Mark McSherry

Twitter, Inc. announced on Monday afternoon it has entered into a definitive agreement to be acquired by a private entity wholly owned by Elon Musk for $54.20 per share in cash in a transaction valued at $44 billion.

Upon completion of the transaction, Twitter will become a privately held company.

Under the terms of the agreement, Twitter stockholders will receive $54.20 in cash for each share of Twitter common stock that they own.

The purchase price represents a 38% premium to Twitter’s closing stock price on April 1, 2022, the last trading day before Musk disclosed his 9% stake in Twitter.

The transaction, which has been unanimously approved by the Twitter board of directors, is expected to close in 2022, subject to the approval of Twitter stockholders, the receipt of applicable regulatory approvals and the satisfaction of other customary closing conditions.

Musk has said he has secured $25.5 billion of fully committed debt and margin loan financing and has said he is providing an $21 billion equity commitment.

“There are no financing conditions to the closing of the transaction,” said Twitter.

Bret Taylor, Twitter’s independent board chair, said: “The Twitter board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing.

“The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.”

Twitter CEO Parag Agrawa said: “Twitter has a purpose and relevance that impacts the entire world. Deeply proud of our teams and inspired by the work that has never been more important.”

Musk said: “Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated.

“I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans.

“Twitter has tremendous potential – I look forward to working with the company and the community of users to unlock it.”

Reuters reported that Twitter CEO Parag Agrawal would get an estimated $42 million if he were terminated within 12 months of a change in control at the social media company, citing research firm Equilar.

The White House declined to comment on the deal — but said that President Joe Biden has long been concerned about the power of social media platforms.

“Our concerns are not new,” said White House spokesperson Jen Psaki, adding that the platforms need to be held accountable.

“The president has long talked about his concerns about the power of social media platforms, including Twitter and others, to spread misinformation.”

Interactive Investor head of investment Victoria Scholar said: “Although this offer represents a premium of more than 30% to Twitter’s share price before Musk’s 9.2% stake was announced earlier this month, it is still sharply below the stock’s peak from February of last year.

“Initially Twitter was opposed to relinquishing ownership to the Tesla chief amid a difference in opinion on the role of the social media platform.

“Musk describes himself as a free-speech absolutist whereas Twitter and its employees have been focused on content moderation by removing trolls, fake news, and conspiracy spreading.

“Twitter’s poison pill strategy was aimed at diluting a potential hostile takeover from Musk, with the microblogging site hoping that a rival more ideologically aligned bidder would come to the table.

“When no such approach materialised, Twitter had two options, either to accept Musk’s offer or focus on turning around company itself.

“Clearly Twitter’s management has lost faith in its own ability to restore confidence in the business, with the board opting to go with the former option instead.

“On top of that, the broader shaky market backdrop played into Musk’s hands.

“Given the recent sharp sell-off in US tech with some other stocks in the sector like Netflix and Facebook nursing heavy losses, the M&A speculation kept Twitter’s stock well supported.

“The board decided to take the generous offer instead of risking the bearish fate of some of its rivals.

“It has been surprising to see the sheer pace at which this story has developed, given the initial resistance from Twitter with Musk getting exactly what he wanted in a matter of days.

“It was just eleven days ago that Musk tabled what he described as his ‘best and final’ offer for the company.

“It was assumed that this rhetoric was purely part of his negotiation tactics with reports that he would need to sweeten the deal possibility with private equity backing in order to get approval from Twitter.

“However the company swiftly U-turned on initial resistance by accepting Musk’s very first offer, an unusual situation within such high level negotiations.

“There are big questions ahead about what Musk’s leadership will mean for the company.

“There is the possibility that its headquarters could be moved to Austin, headcount could face cuts and there is likely to be a ideological shift in terms of the company’s focus away from content moderation and towards free speech instead.

“However despite speculation, Fox News is reporting that Donald Trump will not be returning to Twitter as he is using his own Truth Social platform instead.

“Overall stakeholders will be hoping that Musk can inject some of his Tesla-style magic to improve usability as well as monetisation, two things that Twitter has struggled with for a long time and more than most of its rivals.

“Meanwhile Tesla shares are under pressure with rising investor nervousness that its CEO will now be spread too thinly, distracted from electric vehicles by his new role as a social media mogul.”

Hargreaves Lansdown senior investment and markets analyst Susannah Streeter said: “Although Elon Musk likes his fingers to be pretty much constantly tapping out tweets, he clearly wants Twitter to adopt a hands off approach when it comes to moderation under his ownership.

“But just how he’ll avoid a collision course with regulators isn’t clear given that he’ll own the platform he uses to makes sweeping criticisms of the way they operate.

“The challenge will also be maintaining and building revenue given that the controversial opinions he hopes to give more of a free rein to are often unpalatable to advertisers.

“He clearly sees introducing more subscription models as the way forward, but the risk is today’s regular users may just end up paying to receive more abuse, which doesn’t bode well for long term retention of the moderate Twitterati.

“However Musk’s star quality and eagerness to stir up more controversial views on the platform may prove to be irresistible entertainment.

“If this deal goes through Musk’s Twitter is set to take on the heady scent of a sweaty town hall gathering, with combatants keyboard-ready to fire vociferous missives at their opponents.

“Injecting growth into this new social media boxing ring, and proving it is worth more than its $44 billion price tag, is going to be an extremely hard slog in the months and years ahead.

“But it seems promoting free speech rather than focusing on wealth creation is his primary motivation here.

“Given that Musk has time and time again deflected blows of criticism aimed at his perceived over ambition, he is likely to emerge bruised but in fighting form whatever obstacles are thrown at him.”

John Colley, Associate Dean of Warwick Business School, said: “The price offered by Elon Musk took advantage of the current weakness in technology share prices.

“Twitter was well down from its peak and the share price had halved over the last year. The premium that Musk offered must have been attractive to shareholders.

“However, $44 billion seems a lot to pay for a hobby — even for Elon Musk. One wonders, how much of a plan he has to add value?

“Previous management have struggled to monetise the model and Twitter did not look like making any return until Donald Trump adopted it as his main channel for communicating with the public.

“The jury is still out on whether Twitter can really compete against Facebook, Google and TikTok.”

Goldman Sachs & Co. LLC, J.P. Morgan, and Allen & Co. are serving as financial advisors to Twitter, and Wilson Sonsini Goodrich & Rosati, Professional Corporation and Simpson Thacher & Bartlett LLP are serving as legal counsel.

Morgan Stanley is acting as lead financial advisor to Musk. BofA Securities and Barclays are also acting as financial advisors. Skadden, Arps, Slate, Meagher & Flom LLP is serving as legal counsel.