How Elon Musk won Twitter

The social-media network was expected to reject the Tesla CEO’s offer — then bankers got involved ...

The future of Twitter Inc. changed on Thursday. Elon Musk surprised the social-media company’s board that morning by unveiling $US46.5 billion in financing he had cobbled together in short order, adding credibility to the bare-bones takeover bid he had made just a week earlier.

Behind the scenes, Twitter’s bankers delivered a report to its directors saying that not only was Mr. Musk’s $54.20-a-share bid fair, but that the company also could struggle to get there on its own, people familiar with the matter said. Meanwhile, technology stocks — even of money machines like Facebook parent Meta Platforms Inc. — were tanking, making Mr. Musk’s all-cash offer seem more attractive.

What looked like a strong hand for Twitter’s board just a few days earlier — when Mr. Musk didn’t have the financing and had seemingly little shareholder support — was weakening by the hour.

Twitter representatives started asking Mr. Musk’s camp questions about the financing, said people familiar with the matter. Then on Saturday, Bret Taylor, the Salesforce Inc. co-chief who leads Twitter’s board, spoke to Mr. Musk, the people said. The full board was going to meet the following morning, he told the billionaire, to discuss taking the deal. He suggested they talk again afterwards.

Twitter had been expected to reject Mr. Musk’s offer, which was well below the high of nearly $80 that Twitter stock had traded at last year. But by the time the two men reconnected Sunday afternoon, Twitter’s board had voted in favour of negotiating with Mr. Musk and advisers were hashing out a $44 billion deal. It was announced Monday afternoon.

This account is based on conversations with people familiar with how the blockbuster deal came together.

Mr. Musk carried out his pursuit with his signature mix of mayhem and winking jabs. When he unveiled his bid, it sparked the same question that has surrounded his other business ventures, from mass-producing electric cars to putting humans on Mars to drilling giant tunnels for superfast travel: Could he pull it off?

Twitter had been expected to reject Mr. Musk’s offer, which was well below the high of nearly $80 that Twitter stock had traded at last year.

Now he faces fresh challenges. Mr. Musk has hocked roughly $60 billion of his Tesla Inc. stock — about one third of his stake — as collateral for bank loans, tying his personal fortune to Twitter’s. He must come up with $21 billion more in cash, which could mean selling additional shares in Tesla, just as the company is hitting its stride.

Tesla shares have lost about 8% since Mr. Musk first disclosed a Twitter stake, suggesting investors are worried he will be distracted or financially stretched.

Twitter will be saddled with hundreds of millions of dollars in annual interest payments, a risk for any company but especially in this case, as Mr. Musk has said he doesn’t care whether it makes money — it has had trouble doing so over the years. And by pushing the company away from content moderation, which Mr. Musk has called censorship, he is likely to embroil it in debates about free speech and online safety.

Mr. Musk will face whether to allow former President Donald Trump back on Twitter. After the January 6 riot last year, the company said it permanently suspended Mr. Trump’s personal account. The former president told Fox News on Monday that he had no plans to return to Twitter and would instead use his Truth Social social-media network to reach followers.

The saga began on April 4, when Mr. Musk disclosed a more than 9% stake in Twitter, making him its largest shareholder. His regulatory filing was late, miscounted the number of shares he owned and indicated he would be a passive investor. His lawyers soon amended it to clarify that he could take an active role.

Twitter the next day announced that Mr. Musk would join its board. The two sides had already been discussing the possibility, and Twitter hoped doing so might muzzle him, as he had continued his public criticisms of the company.

Mr. Musk was already baulking at how constrained he would be if he joined the board. Still, the two sides charged forward. Twitter completed a background check of Mr. Musk and aimed to make it official by the end of the weekend. But that Saturday, April 9, he told the company he had changed his mind.

Twitter CEO and co-founder Jack Dorsey.

Privately, he began plotting his next move: a full-fledged takeover bid. He went public on April 14 with his bid. “I made an offer,” he tweeted, along with a link to a regulatory filing. Once his advisers determined the offer should include a roughly 40% premium to Twitter’s stock price, he decided to go with $54.20, which incorporated a running gag of his — a reference to April 20, an annual cannabis-celebration day.

The offer said nothing on how he planned to pay for it — no small feat, even for Mr. Musk, given that the bulk of his billions are tied up in Tesla shares and stakes in his other companies. It was part of an unorthodox plan devised by his team to get Twitter and the market to discount his offer at first, which could provide an edge in negotiations down the line.

Twitter’s stock closed down that day, a sign shareholders weren’t sure a deal would happen. For Wall Street, the bid brought back flashbacks of when he famously tweeted in 2018 that he had “funding secured” to take Tesla private at $420 a share — yet another marijuana joke. The deal never happened, and he later paid regulators a $20 million fine in connection with the incident.

At first glance, the $54.20 offer appeared underwhelming to Twitter’s advisers. The shares were down significantly and the company had been seen as a prize for potential suitors over the years, including deep-pocketed technology companies such as Salesforce.

Twitter quickly installed a “poison pill,” a legal manoeuvre that would make it difficult for Mr. Musk to expand his stake beyond 15%. It was finalised on a quiet Good Friday, with stock markets closed for the holiday.

The turning point came Thursday, April 21, when Mr. Musk said he had lined up financing for his bid from blue-chip banks including Morgan Stanley, Barclays PLC and Bank of America Corp. The package — three-quarters of it drawn from Mr. Musk’s personal fortune — lent credibility to the bid and neutralised potential criticism by Twitter. He also noted that his proposal was no longer subject to his team’s completing due diligence, clearing a path for a deal to be reached at rapid speed.

Twitter had already been hearing from shareholders concerned that Mr. Musk’s offer might be the best it could do, and the existence of financing ramped up pressure on directors to take it seriously.

In a series of video calls on Friday, Mr. Musk continued making his case to top shareholders, only fleetingly aware at the time that Twitter’s board committee tasked with reviewing his bid was beginning to have a change of heart. Twitter’s bankers had delivered an opinion that the company’s go-it-alone path, in the worst case, could be well below $54.20 a share.

No serious corporate suitors surfaced after Mr. Musk made his bid, perhaps wary of taking on the world’s richest person and mindful of a chillier antitrust climate in Washington. A sale to a private-equity firm would be difficult to finance.

Mr. Musk sensed a shift when Mr. Taylor talked to him the following day and pressed him on whether he would sweeten the offer. Mr. Musk had previously said his offer was “best and final” and wouldn’t budge now, telling Mr. Taylor that he had a reputation to protect. Mr. Musk was prepared to take the bid directly to shareholders if the board rejected it — something he had already suggested publicly via a series of cryptic tweets.

The pair agreed to reconvene the next day, after Twitter’s board would officially vote on whether to open negotiations with Mr. Musk. On Sunday, Mr. Musk made clear to Twitter he was eager to complete a deal by Monday. Because the price was fixed, Twitter focused its negotiations on protections for shareholders in case the deal didn’t go through, given Mr. Musk’s fickle nature and his rocky relations with regulators.

Advisers on both sides were still putting the finishing touches on the deal Monday morning, and hopes for a premarket announcement faded. The news came instead in the middle of the trading day — an almost-unheard-of rollout for big corporate news.

It was a fitting coda to an unconventional deal. Mr. Musk trolled Twitter on its own platform through the two-week takeover battle, offering a glimpse of the Twitter he envisions and that he will now be able to pursue — unshackled by content guidelines or niceties. He took swipes at Twitter’s bankers, U.S. securities regulators, fellow billionaire Bill Gates and Justin Bieber, whose infrequent tweeting he seemed to take as a symptom of the platform’s flaws.

At an all-hands employee meeting Monday afternoon, Twitter CEO Parag Agrawal said there were no lay-offs planned and that the company’s priorities weren’t changing before the deal closed, said people who heard the remarks. Asked about the possibility that Mr. Trump would be allowed back on Twitter, Mr. Agrawal deflected, according to the people, saying that once Mr. Musk takes over, “We don’t know what direction the company may go.”

The Wall Street Journal