Toronto
Has Elon Musk developed cold feet? Is he experiencing buyer’s remorse? Or is he trying to create drama for the markets, true to his public persona? Or could Musk be negotiating for a better price? Musk started buying Twitter stock in January.
On March 14, he announced a 9.2 per cent stake in the company.
On April 5, Twitter CEO Parag Agrawal announced that Musk would join Twitter’s board of directors, and called it a welcome move that would make Twitter stronger in the long-term.
On April 10, Agrawal announced that Musk decided against joining the board.
On April 14, Musk announced an offer to pay USD 54.20 per share to buy the entire stock of the company.
In response, on April 15, Twitter announced a Shareholder Rights Plan, a poison pill to deter Musk from acquiring the company.
On April 21, Musk presented a detailed plan to finance the USD 44 billion deal.
Importantly, Musk would pay USD 21 billion of his own funds that would largely come from the sale of his Tesla stock holdings, and he would further borrow USD 13 billion against his Tesla holdings.
Having seen a concrete financing plan, Twitter’s board accepted Musk’s offer on April 25.
Happily ever after? It should have been happily ever after for Twitter and Musk, but on May 17, Musk expressed concerns that 20 per cent of Twitter accounts are fake, that his offer was based on Twitter’s subscriber count being accurate, and that he would not proceed with deal unless there was proof that fewer than five per cent of accounts are fake.
Musk’s threat made no sense, because his offer was never about the number of subscribers or about the economics of the deal.
After all, Twitter’s revenues, cash flows, dividends or profits cannot justify a USD 44 billion valuation.
