Elon Offers to Buy Twitter for $43B - The Entertaining SEC Filing

In a recent SCHEDULE 13D/A SEC filing it was revealed that Elon Musk has offered to buy 100% of Twitter (NYSE: TWTR) for $54.20 per share in cash. The current TWTR stock price is $44.8 as of writing this. After reading the filing I wanted to quickly share my thoughts because it is one of the more entertaining SEC filings. If you haven't been keeping track of the recent Elon Musk Twitter saga then you can check out the most recent news here.

I've shared some key excerpts from the filing below and will provide my thoughts. Typically if there is an acquisition or buyout offer, the buyer is paying a premium and we see the stock price move up, at least to the premium that the buyer is willing to pay. There is also a risk: if the board does not accept the offer then we typically see a drop in price. There are other scenarios and cases where this doesn't play out but let's jump into the filing.

Note: the SEC filing is italicized and formated for readability


Exhibit B

Bret Taylor

Chairman of the Board,

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.

As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced. My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.

Twitter has extraordinary potential. I will unlock it.

/s/ Elon Musk

Elon Musk

Elon already has a 9% stake in Twitter that he disclosed a week ago. He was also openly discussing being on the board of Twitter. There are 2 key points that stand out from the filing.

1. Free Speech - If Elon successfully buys Twitter and takes it private we can assume there would be significant changes to the platform. The control that he would have as the owner of a private company would be immense. He has long been a proponent of free speech and limited government regulation so we could assume that the changes to Twitter would align with his beliefs.

2. Buyout Premium - The buyout premium is pretty strong, and if I was an existing Twitter shareholder I would gladly accept the offer (on a pure return basis). I also think there are a number of Twitter investors (and employees) who wouldn't be happy with Elon taking the company private primarily because they don't agree with his vision for Twitter.

Script

SEND VIA TEXT

As I indicated this weekend, I believe that the company should be private to go through the changes that need to be made.

After the past several days of thinking this over, I have decided I want to acquire the company and take it private.

I am going to send you an offer letter tonight, it will be public in the morning.

Are you available to chat?

VOICE SCRIPT

1. Best and Final:
   1. I am not playing the back-and-forth game.
   2. I have moved straight to the end.
   3. It's a high price and your shareholders will love it.
   4. If the deal doesn't work, given that I don't have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder.
      1. This is not a threat, it's simply not a good investment without the changes that need to be made.
      2. And those changes won't happen without taking the company private.
2. My advisors and my team are available after you get the letter to answer any questions
   1. There will be more detail in our public filings. After you receive the letter and review the public filings, your team can call my family office with any questions.

This is straight to the point. Aside from being entertaining, there are a few aspects that stand out.

1. Final Offer - Elon is essentially saying this is his final offer and he is at the end of the line, a good negation tactic

2. Threat - he mentions that he would need to reconsider his position in Twitter (i.e. sell the current 9% holdings) if the offer is rejected. He then explicitly says this isn't a threat. This pretty much is a threat because it would not be in the current shareholder's interest for the board to reject the deal because there would likely be a significant drop in the stock price.

If you are a current holder of Twitter then this buyout is great news. If you don't hold Twitter, then depending on your risk tolerance, there might be a play prior to the buyout. The risk is if the buyout doesn't happen and Elon dumps his Twitter shares.