It turns out that taking Twitter private isn’t as easy as forking over a gigantic bag of money—even if it’s a really, really gigantic bag.
Last week, Tesla CEO Elon Musk submitted a filing informing the Securities and Exchange Commission that he was offering to buy the social media platform for $54.20 per share, which would amount to about $43 billion in total. The whole thing was a little haphazard: “My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder,” wrote Musk, who recently revealed that he had purchased a 9.2 percent stake in Twitter, making him the company’s largest shareholder. “Twitter has extraordinary potential. I will unlock it.”
As this is a hostile takeover, Twitter’s board launched a defensive tactic known as a poison pill in response late last week, which would essentially allow investors other than Musk to buy new shares at a lower price. The ploy would dilute Musk’s stake and ultimately make it more complicated and expensive for him to take over the company.
Musk is trying his darndest to buy Twitter anyway. He now appears to be launching a pressure campaign against the board. “Board salary will be $0 if my bid succeeds, so that’s ~$3M/year saved right there,” he tweeted on Monday, implying that the board’s interests (like having a cushy board gig) are not aligned with those of shareholders. He’s also suggested that he may make a direct appeal to Twitter’s shareholders with what’s known as a “tender offer,” which is a request that they sell their shares to him at a certain price without having to involve the board. Another way to circumvent the board would be to try to get shareholders to simply vote out the sitting directors.
Whether this could work really depends on if Musk can gather considerable support from the rest of Twitter’s shareholders, and it’s unclear if he has that. In fact, Twitter’s major investors are reportedly less than impressed with his offer. Saudi Arabian Prince Al Waleed bin Talal, who claims to be “one of the largest & long-term shareholders of Twitter,” wrote in a tweet, “I don’t believe that the proposed offer by @elonmusk ($54.20) comes close to the intrinsic value of @Twitter given its growth prospects.”
Given Musk’s status as the richest man in the world, with a net worth of about $219 billion, he certainly could bulldoze over these roadblocks just by throwing even more money at them. But as the Financial Times reports, it would be a huge headache. Most of Musk’s wealth is tied up in stock from Tesla and, to a lesser extent, SpaceX—not sitting in a bank account. He could sell those shares, though a huge chunk would have to go to taxes. The more plausible route would be to pledge his Tesla shares for a hefty loan.
What’s more, running a social media network is not in Musk’s wheelhouse, and it could distract from his other time-consuming endeavors like producing sleek electric cars and launching rockets. Based on previous statements, it seems that Musk is intent on curbing Twitter’s moderation policies in the name of free speech. Regardless of whether that’s a good idea, it’s going to be a punishing task. Former Reddit CEO Yishan Wong penned an insightful Twitter thread over the weekend about the “world of pain” that Musk is in for if he tried to take over the platform, noting how all large social networks inevitably have to figure out how to enact a certain amount of “censorship” purely in order to function without collapsing from perpetual conflicts among users. “The process through which all of that will happen is painful, which is why I don’t think Elon should do it,” wrote Wong. “It is not a good use of his time, and I think his time is uniquely valuable and limited.” Maybe Musk will come to his senses on this front. Or maybe, creating a little chaos is the point.