Twitter, under shareholder pressure, begins deal talks with Musk -sources

By Svea Herbst-Bayliss and Greg Roumeliotis
(Reuters) -Twitter Inc kicked off deal negotiations with Elon Musk on Sunday after he wooed lots of the social media firm’s shareholders with financing particulars on his $43 billion acquisition provide, individuals accustomed to the matter stated.
The corporate’s determination to interact with Musk, taken earlier on Sunday, doesn’t imply that it’s going to settle for his $54.20 per share bid, the sources stated. It signifies, nonetheless, that Twitter is now exploring whether or not a sale of the corporate to Musk is feasible on engaging phrases, the sources added.
Musk, chief government of electrical automobile big Tesla Inc, has been assembly with Twitter shareholders in the previous few days, looking for help for his bid. He has stated Twitter must be taken personal to develop and turn out to be a real platform without cost speech.
Many Twitter shareholders reached out to the corporate after Musk outlined an in depth financing plan for his bid on Thursday and urged it to not let the chance for a deal slip away, Reuters reported earlier on Sunday.
Musk’s insistence that his bid for Twitter is his “finest and ultimate” has emerged as a hurdle within the deal negotiations, the sources stated. However, Twitter’s board has determined to interact with Musk to assemble extra data on his skill to finish the deal, and probably get higher phrases, the sources added.
Twitter has not but determined if it’ll discover a sale to place strain on Musk to boost his bid, in response to the sources. The individuals with information of the matter declined to be recognized as a result of the deal discussions are confidential.
Twitter desires to know extra about any lively investigations by regulators into Musk, together with by the U.S. Securities and Alternate Fee (SEC), that will current a threat to the deal being accomplished, one of many sources stated.
Securities legal professionals say that Musk, who settled expenses that he misled buyers by suggesting 4 years in the past he had secured funding to take Tesla personal, could have breached SEC disclosure guidelines as he amassed a stake in Twitter earlier this 12 months.
Twitter can be trying into whether or not regulators in any of the most important markets it operates would object to Musk proudly owning the corporate, the supply added. Have been Twitter to determine {that a} sale to Musk could be dangerous, it may ask for a sizeable break-up payment, in response to the sources.
The social media firm adopted a poison capsule after Musk made his provide to stop him from elevating his greater than 9% stake within the firm above 15% with out negotiating a cope with its board. In response, Musk has threatened to launch a young provide that he may use to register Twitter shareholder help for his bid.
A priority that Twitter’s board weighed was that except it sought to barter a cope with Musk, many shareholders may again him in a young provide, the sources stated.
Whereas the poison capsule would stop Twitter shareholders from tendering their shares, the corporate is nervous that its negotiating hand would weaken significantly if it was proven to be going in opposition to the desire of lots of its buyers, the sources added.
Representatives for Twitter and Musk didn’t instantly reply to requests for remark.
The Wall Road Journal reported earlier on Sunday that Musk and Twitter would meet to debate the acquisition provide.
‘INTRINSIC VALUE’
The worth expectations amongst Twitter shareholders for the deal diverge largely primarily based on their funding technique, the sources stated.
Lively long-term shareholders, who along with index funds maintain the most important chunk of Twitter shares, have greater value expectations, some within the $60s-per-share, the sources stated. They’re additionally extra inclined to present Parag Agrawal, who turned Twitter’s chief government in November, extra time to spice up the worth of the corporate’s inventory, the sources added.
“I do not consider that the proposed provide by Elon Musk ($54.20 per share) comes near the intrinsic worth of Twitter given its progress prospects,” Saudi Arabia’s Prince Alwaleed bin Talal, a Twitter shareholder, tweeted on April 14.
Brief term-minded buyers similar to hedge funds need Twitter to just accept Musk’s provide or ask for less than a small improve, the sources stated. A few of these are fretting {that a} current plunge within the worth of know-how shares amid considerations over inflation and an financial slowdown makes it unlikely Twitter will be capable to ship extra worth for itself anytime quickly, the sources added.
“I’d say, take the $54.20 a share and be accomplished with it,” stated Sahm Adrangi, portfolio supervisor at Kerrisdale Capital Administration, a hedge fund that owns 1.13 million shares in Twitter, or 0.15% of the corporate, and has been an investor since early 2020.
One silver lining for Twitter’s board is that Musk’s provide didn’t seem to transform a lot of his military of 83 million Twitter followers into new shareholders within the San Francisco-based firm who may again his bid, the sources stated.
Twitter’s retail investor base has elevated from about 20% earlier than Musk unveiled his stake on April 4 to some 22%, in response to the sources.
(Reporting by Svea Herbst-Bayliss in Boston and Greg Roumeliotis in New York; Enhancing by Will Dunham and Kenneth Maxwell)