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Elon Musk has offered to buy Twitter at a valuation of $43 billion. What happens next – or can happen -:
The Board evaluates the proposal. The board will work with its advisers at Goldman Sachs to review Mr. Musk’s proposal. Among other things, they will need to consider whether the deal values the company fairly and whether Mr Musk has the finances to put together a deal.
The board can’t simply decide that they don’t like Mr. Musk as a suitor, but they can “find reasons why they don’t like the tender,” such as his ability to fund it, said Steven Davidoff Solomon, professor at the University of California, Berkeley, School of Law.
The board explains its decision. It will likely take several days for the board to review the proposal. If he turns down the offer, it can go one of several ways: He can activate a defense mechanism known as the poison pill, which limits the ability of Mr. Musk and all other shareholders to buy Twitter shares on the open market. .
When he does, he may still decide to sell himself, but without pressure from Mr. Musk or any other suitor, he does not threaten to buy it by buying a substantial number of shares on the open market.
There are reasons why Twitter chose not to make poison pills. He may be wary of possible criticism that a poison pill is deflecting the concerns of a rather vocal member of his community.
Likewise, Mr. Musk, whose most recently reported stake on Twitter is just over 9 percent, is encouraging him to keep his Twitter share below 10 percent. Once it reaches that threshold, the company is limited in how fast it can sell.
Assuming Twitter turns down the offer, Mr. Musk might raise his offer – despite already saying it’s the best and final. It can also take the offer directly to other shareholders through what is known as a tender offer, where it will buy shares from other shareholders.
Yet at least one shareholder already said The offer lowers the value of the company.
The board searches for a potential white knight. “It’s been essentially for sale since Twitter went public,” said Howard Berkenblit, who heads the Capital Markets group at the Sullivan & Worcester law firm.
Mr. Musk’s recent event has likely fueled interest and Twitter’s propensity for a deal. Some private equity firms might be put off by Twitter’s limited cash flow, but given the growing interest in the social media giant’s power and reach, some tech companies might take a look.
There may be great suitors. Remember Microsoft, which owns both LinkedIn and Oracle. competed for a deal with the video sharing company TikTok. Still, potential antitrust considerations will likely be a significant deterrent given the Biden administration’s scrutiny of major tech deals.
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