Easter greetings to all my Christian readers. I pray that as we celebrate His resurrection, we experience new hope and abundance of God’s divine grace in our lives.
Today, we will be looking at the story currently shaking corporate America; which has to be the offer made last week by Elon Musk to buy social media platform – Twitter and take it private.
For the uninformed, on the 4th of this month, Mr. Musk announced that he had purchased 9.1% of Twitter. As to be expected, the news sent the share price of the company soaring. In order to curtail his actions, the company offered him a seat on the board in a bid to restrict his ownership to a maximum of 15% of the company.
Although he initially agreed to join the board, Mr. Musk, later on, changed his mind. Subsequentially, he updated documents with the Security and Exchange Commission indicating that he was not interested in being a passive shareholder but was interested in being an active one. The filing was the first indication analysts had about his real intentions.
Last Thursday’s announcement of his offer to buy the remaining shares at $54.20 – 40% above its last traded price of $45.85 proved them right. In absolute terms, he is valuing Twitter at a reasonable premium of $43 billion when the market cap is $37 billion.
Even though he is the richest man in the world, Elon Musk does not readily have funding for this purchase but is in talks with investment giant Morgan Stanley to that effect. One obvious thing is that he is not interested in buying the shares for profit reasons but as a form of free speech campaign. In fact, after he announced his shareholding, he made some suggestions which he believes will unlock more value in the company.
Twitter’s board has subsequently declined the offer and has chosen to adopt measures aimed at protecting the company from a hostile acquisition bid. This tactic is commonly called a poison pill.
A poison pill is a financial strategy known as a shareholder right plan which allows existing shareholders to purchase additional shares at a discount. This in effect makes it more expensive for the bidder to acquire shares through the dilution of the company’s shares. This indicates that we are yet to see the end of this saga.
Elon Musk himself knows that he may not succeed in his quest for the ownership and has also publicly indicated this. In fact, in his letter to the board, he had also indicated his willingness to dump all his shares if his offer was rejected. That action will invariably send the share price crashing.
Many analysts suspect that a compromise may be reached wherein he forgoes ownership in exchange for some changes; one of which is making subscribers pay a fee for using the platform.
For me, this saga highlights the fact that money gives one freedom to explore one’s desires. Mind you, I am indifferent to his reasons but just that he is exploring this purchase simply because he can afford to.
Another thing here is that priorities differ. Many people have criticized the bid simply because they do not believe that it is the best use of his funds. Unfortunately, they can’t dictate how an individual uses his or her funds.
Right now, we can only wait and watch to see how things will turn out.
Till we meet again next week, do have a profitable week!