Elon Musk and Twitter's relationship has taken several turns in the past few months and has gained a lot of traction in the news because of the implications it can have on the stock market concerning Twitter's shareholders and the hundreds of millions of users in the world as well. It is no secret now that Musk has made an offer to buy 100 per cent of Twitter's shares and this could spell a lot of changes, right from its content policies to its revenue structure. But what kicked off this series of events? What are the exact implications? What is Twitter's board doing to counter Musk's hold of power? We decode this saga bit by bit in this take of What the FAQ.
What brought Musk into the Twitterverse as more than just a user?
Elon Musk has been an avid user of Twitter and has more than 81 million followers on it. Beyond tweeting regularly, from January 31 he began buying hundreds of thousands of shares in the company beginning with 6,20,000 shares bought at $36.83 per share. He now is the single largest shareholder of Twitter with 9.2 per cent stake in the company. This is if you disregard investment giant Vanguard Group that controls 10.3 per cent of shares.
So can Elon Musk be among the board members at Twitter?
With so large a share of the company, it was expected that Musk would join the Board of Directors. A lot was expected of him after he had tweeted a poll asking users if Twitter promotes free speech for its users. The inadvertent result was that many users suggested he buy Twitter. Even CEO Parag Agarwal welcomed Musk to the board, saying he would bring "great value" to the social media giants. All this took a huge U-turn when it was known that Musk had turned down the opportunity to join the board with Agarwal commenting that it was perhaps "for the best".
Why did Musk choose not to be a board member?
There are a lot of theories on this one. The most popular one suggests that Musk did so to keep himself out of having to keep the promise of his ownership stake of Twitter at 14.9 per cent or below. By not being a board member, Musk is now free to try to take over the company by making a bigger bid to own a larger stake.
What is Musk's latest move?
He has made an offer to buy 100 per cent stake at Twitter for $43 billion which comes to $54.20 per share, all in cash. He has since gone on to state that Twitter has extraordinary potential and that he wants to unlock it. He added, "My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder."
How is Twitter countering this latest move?
Twitter is attempting to put off Musk's takeover move by employing a "poison pill" scheme. A poison pill is a move by which corporate boards can flood the market with loads of newly created stock so that a takeover becomes far more expensive for activist investors or unwelcome suitors. Twitter's plan will be triggered if a shareholder accumulates a stake of 15 per cent or more. However, Elon Musk indicated that such a move would be harming shareholder interests and the company would be in breach of their fiduciary duties. It does look like we have not seen the end of this titanic tussle, not by a long way.
