From almost the start, Elon Musk wanted to buy Twitter — not just sit on its board or remain a silent big shareholder — and he considered launching a competing service before scrapping the plan to focus on a takeover, according to new details about the project. $44 billion deal offered in SEC filing.
The filing, a proxy from Twitter’s board urging shareholders to approve Musk’s acquisition, illuminates his original lawsuit: Musk really wanted to buy Twitter! And he’s been thinking about it for longer than we knew. Like so much else, what’s revealed in the proxy only complicates the very latest situation – with Musk perhaps not buy Twitter after all (although I thought about it for quite a while). He says the deal is void unless Twitter can prove its claims about spam and automated accounts, while Twitter insists the deal should go ahead using the agreed price of 54, $20 per share.
Alright, let’s talk about what we learned from the proxy. After Musk began amassing what would be a more than 9% stake in the company, he met with Twitter CEO Parag Agrawal and Chairman Bret Taylor on March 27 and told them he had amassed that large stake. . Additionally, he said, he was considering a number of options for his next move: launch a competing service, join Twitter’s board, or acquire Twitter. Musk quickly dropped the idea of a competing app. (Smart. As President Trump recently discovered, that’s hard.) And he didn’t want to join the board either. He accepted an administrator position, then turned it down a few days later. In refusing the seat, he told Twitter that he intended to buy the company. Which leaves us with the third option: acquire Twitter.
Until now, it was unclear when Musk decided to pursue an unsolicited takeover, but the power of attorney shows how long he has been concerned about it. Externally, Twitter didn’t reveal much about what it knew about Musk’s plans. In public comments about Musk and his abandoned board seat, Agrawal warned employees and shareholders of “distractions ahead.” (Distractions! That seems like an understatement in hindsight.) Agrawal didn’t mention that Musk had already told him and Twitter’s board of his intention to buy the company. Internally, however, the specter of a Musk takeover caught the attention of the board and seemed to consider every part of how it treated him from the start, including offering him a sits on the board and trying to limit the amount of Twitter shares he could go on. to buy.
Another thing the proxy tells us: Musk and Twitter co-founder Jack Dorsey have been close confidants throughout this, even closer than we’ve gathered from their tweets back and forth. They are friends! And no, that’s not a cutesy exaggeration. The power of attorney actually says so. Here it is, on page 43: During a board meeting on April 3, “Mr. Dorsey informed the Twitter Board that he and Mr. Musk were friends. Their relationship has been a source of complications for Twitter during this process, with Dorsey publicly advocating for Musk to take the company private and criticizing the board (on which he still sits) before directors voted to approve the company. offer from Musk. It turns out that Dorsey was the first person Musk contacted about Twitter (this happened on March 26), and in another conversation, Musk asked Dorsey to rescind his plans to leave the board. administration in May. Dorsey refused and, at the same time, told Musk that Twitter would be better off as a private company. Four days later, Musk notified the board of directors of his intention to take Twitter private.
To recap: Musk and Dorsey are friends! And their friendship is at least partly what fueled Musk’s interest in Twitter – we kind of knew that before the proxy, but this really clarifies it – even if Musk’s interest in Twitter hasn’t always seemed like the best thing for Twitter.
Here’s some other interesting tidbits from the proxy, and then we’ll come back properly to what happened on Tuesday morning:
- Musk passed his background check! There has been slight speculation on the internet that something may have happened during the vetting done by Twitter when he thought he was joining the board. Possibly a previously unknown SEC investigation — which could have worked the opposite way of Musk joining the board. No.
- Twitter didn’t do much to find a so-called white knight. On April 14, a day after Musk publicly revealed his intention to buy Twitter, Twitter’s board met with its Goldman Sachs bankers and decided not to pursue “strategic alternatives” to a sale of Musk. (By that, they mean, “Let’s find another buyer we can live with more easily.” In other words, a white knight.) Why hasn’t Twitter formally solicited other offers? In a grim reflection of Twitter’s business prospects, bankers and the board concluded: “It was unlikely that other parties would have the interest or ability to acquire Twitter,” reads the proxy. . Simply put, no one but Musk would be willing to buy Twitter right now.
- By the time Musk showed up, Twitter already knew it was falling short of targets set last year to grow revenue to $7.5 billion by 2023. Internal projections showed the company landed at $7.2 billion, which would still represent substantial growth from $5.1 billion in 2021 revenue. Twitter projected revenue to grow from $10 billion (2025) to $12.9 billion (2027). Musk reportedly launched far more ambitious goals by pitching potential co-investors to the deal. According to New York Times, he thinks he can grow Twitter’s revenue to $28 billion by 2028, $12 billion from ad sales, $10 billion from subscription products. Currently, Twitter’s revenue comes almost entirely from ads.
- One last piece of the proxy that you have to smile a bit at, considering how it’s positioned. The document has a section titled “Twitter Board Recommendation and Reasons for the Merger,” in which the board lists the reasons why it believes shareholders should approve the deal. Among other factors, they include Twitter’s past struggles to grow users and revenue simultaneously; the bankers’ conclusion that $54.20 is a good price; lack of interest from someone else; and a reasonable likelihood of consumption. The belief of Twitter’s board of directors that an acquisition by Mr. Musk has a reasonable probability of closing.
Funny how “reasonable likelihood of consumption” written since – well, the deal looks a lot less likely to be consumed today than it was a week ago. (At least $54.20 per share.) And here we go back to the very latest events.
Hours before Twitter released that proxy statement on Tuesday morning, Musk said the deal couldn’t happen until the company showed him proof of its estimate that less than 5% of Twitter accounts are spam. Musk has made the fight against spam — bot accounts — one of his favorite talking points, and on Friday he said he was putting the deal on hold until he further analyzes the issues. the company’s spam estimates, which have been included in SEC filings for several years.
At a tech conference on Monday, Musk said he thinks the number could be as high as 20%. Meanwhile, Agrawal posted a lengthy Twitter thread on Monday outlining the company’s actions against bots and again said the number was less than 5%. Musk responded to Agrawal’s comments with a poo emoji.
Yeah, Musk, the guy who’s been thinking about buying or competing with Twitter for longer than we know, may change his mind about buying Twitter. He appears to be positioning the bots as a pretext to walk away from the deal – although he would be liable for $1 billion in severance pay if both sides agree to call things off – or as a pretext to force Twitter to renegotiate the $54.20 share price amid the recent pullback in tech stocks.
Twitter could choose to do neither and take Musk to court to force him to honor his signed agreement with the board to buy the company. If the board thought $54.20 a share looked good in April, it looks even better in May after this fall in stock prices across the industry. In a proxy press release, the company said, “Twitter is committed to completing the transaction at the agreed price and terms as quickly as possible.”
Twitter investors aren’t excited about what’s happening. The stock fell another 0.6% in early trading on Tuesday after falling nearly 7% on Monday. The widening gap between the stock price and Musk’s offer – it had narrowed to a few dollars a few weeks ago – indicates that investors are increasingly worried that the deal will not materialize.
It’s all quite ironic. A few weeks ago, Musk really wanted this done, and Twitter didn’t. Now a cold-footed Musk seems less interested, but Twitter really wants to do it. Why? He told us why directly in the proxy: “If the merger is not completed, and depending on the circumstances that cause the merger not to be completed, the price of our common stock may decline significantly.”