Elon Musk Offers To Buy Twitter For One Specific Reason
Elon Musk has made an offer to take Twitter private and he's saying it's for a specific reason that isn't related to the price tag
Elon Musk made waves a couple of weeks ago when the reported richest man in the world (reported being the operative word) decided to purchase the largest single shareholder stake in Twitter. Musk had been vocal on the platform for years and also vocal around what he saw as issues where the social media platform was concerned. The initial purchase of the stock by Musk was met with speculation that it wasn’t likely to stop there, that bigger plans were afoot where the Tesla and SpaceX founder was concerned. That speculation appears to have been correct with reporting on Thursday that Musk has made an official offer to purchase Twitter, and he’s offering a pretty penny.
The SEC filing on Thursday reported that Elon Musk had made an offer to purchase Twitter at the (likely) non-arbitrary price of $54.20 a share (420 is conspicuous), well above the current $45.85 trading price (38% over the April 1st trading price), setting the purchase at around $43.4 billion. The industry term for this move is called a “Bear hug” or offer well above market in order to entice the current ownership or stakeholders to sell when they might not have previously been incentivized to do so. On a market level, the move by Elon Musk would position himself to be the outright owner of the social media platform, putting the current ownership and stakeholder group in a curious position.
But Elon Musk has also been vocal about the “why” behind his move to buy Twitter. As part of the timing of the offer to purchase Musk wrote a letter to Twitter Chairman Brent Taylor (via Sky News) about the goal of upholding free speech on the platform. Of course, Musk has used Twitter liberally over the years, becoming one of the most engaging figures out there. He’s said that he wants Twitter to be a place of open sharing and wanted to ensure that the platform didn’t devolve into a place where free speech wasn’t at its core ethos. Here is part of what Elon Musk had to say about it:
“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy…However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”
Originally, after his stock purchase, Elon Musk was set to join the Twitter Board of Directors, becoming a major voice in their move forward. But then, just as quickly, he declined that offer. A contingency of joining the Twitter Board was that he would not purchase more than 14% of Twitter stock, so when he declined it appeared that this was so the door could open to something like a hostile takeover. This SEC filing confirms that original thought process. Joining the board would have meant he couldn’t make this current move.
Now look, there are “reported” reasons and “real” reasons for someone like Elon Musk to make an offer to purchase Twitter. The truth is likely somewhere in between. For starters, even for someone worth a reported $265 billion, this Twitter offer is so small number. Taking the company private would, for sure, be a major move even for someone as rich as Musk. And while free speech might be one of the outward-facing pieces of the narrative, no doubt Musk also sees the financial ramifications (or upside) of such a purchase. He’s already run afoul of the SEC in the past for his use of Twitter when it comes to his stock prices.
It will be interesting to see how this all plays out. Is Elon Musk making a free speech play? A financial play?Both? Neither? There are a lot of questions about this latest move and the dominos might have just started falling.
