Twitter and Elon Musk are in talks to strike a deal

Twitter Inc.

TWTR 3.93%

is in talks to sell itself to Elon Musk and could finalize a deal as soon as this week, people familiar with the matter have said, a dramatic turn of events just 10 days after the billionaire unveiled his $43 billion offer for the social media company.

The two sides met on Sunday to discuss Mr. Musk’s proposal and were making progress, but still had issues to work out, the people said. There is no guarantee that they will reach an agreement.

Twitter was expected to reject the offer, which Mr Musk made on April 14 without saying how he would pay for it, and put in place a so-called poison pill to prevent him from increasing his stake . But after the Tesla Inc.

TSLA -0.37%

revealed it had $46.5 billion in funding and as the stock market slumped, Twitter changed stance and opened the door to negotiations, The Wall Street Journal reported Sunday.

Mr Musk has said from the start that his offer of $54.20 per share was his “best and final”, and he has repeatedly told Twitter chairman Bret Taylor in recent days that he will not budge on the price. , some people said. . Conversations between the two sides were expected to focus on issues such as what Mr Musk would pay if an agreed-upon deal fell apart before it was consummated.

Twitter is expected to report its first quarter results on Thursday and was expected to weigh in on the supply then, if not sooner.

The potential U-turn from Twitter comes after Mr Musk met privately with several company shareholders on Friday to tout the virtues of his proposal while reiterating that the board has a ‘yes or no’ decision to make. , according to people familiar with the matter. He also pledged to address free speech issues he sees as plaguing the platform and the country more broadly, whether or not his candidacy is successful, they said.

Mr Musk delivered his pitch for selecting shareholders in a series of video calls, with a focus on actively managed funds, people said, in hopes they could sway the company’s decision .

Mr. Musk said he saw no way for Twitter’s management to bring the stock back to its offering price on its own, given the company’s problems and a continued inability to fix them. It was unclear whether he detailed specific steps he would take, although he tweeted about wanting to reduce the platform’s reliance on advertising, as well as bringing simpler edits such as allowing longer tweets.

Elon Musk has previously said he plans to take his offer directly to shareholders by launching a tender offer.


Photo:

Miguel Roberts/The Brownsville Herald/Associated Press

Some shareholders joined him after the meetings. Lauri Brunner, who manages Thrivent Asset Management LLC’s large-cap growth fund, considers Mr. Musk a skilled trader. “He has an established track record at Tesla,” she said. “He is the catalyst that drives strong operational performance at Twitter.” Minneapolis-based Thrivent has a roughly 0.4% stake in Twitter worth $160 million and is also a shareholder in Tesla.

Mr Musk has previously said he plans to take his offer directly to shareholders by launching a tender offer. Even if he were to win significant shareholder support in a takeover bid – which is far from guaranteed – he would still need a way around the corporate poison pill, a legal maneuver that she has employed which effectively prevents her from increasing her stake to 15% or more.

A tactic often used to push an offer, seeking to take control of the target board, is out of reach for now. Twitter directors have staggered terms, which means a dissenting shareholder would need several years to gain control rather than a single shareholder vote. Twitter last year tried to phase out staggered board terms given they are frowned upon by the corporate governance community, but not enough shareholders voted on the measure. The company is trying to do it again at this year’s annual meeting scheduled for May 25. Only two directors are up for re-election, and it is too late for Mr. Musk to nominate his.

As Elon Musk tries to buy Twitter, WSJ looks back at former Twitter contenders, like Salesforce, Disney and Alphabet. Tech journalist Tim Higgins explains why those past conversations fell through and what’s different this time. Illustration: Nikki Walker

Twitter shares have been trading below its offer price since it made the offer on April 14, usually a sign that shareholders are skeptical of a deal, despite having closed up around 4% on Friday to $48.93, the day after it unveiled the financing for the deal. . Mr. Musk has indicated that if the current bid fails, he could sell his stake, which totals more than 9%.

The funding included more than $25 billion in debt from nearly every top-tier global investment bank except for Twitter’s two advisers. The rest was $21 billion in equity that Mr. Musk would provide himself, likely by selling existing stakes in his other businesses such as Tesla. The speed at which the funding came together and the market’s massive sell-off in recent days — which makes the all-cash offer relatively more attractive — likely contributed to Twitter’s greater willingness to accept M’s proposal. .Musk.

Twitter’s board is expected to engage with Mr. Musk since his stock has “gone nowhere” since the company went public eight years ago, Jeff Gramm, portfolio manager at Bandera Partners LLC, a New York-based hedge fund with about $385 million under management, said earlier. . The company last bought Twitter shares in February and owns about 950,000 shares in total, representing about 11% of its portfolio.

Mr. Gramm said Twitter’s board could not abandon Mr. Musk’s offer without coming up with an alternative that delivers real value to shareholders. “I don’t know what it can be at this point besides finding a higher offer,” he said.

Write to Cara Lombardo at cara.lombardo@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

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