Elon Musk and Twitter are reportedly nearing a deal that would allow the CEO of Tesla to take over the social media company, after discussions late into the night on Sunday.
According to the New York Times, the Wall Street Journal and other media outlets, the two sides were engaged in detailed negotiations through the weekend discussing precise details of a possible takeover, including a timeline and possible breakup fees should a deal fall apart.
The reports suggest a formal agreement could come this week, possibly as early as Monday. Twitter shares rose 5 per cent in pre-market trading on Monday, but below Musk’s offer of $54.20 a share — a sign investors think there’s some doubt the deal will go through. That would value the company at $43 billion US.
It’s the latest development in a fast-moving saga over the past few weeks, one that saw the world’s richest man quietly buy enough shares in the company to be its biggest single owner, before declaring his interest in the company was “passive” and denying he had any interest in controlling it.
After being invited to join the board, Musk then rejected that offer and turned more aggressive, launching a formal takeover bid. Twitter’s board rejected that by implementing a “poison pill” designed to thwart off any unwanted advances.
That move was largely designed to buy the company to buy some time to come up with a better alternative to Musk’s offer, but the board’s sudden receptiveness is a sign that they haven’t managed to come up with a plan B, Wedbush Securities analyst Dan Ives said.
“While the Board approved the poison pill which essentially gave them time to find a ‘white knight’ and second bidder, likely they are now empty handed,” he said Sunday.
WATCH | Here’s why Musk wants to buy Twitter:
Wedbush Securities analyst Dan Ives discusses why Elon Musk is trying to buy Twitter and whether or not the billionaire’s hostile takeover attempt is likely to succeed. 3:39
Musk has said he wants to buy Twitter because he doesn’t feel it’s living up to its potential as a platform for free speech.
In recent weeks, he has voiced a number of proposed changes for the company, from relaxing its content restrictions — such as the rules that suspended former President Donald Trump’s account — to ridding the platform of its problems with fake and automated accounts.
Ives, however, says the beginning of the end game for the company is probably underway, with the likeliest scenario being that Musk takes over the company.
“The Street will read this news today as the beginning of the end for Twitter as a public company with Musk likely now on a path to acquire the company unless a second bidder comes into the mix,” Ives said.
Bloomberg Intelligence technology analyst Mandeep Singh agrees that a Musk-led takeover is now the most likely scenario as the comapny has run out of time to come up with alternatives.
“Twitter’s hand could force it to announce a deal with Elon Musk, given its near-term results likely face headwinds from a sharp slowdown in brand ad spending,” he said.
More to come.
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