(Bloomberg) -- While it’s anyone’s guess how Elon Musk’s $44 billion takeover attempt of Twitter will end, there is some clarity over how it started.
The key relationships in the run-up to Musk’s takeover offer revolve around calls with Twitter co-founder Jack Dorsey and board member Egon Durban, managing partner at private equity firm Silver Lake who helped Musk on his ill-fated 2018 attempt to take Tesla Inc. private, according to a US securities filing on Tuesday.
During the course of March 26, Musk chatted to Dorsey and Durban about his plans for the social media platform, including that he had taken a “significant stake” of more than 5% stake in the company.
Durban soon informed Bret Taylor, the board chairman, Martha Lane Fox, one of Twitter’s directors, and Chief Executive Officer Parag Agrawal, of Musk’s interest in joining the board and set up a meeting between Musk and the Twitter executives.
Many of the following twists in the Twitter takeover have been highly publicized by Musk, on Twitter -- his financing, his concerns over bots, even poop emojis to Agrawal. However, the latest details highlight how the troubled takeover has appeared to be been driven by the billionaire’s whims rather than deep financial analysis.
In early April, after the initial conversations with Musk, it seemed Twitter’s board and its legal team had successfully sated his appetite to change the company. Musk agreed to take a board seat, limit his stake in Twitter to 14.9%, and spent three days chatting about new products with Agrawal -- presumably including adding an edit button.
By now Dorsey had informed the Twitter board of the somewhat obvious fact that “that he and Mr. Musk were friends,’ according to the filing. The pair, two of the tech industry’s most high-profile entrepreneurs, have regularly chatted about cryptocurrencies and making Twitter’s software and content moderation decisions more transparent.
Durban also told the board that he had worked on “unrelated matters with Mr. Musk in the past.” These matters involved advice given by Silver Lake -- along with other investors -- in 2018 over taking Tesla private. The US Securities and Exchange Commission sued Musk for securities fraud, after he falsely claimed -- via Twitter -- he had funding to take Tesla private.
On April 4, Musk publicly disclosed his 9.2% stake in Twitter and board members outlined their offer for him to have a seat at the table, subject to him agreeing to not acquire more than 14.9% of the company. Meanwhile, Musk continued to discuss Twitter’s strategy with Dorsey and Agrawal. Dorsey shared his own view that Twitter would do better as a private company, and that he would not stay on as a board member with Musk.
Musk’s conversation with Dorsey clearly outweighed any potential product launch with Agrawal. On April 9, Musk decided he wanted to buy Twitter instead. He made his formal offer of $54.20 a share on April 14, setting off a scramble to finance the deal.
Since then, Musk’s takeover attempt of Twitter has been one of general chaos, most recently culminating in Musk declaring Tuesday morning that he won’t proceed unless the social media giant can prove bots make up fewer than 5% of its users.
Wall Street has always been skeptical of the deal. The spread between Musk’s offer and Twitter’s last trading price is currently about 40%, suggesting investors think there is little chance the deal will get done without a discount -- if at all.
There is unlikely to be a white knight to push the price back up. In mid-April a number of financial sponsors and institutional investors got in touch with Twitter’s advisers that they might be interested in either buying or funding a deal for Twitter. However, “None of these parties (or any other party) made a proposal to acquire Twitter,” according to the filing.
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