Musk is looking for a scapegoat out of the Twitter deal: Wedbush Securities‘ Dan Ives
Twitter users woke up April 4 and found the words “Elon” and “Elon Musk” trending on the site — not because the world’s richest, most-followed businessman had caused a stir with his futuristic companies, but because he’d disclosed a major stake in Twitter Inc.
Suddenly, Musk was Twitter’s largest individual shareholder, with more than nine per cent of the company, and speculation swirled about how he would influence the network’s future. He’d been frequently tweeting ideas for revamping the social media platform. Over the next week, Musk would accept an offer to join Twitter’s board of directors and, in a sudden reversal, reject that offer five days later, leaving the company’s management, employees, investors and interested observers guessing about his plans.
On April 25, Twitter and Musk said they’d reached an agreement for the billionaire to acquire the company and take it private. They expect the deal to close by the end of the year, and a lot could happen before then. As the news develops, here’s a look at what’s happened so far:
Jan. 31: Musk starts building his stake
Musk started quietly buying Twitter shares on Jan. 31. By March 14, Musk had accumulated an over five per cent stake, the point after which he was supposed to disclose the activity to the Securities and Exchange Commission, and by extension, the public. Musk missed the deadline to inform the SEC by 10 days. Because Twitter’s share price rose the second his stake was revealed, he was able to accumulate more on the cheap by not disclosing — a misstep that would later trigger a shareholder lawsuit.
March 24: Musk starts critiquing Twitter, on Twitter
His stake still secret, Musk began tweeting criticisms of the company in late March.
“Worried about de facto bias in the Twitter algorithm having a major effect on public; Twitter algorithm should be open source,” Musk tweeted on March 24.
“Free speech is essential to a functioning democracy. Do you believe Twitter rigorously adheres to this principle?” Musk asked his Twitter followers in a poll posted on March 25.
“Is a new platform needed?” Musk asked in a tweet on March 26. “Am giving serious thought to this.”
Several users commenting on the Tesla Inc. chief executive officer’s tweet recommended he look into buying Twitter instead. Soon they would find out he was already acquiring shares.
April 4: Musk’s stake becomes public, and he’s invited to join Twitter’s board
Musk’s filing listed him as a passive investor, and yet, shortly after it became public, he started tweeting out business propositions for the social media company. Musk posted another poll on Twitter asking users to vote on whether they wanted the company to add an edit button that would allow people to change tweets after they’ve been published. Twitter CEO Parag Agrawal urged users to “vote carefully” on the poll. “The consequences of this poll will be important.”
By the end of the day, Twitter invited Musk to join the board. Musk signaled that he would sign an agreement stipulating that he could not own more than 14.9 per cent of the company’s stock.
April 5: Musk becomes an active investor
In the morning, several of Twitter’s board members took to the platform to congratulate Musk on his decision to join their ranks. Agrawal tweeted that the company and Musk had been chatting for weeks. Agrawal’s tweet led people to question why someone engaged in discussions to become a director would file as a passive investor.
Later that day, Musk refiled the disclosure of his stake to classify himself as an active investor, making the change only after indicating that he would accept a seat on the social media company’s board.
April 9: Musk rejects the board seat
The day that Musk was set to officially join Twitter’s board, Musk informed the company that he would be rejecting its offer. But, Twitter sat on the news for roughly 36 hours while waiting to see whether Musk would change his mind. Twitter’s investor relations website listed Musk as a board member throughout the weekend.
During that time, while the public still thought Musk was set to join Twitter’s board, Musk tweeted several veiled criticisms and suggestions for the company. Musk asked his followers, “Is Twitter dying?”
Musk suggested that everyone who signs up for Twitter Blue, a subscription version for power users, should get an authentication checkmark. He suggested Twitter should convert its San Francisco headquarters into a homeless shelter “since no one shows up anyway.” And he made some crass jokes, suggesting removal of the “w” in Twitter.
April 10: Twitter makes the news public
On Sunday, Agrawal sends out a note to employees, and later tweets it publicly. Neither Agrawal or Musk give a reason for the reversal.
April 11: Speculation abounds
Musk files an amended disclosure with the SEC. He can now purchase as many shares as he wants. Without a board seat, he no longer has to act in the best interest of Twitter shareholders. At Twitter, which doesn’t have a founder with majority control like other tech giants, employees are “ super stressed,” concerned that this is only the beginning of the whiplash.
April 14: Musk offers to buy the whole company
In an SEC filing and accompanying tweet, Musk said he would buy out stockholders in a cash deal valued at US$43 billion and take Twitter private. The offer is US$54.20 a share, a 54 per cent premium over the price when he started building his stake in January. The number is also an apparent (and not-very-subtle) reference to Musk’s failed bid to take Tesla private in 2018 for US$420 a share — and, of course, to a special number in pot culture. Morgan Stanley is brought in to advise on the bid, which Musk describes as his “best and final” one.
April 15: Twitter adopts ‘poison pill’ to ward off Musk takeover
To thwart Musk, Twitter launched a so-called poison pill, which is a rights plan that allows shareholders to purchase shares at a discount if any shareholder exceeds 15 per cent ownership. This would effectively dilute the billionaire’s stake. The company said in a statement that the intention of the plan is to ensure that anyone taking control through open-market accumulation pay all shareholders an appropriate premium. Twitter has been fielding interest from other parties, including private equity firm Thoma Bravo, according to a person familiar. The company is being advised by Goldman Sachs Group Inc. and JPMorgan Chase & Co. Twitter founder Jack Dorsey, a friend of Musk, acknowledged in a tweet that as a public company Twitter has always been for sale.
April 16: ‘Twitter’s board owns almost no shares’
In a flurry of tweets about the potential deal, Musk said, “With Jack departing, the Twitter board collectively owns almost no shares,” so its economic interests are not aligned with shareholders. Dorsey replied, “It’s consistently been the dysfunction of the company.” Dorsey is scheduled to leave the board once his term expires at the next shareholder meeting on May 25.
Wow, with Jack departing, the Twitter board collectively owns almost no shares! Objectively, their economic interests are simply not aligned with shareholders.— Elon Musk (@elonmusk) April 16, 2022
Vanguard’s April 8 disclosure that it owns 82.4 million shares or 10.3 per cent of the company fuels tweets that Musk is no longer the top Twitter shareholder.
April 19: Musk retains Morgan Stanley to consider leveraged buyout
The New York Post reports that Musk is willing to invest up to US$15 billion of his own cash and borrow against his Twitter stake to push through a deal.
April 21: Musk lines up US$46.5 billion in funding
Musk explores a tender offer for Twitter, saying he’s secured US$46.5 in funding. A filing with the SEC shows that he has US$25.5 billion in debt financing from Morgan Stanley and other financial institutions, including margin loans backed by his equity stake in Tesla and US$21 billion in equity financing from himself. But whether the billionaire will sell part of his stake in one of his prized companies to acquire Twitter remains to be seen.
April 24: The board holds discussions with Musk
Talks between Twitter’s board and Musk took place Sunday and continued into the next day. The board began to take Musk’s offer more seriously once he presented details of his financing.
April 25: Twitter yields to Musk, agrees to offer
Twitter agreed to sell to Musk for his original offer of US$54.20 a share. The transaction, valued at about US$44 billion, will take the company private. Musk said he will prioritize free speech on the site, open-source its algorithms, eliminate spam and add new features. Twitter said it expects the deal to close in 2022.
April 29: Musk sells Tesla stock
Musk disclosed an additional US$4.5 billion worth of Tesla Inc. stock sales in new regulatory filings, bringing the total he’s disposed of in the process of buying Twitter to more than US$8.5 billion. Tesla’s CEO offloaded more than 5 million shares on April 28, according to the new filings, and tweeted “No further TSLA sales planned after today.” That followed previous disclosures of sales totaling 4.4 million shares the two prior days. Musk has now sold about US$25 billion worth of stock in the electric-car maker during the last six months.
No further TSLA sales planned after today— Elon Musk (@elonmusk) April 29, 2022
May 4: Billionaire backers pony up additional funds
Musk raises an additional US$7.1 billion of new financing commitments to fund the deal. Backers include Oracle Corp. founder Larry Ellison who puts up US$1 billion, Sequoia Capital for US$800 million, Vy Capital US$700 million, Binance US$500 million, and more than a dozen others, according to company filings. He also secures a pledge from Saudi Arabia’s Prince Alwaleed bin Talal, who agreed to roll over his nearly 35 million Twitter shares, worth about US$1.9 Billion at US$54.20 per share.
May 6: Plans for Twitter revealed
The New York Times reports that, according to a pitch deck presented to investors, Musk is planning to quintuple Twitter’s revenue US$26.4 billion by 2028, from US$5 billion last year, and sees a similar growth of users, to 931 million from 217 million. To accomplish this he plans to expand the company’s negligible payments business currently used for tipping creators, and grow it to US$15 million in revenue by 2023, and US$1.3 billion by 2028. The deck also revealed plans to cut the company’s reliance on advertising to less than 50 per cent of revenue, further develop a subscription product and prepare for fluctuating headcount.
May 10: Trump ban to be lifted
Musk confirms that he would reverse Twitter’s ban on former U.S. president Donald Trump once owner.
“I would reverse the permanent ban,” he said at a Financial Times conference. “Perma bans just fundamentally undermine trust in Twitter as a town square where everyone can voice their opinion.”
“My opinion, and Jack Dorsey I want to be clear shares this opinion, is that we should not have permanent bans,” Musk said, referring to the Twitter co-founder and former chief executive officer. Dorsey tweeted his agreement, and both men added caveats that illegal behavior or spam wouldn’t be allowed.
I do agree. There are exceptions (CSE, illegal behaviour, spam or network manipulation, etc), but generally permanent bans are a failure of ours and don't work, which I wrote about here after the event (and called for a resilient social media protocol): https://t.co/fQ9KnrCQGX— jack⚡️ (@jack) May 10, 2022
May 12: Hiring freeze goes into effect and key executives depart
Twitter CEO Parag Agrawal announces a hiring freeze and other cost-cutting efforts amid the state of uncertainty over the acquisition. Two of Twitter’s top leaders also depart: Kayvon Beykpour, head of consumer product, and Bruce Falck, in charge of revenue product, were both asked to leave, the two executives said in separate posts. Beykpour was laid off while on paternity leave, he said in a Twitter thread. “Interrupting my paternity leave to share some final @twitter-related news: I’m leaving the company after over seven years,” and added, “The truth is this isn’t how and when I imagined leaving Twitter, and this wasn’t my decision. Parag asked me to leave after letting me know that he wants to take the team in a different direction.”
The truth is that this isn’t how and when I imagined leaving Twitter, and this wasn’t my decision. Parag asked me to leave after letting me know that he wants to take the team in a different direction.— Kayvon Beykpour (@kayvz) May 12, 2022
The social media company won’t hire new employees and may rescind offers already out, according to an internal memo obtained by Bloomberg. Some exceptions will be made for business-critical roles, as determined by Twitter leadership. The company is also pulling back on costs such as travel, consulting and marketing, according to the memo.
Agrawal said global events, including the war in Ukraine and the supply chain crunch, have hurt Twitter’s business and may continue to do so. The company isn’t planning broad job cuts, “but leaders will continue making changes to their organizations to improve efficiencies as needed,” Agrawal wrote.
May 13: Twitter deal on hold
“Twitter deal temporarily on hold pending details supporting calculation that spam/fake accounts do indeed represent less than five per cent of users,” Musk said in a tweet, which sent Twitter stock plummeting.
A few hours later he sent another tweet saying he is “still committed” to the acquisition.
Musk said he was waiting for details on a recent filing from Twitter that fake accounts on the social media platform contributed less than five per cent of its users. In a follow-up tweet late Friday, he added that his team would do a random sample of 100 followers as a way to find out.
May 16: Musk and Agrawal have it out... on Twitter
In a Twitter thread, Agrawal said that measuring spam accounts was complicated because some are actually real humans even if they look like spam, and vice versa. Twitter also allows bots on the service, so simply setting up an automated account is not against the rules.
Musk was not impressed with Agrawal’s response. He suggested calling users to verify their accounts, then he simply replied to Agrawal with a poop emoji.
Unfortunately, we don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can’t share). Externally, it’s not even possible to know which accounts are counted as mDAUs on any given day.— Parag Agrawal (@paraga) May 16, 2022
May 17: Musk threatens to pull deal
Musk declares he won’t proceed with his takeover plan unless the social media giant can prove bots make up fewer than 5% of its users. The billionaire tweeted “this deal cannot move forward” unless Twitter provides proof of its claims, reiterating his own view that the ratio of fake accounts is far higher than Twitter has said, stoking speculation Musk may try to lower the price or even walk away.
“20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher. My offer was based on Twitter’s SEC filings being accurate. Yesterday, Twitter’s CEO publicly refused to show proof of <5%. This deal cannot move forward until he does,” Musk said.
20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.— Elon Musk (@elonmusk) May 17, 2022
My offer was based on Twitter’s SEC filings being accurate.
Yesterday, Twitter’s CEO publicly refused to show proof of <5%.
This deal cannot move forward until he does.