How Will Twitter’s Board Handle Elon Musk?

Many traders, analysts and funding bankers count on Twitter Inc’s board of administrators to reject Elon Musk’s $43 billion (roughly Rs. 3,27,855 crore) acquisition provide within the coming days as insufficient, however how would the social media firm then proceed?

Twitter shares dropped on Thursday after Musk unveiled his provide, because the market deemed it too low and too skinny on financing particulars. Twitter’s board is at the moment evaluating the bid and plenty of traders and analysts say {that a} rejection is probably going, barring any adjustments to the provide from Musk.

Here are some choices out there to Twitter’s board ought to it resolve to show down Musk’s provide:

Buy extra time

Twitter’s board might resolve to not interact in sale talks with Musk and as an alternative give extra time to its new Chief Executive Parag Agrawal to satisfy the corporate’s operational targets. The board adopted a one-year poison capsule final week that stops Musk from proudly owning greater than 15 p.c of the corporate with out its consent, successful itself a while. It additionally faces no short-term problem as a result of the deadline for traders to place ahead their very own board nominees at its annual shareholder assembly in May handed with none rival slate filed.

Agrawal, beforehand Twitter’s chief expertise officer, succeeded Jack Dorsey on the helm of the corporate on the finish of November.

Agrawal mentioned in February that he was sticking with the formidable income and consumer progress targets that the corporate introduced final 12 months, regardless of investor skepticism that has weighed on Twitter’s shares. Those targets embody reaching 315 million common ‘monetisable’ day by day lively customers – registered customers that see adverts on the platform – and producing at the very least $7.5 billion (roughly Rs. 57,180 crore) of annual income by the tip of 2023. 

Musk has given conflicting indicators on what he would do if his bid fails. He mentioned final week that he would rethink his place as Twitter’s shareholder if his provide is rejected. This may point out that Musk would then promote his greater than 9 p.c stake in Twitter and stroll away. However, Musk additionally tweeted final week that Twitter shareholders ought to get a say on his proposed deal no matter what the corporate’s board thinks. This was interpreted by some traders as a touch that he can be keen to press on with a hostile bid.

Try to barter with Musk

Twitter can provide to open its books to Musk, hoping that this might result in a greater provide. This would take a look at Musk’s description of his $54.20 (roughly Rs. 4,130) all-cash bid as his “best and final offer”. The Tesla Inc chief government, whose web value is pegged by Forbes at $265 billion (roughly Rs. 20,20,455 crore), has not specified how a lot of his personal fortune he can be keen to contribute in the direction of a deal to accumulate Twitter.

It is feasible that Musk finally ends up partnering with non-public fairness companies, sovereign wealth funds or different deep-pocketed traders to cut back his personal fairness verify in any transaction. He mentioned final Thursday that he wished as many current Twitter shareholders to roll their stakes in a deal as legally potential.

Solicit bids from different events

Twitter’s board can discover strategic alternate options, which might contain contacting corporations, non-public fairness companies and different potential suitors to gauge their curiosity in a deal. The advantage of this feature is that it may determine a greater deal or put strain on Musk to boost his provide. The draw back is that it may increase the hopes of many traders that Twitter will promote itself, pressuring it to barter a deal from a place of weak point, on condition that its shares are buying and selling at just a bit over half of what they have been value just a little over a 12 months in the past.

One potential bidder, buyout agency Thoma Bravo LP, contacted Twitter final week to specific its curiosity in a proposal that might problem Musk, Reuters reported. Other non-public fairness companies may enter the fray, and a few expertise and media corporations can also select to courageous the regulatory scrutiny that might include such a deal.

It is feasible that any various transaction that Twitter opts for wouldn’t be an acquisition. Twitter may select to pursue an analogous deal now with one other occasion, elevating more money and avoiding an outright sale.

© Thomson Reuters 2022