Twitter Inc entered deal negotiations with Elon Musk on Sunday after courting many of the social media company’s shareholders with financing details about its $43 billion takeover bid, people familiar with the matter said.
The company’s decision to deal with Musk earlier on Sunday does not mean it will accept its offer of $54.20 per share, the sources said. However, it means that Twitter is now investigating whether a sale of the company to Musk on attractive terms is possible, the sources said.
Musk, chief executive of electric car giant Tesla Inc, has been meeting with Twitter shareholders in recent days, seeking support for his bid. He has said Twitter needs to be taken private to grow and become a true platform for free speech.
Many Twitter shareholders reached out to the company after Musk outlined a detailed financing plan for his offer on Thursday, urging the company not to let the chance of a deal slip by, Reuters reported earlier on Sunday.
Musk’s insistence that his offer on Twitter is his “best and last” has emerged as a hurdle in the deal’s negotiations, the sources said. Nevertheless, Twitter’s board has decided to work with Musk to gather more information about his ability to close the deal and potentially get better terms, the sources said.
Twitter has not yet decided, according to the sources, whether it will investigate a sale to pressure Musk to increase its offer. The people with knowledge of the matter did not want to be identified because the deal talks are confidential.
Twitter wants to learn more about any active regulatory investigations into Musk, including by the U.S. Securities and Exchange Commission (SEC), that pose a risk to the deal’s closing, one of the sources said.
Securities attorneys say Musk, who settled allegations that he misled investors by suggesting he had secured funding to take Tesla private four years ago, may have violated SEC disclosure rules when he acquired a stake in Twitter earlier this year.
Twitter is also investigating whether regulators in any of the key 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 hefty break-up fee, according to the sources.
The social media company took a poison pill after Musk made his offer to prevent him from raising his 9% stake in the company above 15% without striking a deal with the board. In response, Musk has threatened to make an offer that he could use to register Twitter shareholder support for his offer.
One concern that Twitter’s board of directors weighed in was that unless it tried to negotiate a deal with Musk, many shareholders could back him in a takeover bid, the sources said.
While the poison pill would prevent Twitter shareholders from offering their shares, the company is concerned its negotiating hand would weaken significantly if it turned out to go against the will of many of its investors, the sources added.
Representatives from Twitter and Musk did not immediately respond to requests for comment.
The Wall Street Journal reported earlier on Sunday that Musk and Twitter would meet to discuss the takeover offer.
Price expectations among Twitter shareholders for the deal vary largely based on their investment strategy, the sources said.
Long-term active shareholders, who along with index funds own the majority of Twitter stock, have higher price expectations, some in the $60 a share, the sources said. They are also more likely to give Parag Agrawal, who became Twitter’s CEO in November, more time to increase the value of the company’s stock, the sources said.
“I don’t believe Elon Musk’s proposed offer ($54.20 per share) comes close to Twitter’s net asset value given its growth prospects,” tweeted Saudi Prince Alwaleed bin Talal, a Twitter shareholder, on April 14. .
Short-term investors such as hedge funds want Twitter to accept Musk’s offer or ask for just a small raise, the sources said. Some of them worry that a recent drop in the value of technology stocks amid concerns about inflation and an economic slowdown makes Twitter unlikely to be able to provide more value for itself any time soon, the sources added.
“I’d say take the $54.20 a share and be done with it,” said Sahm Adrangi, portfolio manager at Kerrisdale Capital Management, a hedge fund that owns 1.13 million shares of Twitter, or 0.15% of the company. , and an investor since early 2020.
One bright spot for Twitter’s board is that Musk’s offer didn’t seem to turn many of his army of 83 million Twitter followers into new shareholders in the San Francisco-based company who could back his offer, the sources said.
Twitter’s retail investor base has jumped from about 20% before Musk revealed his stake on April 4, to about 22%, according to the sources.
(This story was not edited by NDTV staff and was generated automatically from a syndicated feed.)