Elon Musk’s “unsolicited proposal” to buy 100% of Twitter (TWTR34) and take the company private shook the markets this Thursday (14), both because of the aggressiveness of the words and the attempt to “takeover” and the consequences that the business can have.
Analysts consulted by InfoMoney say that there are still many open questions, but they are already starting to outline some scenarios: even if he is the richest person in the world, where would Musk get around US$ 40 billion to buy the rest of Twitter? How would freedom of expression and regulation on the social network work?
Below are the main questions about the business:
- Where will Musk get the money from?
- Is the proposal good? Can she be refused?
- Was it a hostile or aggressive offer?
- What are the alternatives to Twitter?
- How would the regulation on the company look like?
- What would freedom of expression look like?
1. Where will Musk get the money?
Elon Musk’s proposal valued Twitter at more than US$ 43 billion (about R$ 200 billion at the current price). As it already has a 9.2% stake in the company, it would lack about US$ 40 billion for the remainder.
The founder of Tesla and SpaceX is currently the richest man in the world and has an estimated fortune of $219 billion, according to Forbes. But much of that value is tied to his stake in Tesla and SpaceX (which is not a listed company and therefore has no liquidity.
In the proposal filed with the SEC (Securities and Exchange Commission, the American CVM) and in the letter sent to the president of Twitter, Bret Taylor, Musk stated that he was offering “the purchase of 100% of Twitter for US$ 54.20 per share in cash ”.
“He would have to sell a considerable slice of Tesla to buy Twitter,” says Roberto Attuch, founder of OHM Research. “Even for a person of his size it is very difficult to get that money.”
In addition, if it sells its shares in the electric car maker, the shares could suffer sharp devaluation.
Dan Ives, managing director and senior equity analyst at Wedbush, told Forbes that the reason for the drop in Tesla shares today is clear: “Wall Street is concerned about Musk’s distraction and him putting up Tesla shares as financial backing to raise money.” money for the proposal to Twitter”.
Forbes estimates Musk has less than $2 billion in cash today, after selling more than $16 billion of Tesla stock late last year and paying $2.6 billion to acquire his stake in Twitter early on. of 2022.
An analysis by the Financial Times newspaper also ponders that “an intriguing question is where Musk will find the money”. The article says that he has already spent US$ 2.6 billion buying his 9% of the company directly on the market, but to reach 100% the scenario is different. “The probability that Musk will soon own zero percent of Twitter is as high as he will eventually own the entire business.”
2. Is the proposal good? Can she be refused?
Musk said the proposal represents “a 54% premium over the day before my investment in Twitter and a premium of 38% over the day before my public announcement of my investment,” but analysts say the company may be undervalued.
The company’s $54.20 per share is down from the peak reached on February 26, 2021 ($77). The shares rose by 12% in pre-market negotiations today, after the proposal was announced, but began to operate close to stability on the NYSE (New York Stock Exchange) as of 11:30 am.
In addition, Saudi Prince Alwaleed Bin Talal Alsaud, the second largest shareholder in the social network, has already said he will reject the offer. “I don’t believe Elon Musk’s proposed offer ($54.20) comes close to Twitter’s intrinsic value given its growth prospects.”
3. Was it a hostile or aggressive offer?
The founder of Tesla and SpaceX said in the letter sent to Twitter president Bret Taylor that the proposal was his “best and last offer”. “If it is not accepted, I will need to reconsider my position as a shareholder.”
James Cramer, host of Mad Money on CNBC and anchor of Squawk on the Street, said on the American television network that Twitter’s Board of Directors “has no option” but to reject the proposal, due to its aggressiveness.
‘Best and Last Offer’ means no negotiation, and Bret Taylor represents shareholders. He can’t do that. He can’t just say. ‘OK, we accept [a proposta]’. This is not fair to shareholders,” Cramer said.
“I haven’t heard anyone argue that shareholders need to be protected from Elon. He cannot steal from the company, even if he thinks he has a better idea.” “He’s not buying a house.”
4. What are the alternatives to Twitter?
For José Augusto Albino, founding partner of Catarina Capital, Twitter’s Board of Directors now has two options: either the company is looking for another buyer, with a better offer, or it simply does not accept Musk’s onslaught.
In both cases, there will be consequences, such as “making a series of restructurings with the aim of bringing in the long term a value greater than US$ 54 per share”. [o valor da proposta de Musk]”, says Albino.
“From now on, there is no way: either the company sells itself to Musk or a third party, or else it will need to present a bold plan to the market, very different from what it is doing”, says the founding partner of Catarina Capital.
“It will be difficult for any other proposal to emerge, and the Twitter board will be forced to accept this offer and/or pursue an active process to sell Twitter,” Daniel Ives, an analyst at Wedbush Securities, wrote to a client, according to Reuters news agency. .
After the proposal was made public, however, Justin Sun, founder of a crypto asset company called Tron, also said on Twitter that he was offering $60 a share to buy the social network. Sun said the company “is far from unleashing its full potential,” but did not say where the money would come from.
5. How would the regulation on the company be?
Howard Fischer, a partner at law firm Moses & Singer and a former senior SEC trial attorney, told Reuters that Musk’s “previous disagreements” “with regulators may not pose an obstacle” to the purchase of Twitter.
But Dan Lane, an analyst at Freetrade, told the British newspaper The Guardian that the SEC may not accept the takeover attempt. “Spreading the seeds of advocating ‘free speech’ is one thing. But let’s not forget, Elon’s view of simply expressing his opinion has been seen as reckless by regulators in the past.”
Lane also considers that Musk’s own use of the platform could affect the company itself, due to SEC scrutiny. “That’s not something the company is going to want hovering over it.”
Roberto Attuch of OHM Research believes that Twitter’s biggest problem would be with the regulation of content, not the market. “With market regulation, he will have fewer problems, but regulation from the media point of view will continue to have them”, says Attuch. “If you close the capital, the regulation that decreases is only financial. But the regulation that matters, in this case, is not so much her. It’s the media sector.”
John C. Coffee Jr., a professor at Columbia Law School, told Forbes that Musk “plans to fundamentally change his business strategy” from the social network and that, as a result, he “would be excited about the acquisition if he were a Tesla shareholder.” .
“Musk already has two companies that consume it and Twitter would be more than an investment for him; it would be a toy that would take up a lot of your time”, ponders the teacher.
6. What would freedom of expression look like?
Musk said in the letter to Twitter’s president that the company needs to go private because it “cannot prosper or serve” free speech in its current form. “Twitter needs to be transformed like a private company.”
“I invested in Twitter because I believe in its potential to be the platform for free speech around the world and I believe free speech is a social imperative for a functioning democracy,” the billionaire said. He ends the document by saying that “Twitter has extraordinary potential” and will “unlock it”.
The Financial Times article says that “Musk is a remarkable entrepreneur,” but points out that “his hostility to vigorous moderation could result in even greater use of the site by fringe groups.” “This could be bad for civilized debate — and Twitter’s shaky business model.”
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