"Ultimately to Musk?" Twitter Reconsiders Acquisition Proposal... Purchase Price Is Key (Update)

by Cho Seulkina

Published 25 Apr.2022 11:02(KST)

[Image source=Reuters Yonhap News]

[Asia Economy New York=Special Correspondent Joselgina] Twitter is reconsidering Elon Musk, Tesla CEO's acquisition proposal. It is expected that full-scale merger and acquisition (M&A) discussions between Musk and Twitter management will take place ahead of this week's earnings announcement.

The Wall Street Journal (WSJ) reported on the 24th (local time), citing sources, that after Musk revealed plans to raise $46.5 billion in acquisition funds, Twitter is newly reviewing his acquisition proposal and is more likely to enter negotiations than before. A source stated, "Both sides will meet today to discuss Musk's proposal."

Initially, Twitter appeared to reject the proposal outright, even activating a poison pill to defend its management rights immediately after Musk's acquisition offer. However, WSJ analyzed that the atmosphere confirmed over the past few days suggests a possibility of a more accepting attitude toward the acquisition proposal.

On the 21st, Musk disclosed through the U.S. Securities and Exchange Commission (SEC) plans to raise a total of $46.5 billion through debt and equity financing. Then, on the 22nd, he met with Twitter shareholders, including active funds, to explain the acquisition proposal and emphasized that "(the board) will have to make a decision either in favor or against." This move is analyzed to have put pressure on Twitter. Major foreign media reported that shareholder pressure to properly negotiate is increasing.

Shareholders who have already sided with Musk have also been confirmed. Lori Brunner of Sylvent Asset Management, which holds 0.4% of Twitter shares, evaluated, "Musk, the CEO, has a proven track record at Tesla," and "He will be a catalyst to drive strong business performance at Twitter."

Twitter is expected to announce its official stance on this acquisition proposal ahead of its first-quarter earnings announcement on the 28th. However, it is also suggested that Twitter may leave room to avoid clearly stating support or opposition, possibly waiting for other bidders' proposals or trying to secure more favorable terms.

The key issue is the per-share purchase price. Musk's fixed price of $54.20 per share, which he called "the best I can offer," includes a 38% premium based on the price before his investment news was disclosed. However, considering that Twitter's stock price was in the $70 range a year ago, this is not a high amount.

Jeff Gram, manager at Bandera Partners, a New York hedge fund holding 950,000 Twitter shares, said, "The Twitter board cannot withdraw Musk's proposal without presenting shareholders with a substantial alternative," and evaluated, "At this stage, I don't know what else there could be besides offering a higher price." As of the 22nd, Twitter's closing price was $48.93.