Tesla CEO pulls out of $44 bn deal; Here's the Elon Musk-Twitter saga; from hostile bid to the abandoned deal

It has been a whirlwind of a situation, featuring controversial Twitter polls, a will he - won’t he situation with Elon Musk joining the Twitter board, a ‘poison pill’ plan and finally the purchase. But, now in yet another dramatic turn, the deal has turned sour. Musk has withdrawn from the $44 billion deal.

Let’s take a look at how the saga unfolded:

 

 

At the beginning of this month, the eccentric billionaire Musk disclosed that he now owns 9.2 per cent of Twitter’s shares, a number that is even higher than what Jack Dorsey the company’s founder owns. This made him the largest shareholder and this purchase came with an offer for him to join the Twitter board of directors.

Soon after Musk created a number of polls for his followers, on serious topics like freedom of expression, to polling about removing the alphabet ‘w’ from Twitter’s name. He even declared that he has big plans for the company, however, soon after Twitter CEO Parag Agarwal announced that Musk has decided to forego joining the Twitter board.

In yet another surprising move, Elon Musk soon declared that he has made an offer to purchase the whole of Twitter. He valued Twitter at about $43 billion for $54.20 a share, saying the social media company needs to be transformed privately.

A twisted reaction followed the hostile takeover bid, with the company considering launching a ‘poison pill’ protocol.

As per an NYT report, the strategy helps turn a hostile takeover into a complex and expensive process. The company activates shareholders' rights which means that the existing shareholders get the right to buy additional shares at a discounted rate. This helps dilute the acquirer stakes by creating surplus shares in the market.

As per a recent filing with the SEC mutual fund giant, The Vanguard Group disclosed that its funds hold 82.4 million shares, or 10.3 per cent of Twitter's common stock, as of March 31, 2022, while Musk owns around 73.4 million shares.

Twitter’s top shareholders together own about 37 per cent of the company’s shares. Scroll down to find out who they are.

Vanguard, one of the world's largest investment managers, offers hundreds of mutual funds, exchange-traded funds, and retirement programmes.

As of March 31, 2022, Vanguard funds owned around 82.4 million Twitter shares, accounting for 10.3 per cent shares.

Elon Musk, a Twitter user himself, with millions of followers, announced on April 4, 2022, that he owned 73.5 million Twitter shares. This represented a 9.2 per cent stake in the company at the time, the majority stake. He made the purchases on March 14, 2022, according to the disclosure form.

Investors are required to file an ownership declaration within 10 days after acquiring a position of 5 per cent or more in a publicly-traded firm, and they had until March 24 to do so. Failing to make timely disclosure, he was later sued by other shareholders.

Musk committed "materially false and misleading statements and omissions" by neglecting to disclose his investment in Twitter by March, according to a proposed class action filed in federal court in Manhattan. 

Morgan Stanley

BlackRock Inc.

Saudi Prince has recently retweeted Saudi Arabia's Kingdom Holding Company and he has owned 5.2 per cent of Twitter since 2015.

Following this revelation and the Prince’s opposition to Musk buying the social media company, the Tesla CEO and the prince got into a Twitter war of words, with the billionaire questioning “what are the Kingdom’s views on journalistic freedom of speech?”.

State Street Corporation is a financial service and bank holding company based in Boston, United States.

As of year-end 2021, State Street Corp. (STT), which operates the SPDR exchange-traded funds as State Street Global Advisors, had 36.4 million Twitter shares in its funds, representing a 4.5 per cent holding in the firm.

Jack Dorsey, who co-founded Twitter and served as its CEO of Twitter from 2015 to 2021 still owns 2.25 per cent of Twitter.

Dorsey and two other Twitter stockholders sold 22.6 million shares to three investment banks for $15.93 each share in August 2011.

As per a report by Vox, between November 2014 and August 2015 he had sold nearly 380,000 shares of Twitter stock.

According to Bloomberg, in 2016, he donated $100 million of his Twitter stock to the employee equity pool.

On Thursday (April 21), the billionaire announced that he has secured around $46.5 billion to finance the transaction and that he plans to make a direct appeal to shareholders.

As per a BBC report, he plans to back his bid with the backing of Morgan Stanley among other financial institutions.

After all the drama, the poison pill and more, under pressure from Shareholders, Twitter decided to reconsider Elon Musk's buyout offer. 

Apparently Musk "made his pitch to select shareholders in a series of video calls, with a focus on actively managed funds... in hopes that they could sway the company’s decision".

And he has done it. Elon Musk has successfully won the bid to purchase the micro-blogging site Twitter for $44 billion. 

The billionaire set his sights on something and he got it. No amount of drama, or elusive attempts from the Twitter board could sway his resolve.

Musk's takeover is the culmination of a whirlwind of announcements and counter-announcements, punctuated by gleefully fired punches at the company, that too on its own platform.

The Musk-Twitter saga took another wild turn. 

Elon Musk, who has been described as a "self-serving pragmatist" has announced on Friday (July 8) that he was withdrawing from his $44 billion deal to acquire Twitter because the social media business had broken numerous merger agreement clauses.

Musk's attorneys said in a filing that Twitter has ignored or refused to reply to several requests for information on fake or spam accounts on the site, which is vital to the company's business performance.

According to the complaint, Twitter "is in material breach of multiple provisions of that Agreement," and "appears to have made false and misleading representations upon which Mr. Musk relied when entering into the Merger Agreement."

Musk added that another reason he was leaving Twitter was that the company had violated its promise to "preserve substantially intact the material components of its current business organisation" by firing high-ranking executives and a third of the talent acquisition team.

Twitter isn't going to make it easy for Musk to walk out on it. The company's stock started to tumble within a matter of days after Musk's decision to buy it as investors speculated Musk might walk away from the deal. On Friday (8 July) Twitter's stock price fell to its lowest level since March.

Bret Taylor, the chairman of Twitter, said on the microblogging site that the board intended to file a lawsuit to enforce the merger deal.

"The Twitter Board is committed to closing the transaction on the price and terms agreed upon with Mr. Musk and plans to pursue legal action to enforce the merger agreement. We are confident we will prevail in the Delaware Court of Chancery."

More frequently than not, contested mergers and acquisitions that are brought before Delaware courts result in the corporations renegotiating agreements or the acquirer paying the target a settlement to withdraw, rather than a judge mandating that a transaction be completed. This is due to the fact that the target companies are frequently eager to end the uncertainty around their future and move forward.

According to a person familiar with the situation, Twitter, however, is hoping that court procedures will begin in a few weeks and conclude in a few months.