors such as hedge funds want Twitter to accept Musk’s offer or ask for only a small raise, the sources said. Some of them worry that a recent plunge in the value of tech stocks amid worries about inflation and an economic slowdown makes Twitter unlikely to pick up more value any time soon. the sources added.

“I would say, take the $54.20 a share and get it over with,” said Sahm Adrangi, portfolio manager at Kerrisdale Capital Management, a hedge fund that owns 1.13 million shares in Twitter, or 0.15 % of the company, and has been an investor since early 2020.

A silver lining from Twitter’s board is that Musk’s bid doesn’t appear to have converted much of his army of 83 million Twitter followers into new shareholders in the San Francisco-based company who might back his bid. , the sources said.

Twitter’s retail investor base has grown from around 20% before Musk unveiled his stake on April 4 to around 22%, the sources said.

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Reporting by Svea Herbst-Bayliss in Boston and Greg Roumeliotis in New York; Editing by Will Dunham and Kenneth Maxwell

Our standards: The Thomson Reuters Trust Principles.

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