Apr 14, 2022 - Economy & Business

Elon Musk gives Twitter reasons to reject his bid

Photo illustration of Elon Musk.
Photo illustration: Shoshana Gordon/Axios. Photo: Christian Marquardt - Pool/Getty Images

Elon Musk on Thursday may have given Twitter's board of directors ample reason to reject his hostile takeover bid, even though it's at a significant premium to where the company's shares have traded in recent months.

Driving the news: Musk was interviewed on stage at the TED conference in Canada in his first public statements since disclosing his $43 billion offer.

  • "I don't care about the economics at all," said Musk, reflecting how he views Twitter more as a public utility than a private, for-profit business.

That came after Musk said he'd try to finance the deal by convincing major existing shareholders to roll over their stock into his offer, although it's unclear why mutual or hedge fund managers would buy into his noneconomic vision.

  • Musk also didn't appear to have thought through some of the content moderation challenges at Twitter, outside of believing the company has been too heavy-handed.
  • The only real new idea he offered was open-sourcing the Twitter algorithm, perhaps by putting it on Github.

Be smart: Corporate boards have a fiduciary responsibility to shareholders, but that doesn't mean they must accept the highest per share takeover price — or a takeover at all. There are other factors at play:

  1. Whether he takeover has a reasonable chance of closing.
  2. The impact on other stakeholders, such as users and employees.
  3. The board may implement a so-called poison pill to weaken Musk's hand as a major shareholder.

Investors also think there's a major disconnect, as shares on Thursday continued to trade at a significant discount to Musk's $54.20 per share offer price.

  • Earlier today, Vanguard disclosed that it increased its stake in Twitter, which means it leapfrogged Musk to become the company's largest outside shareholder.

The bottom line: By his own admission, Musk only decided to launch a takeover offer within the past week. That means he hasn't yet finalized how he'd finance the offer, who he'd ask to help run the company or a myriad of other issues.

  • All of that works in the board's favor, were it to reject Musk.
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