Twitter reconsiders Elon Musk offer, may be more receptive to deal


Twitter Inc.

TWTR 3.93%

is revisiting Elon Musk’s $43 billion takeover bid after the billionaire funded the offer, a sign the social media company may be more receptive to a deal.

Twitter was expected to reject the offer, which Mr Musk made earlier this month without saying how he would pay for it. But after revealing last week that it now has $46.5 billion in funding, Twitter is taking a fresh look at the offer and is more likely than before to seek negotiations, people familiar with said. folder. The situation is changing rapidly and it is still far from guaranteed that Twitter will.

Twitter is still working on a very large estimate of its own value, which should come close to Mr. Musk’s offer, and it could also insist that sweeteners such as Mr. Musk agree to cover break protections if the agreement collapses. , some people said.

The two sides are meeting on Sunday to discuss Mr. Musk’s proposal, the sources said.

Twitter is expected to weigh in on the offer when it releases its first-quarter results on Thursday, if not sooner, the people said. Twitter’s response won’t necessarily be black and white and could leave the door open to invite other bidders or negotiate with Mr. Musk on terms other than price. Mr. Musk in recent days reiterated to Twitter Chairman Bret Taylor that he would not budge from his $54.20 per share offer, the people said.

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.

The Tesla Inc.

TSLA -0.37%

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

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.

Mr. Musk already has shareholders rallying behind 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 employed to push an offer, seeking to take control of the target board, is out of reach at this time. Twitter directors have staggered terms, meaning a dissenting shareholder would need several years to gain control rather than just one 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.

Shares of Twitter have been trading below its offer price since it made the offer on April 14, generally 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. . He indicated that if the current offer fails, he could sell his stake, which is 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 should engage with Mr. Musk since his stock has “gone nowhere” since the company went public eight years ago, said Jeff Gramm, portfolio manager at Bandera Partners LLC, a New York-based hedge fund with approximately $385 million under management. 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

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