Elon Musk has offered to buy Twitter at a valuation of about $43 billion. Here’s what will happen – or could – happen next:
The board is reviewing the offer. The Board will work with its advisors at Goldman Sachs to review Mr. Musk’s proposal. They will have to consider, among other things, whether the deal values the company fairly, and whether Mr. Musk has the financing to put together the deal.
Stephen Davidoff Solomon is a professor at the University of California, Berkeley School of Law.
The Board announces its decision. The board will likely take up to a few days to review the proposal. If he declines the offer, he can go one of several ways: He can mount a defense mechanism known as a poison pill that limits the ability of Mr. Musk, and every other shareholder, to buy Twitter shares on the open market.
Once it does, it can still decide to sell itself, but without the pressure of Mr. Musk – or any other applicant – threatening to take it over by buying a large number of shares on the open market.
There are reasons why Twitter chooses not to take a toxic pill. He might be wary of potential criticism that the toxic pill deflects the fears of a vocal member of her community.
Likewise, Mr. Musk, whose last reported stake in Twitter was just over 9 percent, has an incentive to keep his share of Twitter shares below 10 percent. Once he gets this far, he is limited by how quickly he can sell outside the company.
Assuming Twitter rejects the offer, Musk can raise his offer – although he has already said it’s the best and last. He can also take the bid directly to other shareholders, through what is known as a bid offer, where he buys shares from other shareholders.
Still, at least one contributor already said Giving reduces the value of the company.
The painting is likely looking for a white knight. “Twitter has been essentially for sale since it went public,” said Howard Birkenblit, who leads the Capital Markets group at law firm Sullivan & Worcester.
Mr. Musk’s recent activity has likely increased interest and Twitter’s potential for the deal. Some private equity firms may be put off by Twitter’s limited cash flow, but a number of tech companies may take a look, given the growing interest in the social media giant’s power and scope.
There could be a great suitor. Remember that Microsoft, which owns both LinkedIn, and Oracle Compete for a bargain With video sharing company TikTok. However, potential antitrust considerations would likely be a great deterrent, given the Biden administration’s scrutiny of big tech deals.