Elon Musk is, without a doubt, one of the most controversial characters on the current technological scene. Everything he says, in many cases through the social network Twitter, generates controversy. He also what he does, especially in the automotive sector, with Tesla, and in technology. That is why, when it became known a few days ago that he had become the main shareholder of Twitter, practically secretly buying shares of the company until keep more than 9% of their titles, caused an earthquake of such magnitude that its effects are still felt. And that can cause the social network to suffer even more shakes, given that just over a week ago it made an offer to keep all of the company’s shares.
The Twitter Board of Directors, from the moment it learned that Musk was its main shareholder, began to prepare for what was coming. Because it is likely that they were already afraid that he wanted to keep the entire social network. That is why Musk was offered a seat on the board of directors, but in return he had to agree not to own more than 14.9% of its total shares. Musk initially seemed to agree to the deal, but after a few days he abruptly changed his mind and rejected the offer.
At least for a couple of days it seemed that the situation calmed down. The Twitter CEO Parag Agrawal, confirmed that Elon Musk would not enter the board and assured that his opinions and suggestions about the social network would still be taken into account. Musk told Agrawal, again via Twitter, that he was looking forward to working with him and the board to improve Twitter over the coming months. But not even a week had passed Musk offered to keep all the shares of the company through a hostile takeover bid. It offered 54.20 euros for each share of the company, which valued it at about 43.4 billion dollars.
The controversy after the purchase offer
The offer sparked a huge amount of controversy and uproar, with the board practically between a rock and a hard place to review the offer and decide what to do next. Meanwhile, Musk was being sued by a Twitter shareholder for, according to Engadget, taking 11 days to officially notify the SEC of his investment in the social network. Indeed, according to the law in this regard, Musk had to have presented all the documentation about his investment before March 24, 10 days after his package of Twitter shares reached 5%. But he didn’t do it until April 4.
That delay may not be significant, but what it may have been is quite lucrative for Musk, since it may have brought him a profit of 156 million dollars, at the expense of other shareholders who sold shares of Twitter between March 24 and 2020. April 4, and they missed the price increase in the securities that occurred when the Musk operation became known. That is why they missed out on this price increase, which took place and in a notable way when the operation was made public, and they suffered a loss.
In the midst of all this, the Twitter Board of Directors confirmed that it was evaluating the offer, which it ultimately rejected, and prepared to adopt measures to avoid situations like this in the future. Among them, what they call the poison pill, which basically consists of launching a plan to increase the number of shares if a certain shareholder exceeds a certain level when buying titles.
Through this system, other shareholders of the company could buy additional shares at a lower price, and it will be triggered if a shareholder buys more than 15% of Twitter’s common shares without receiving approval from the board of directors to do so. Basically, it makes buying all of their shares not only much more complicated, but also less appealing. Also in something more expensive, but it may not deter Musk from his attempt.
Elon Musk vs. the board of directors
Meanwhile, the days went by, and Elon Musk was reeling off the plans he had for Twitter if he managed to get hold of it. Because when he made the offer he did not have the necessary amount to do it, although he was working on it. Musk wants to take Twitter private and turn it into a private company. He also wants to turn the social network into «an inclusive arena for freedom of expression«, despite the fact that many see in this a possible return of Donald Trump, more permissiveness with the extreme right and more space for accounts that try to spread defamation, hoaxes and misinformation.
In addition, Musk claims to want the company’s moderation policies to be more transparent, for which he intends to make his algorithm open source. And also take action against the board of directors, which he considers guilty of practically all the ills of Twitter.
Musk has pointed out that board members have virtually no shares in the social network, that their interests do not coincide with those of the company, and that these are paid positions when they should not be. Between all of them they currently earn around 3 million dollars a year, and Musk assures that if he buys the network he will expel all its members, because he does not trust them, and the positions on the board of directors will not be paid.
A scrambled Twitter, profit from venture capital funds
While all this was happening, Twitter attracted the interest of several funds interested in buying it. The first was Thomas Bravowho has shown interest in prepare a purchase offer that would rival that of Elon Musk. But it is still unknown if this offer will materialize. It is also not known how much the fund would be willing to offer. Parallel, Apollo Global Management, the fund that owns Yahoo, has also shown interest in participating in a takeover bid for Twitter. But the fund has not made it clear whether it is willing to back Musk’s offer or join another.
The days went by and Musk ceased to be the main shareholder of Twitter a few days after increasing his participation in the social network. In the middle of last week it was confirmed that Vanguard Groupother background, had increased their titles of Twitter to own 82.4 million shares, which represents 10.3% of the total.
Of course, the CEO of Tesla is still the largest shareholder of Twitter individually. But with all the noise generated, and the rise in the company’s shares due to recent movements, Vanguard Group has made more than remarkable profits: about 120 million dollars. Undoubtedly, the group is so far one of the main beneficiaries of the situation.
But that hasn’t stopped him from securing the money he needs to go ahead with his bid, despite opposition from Twitter’s management, and the fact that staying with the company can get really expensive. And he already has it, as stated in a communication that he has filed with the SEC. In it he assures that he already has 46,500 million of insured funds, and that given the rejection of his offer by the board of directors, he is studying the possibility of offering to buy the company’s shares directly from its shareholders. Without board approval. For now, his next steps are unknown, although there is no doubt that we will have news about it very soon.
Photo: Daniel Oberhaus (2018)
