The ongoing game of footsie between billionaire tech mogul Elon Musk and social media platform Twitter reached a new stage April 22, as Musk began major steps towards buying the company.
The business pages have been full of various back-and-forth lobs and volleys between the two over the last three weeks.
It all began when Musk announced that he had acquired a 9.2% stake in Twitter, making him the company's largest shareholder at the time.
That title has since been reclaimed by the Vanguard Group, a private equity shop that has since bought 10% of Twitter, or 82.4 million shares.
The ensuing chaos was primarily orchestrated by Musk and his very visible presence on Twitter, where he has 82.9 million followers.
Via that stage, Musk has bounced between being an active investor to a passive investor and back again. He suggested turning the San Francisco headquarters into a homeless shelter, asked followers to weigh in on changes to Twitter's policies and continued to troll Twitter's board whenever he got the chance.
It eventually all culminated in Musk offering to buy Twitter for $46.5 billion, an amount he said in a filing with the Securities and Exchange Commission on April 21 is secured and offers at least some highly-prized shares of Tesla (TSLA) in the deal.
Twitter responded last week to Musk's initial offer by adopting a "poison pill" scenario, which limits any one person from acquiring more than 15% of the company, and may allow offering new stock to everyone but Musk.
But with Musk now outlining financing for his deal, and with new developments on April 22, Twitter has an ever-more-serious scenario to contemplate.
“It signals an increasing level of seriousness,” Donna Hitscherich, a member of the finance faculty at Columbia Business School, told the Washington Post. “You’re ratcheting up the resolve with the hopes that at one point the other side will come to the table.”
Musk Starts to Pounce
Now, Musk has begun the actual process of structuring an entity to actually make the deal a reality.
Musk's major companies are electric carmaker Tesla, infrastructure upstart the Boring Company, biotech Neuralink, and space exploration company SpaceX.
All four have always acted as independent companies, without a parent company. Only Tesla is publicly traded.
Now, however, that could change, possibly via new holding companies that Musk announced on April 22 in a new filing with the SEC.
The holding company method would allow Musk and his partners to use a subsidiary that would eventually merge with Twitter.
That makes Musk's offer much more concrete than it ever has been in the past — and answers naysayers who have long said the Musk does not hold enough liquid assets to mount a takeover for anything.
Will It Work?
How successful Musk's forming three holding companies, each with a variation on the name "X," will be at actually buying Twitter depends on a variety of factors.
Whether the board likes Musk or not as a potential owner does not legally matter — they are legally required as part of their fiduciary duty to review any offers put before them.
Twitter said in a statement that it will review an “updated, nonbinding proposal” that Musk had submitted to the board that includes his new financing details.
“The Board is committed to conducting a careful, comprehensive and deliberate review to determine the course of action that it believes is in the best interest of the Company and all Twitter stockholders,” it said.
