On April 14, Elon Musk launched the latest offensive in his Twitter flash attack: a hostile takeover bid, at $ 54.20 per share, or nearly $ 43.4 billion for the company. The South African billionaire boasts of offering a 38% premium over the share price at the beginning of April, when he became the largest shareholder by acquiring 9.2% of the shares. And he warned: this offer that he considers generous is not negotiable. Unless it’s just a tactic …
Now the ball is in the field of the other shareholders of the social network, free to accept or decline this offer. For its part, Twitter management has stated that its the advice was going “carefully review the offer to determine the course of action that it believes is in the best interest of the company and all of Twitter’s shareholders“But according to The Information, it would tend towards an unfavorable opinion.
Beyond the financial aspect, Elon Musk hasn’t given any details on his acquisition plan, except that he wanted to take the company out of the stock market. In his statement to the SEC (the American financial policeman), he is content to write that the social network with over 330 million monthly users has “extraordinary potential“, that matters”to unlock“.
“The offer is too low”
As soon as the offer was put on the table, the first shareholders publicly announced their refusal to come, starting with Saudi prince and investor Al-Walid bin Talal. “I don’t think Elon Musk’s proposition ($ 54.20) comes close to Twitter’s intrinsic value given its growth prospects. I am one of the largest and oldest shareholders of Twitter. Kingdom Holding Company (his investment fund, ed) and I reject this offer “, he wrote on his Twitter account. The Saudi was joined in his speech by investor Ross Gerber, who owns more than 9,000 shares through his fund. “The offer is too low. Elon needs to bid for $ 69 stock to win Twitter“.
Despite these refusals from the start, several experts believe that Elon Musk will ultimately be successful. In a note seen by AFP, Wedbush Securities analysts predict that the “twists, the soap opera will end with the acquisition of Twitter by Mr. Musk“.
Questioned by La Tribune, Jean-Christophe Liaubet, financial analyst and partner at Fabernovel, believes the offer is “correct“.”With this offer, Lpressure on shareholders is quite high. The spike above $ 70 per share was a long time ago [14 mois, ndlr], and it must be remembered that in February the stock was $ 34“. The tech specialist also points out that the social network’s stock market position is quite advantageous compared to its economic performance.”Twitter is already valued today at more than 7 times the turnover of 2021. For Pinterest or Meta, this coefficient is only 4“.
Twitter, a value apart
To understand this debate on the fair price of Twitter, we need to take into account the specifics of the company. “Twitter has always had a complicated history in the stock market. It is a unique company, apart, even among social networks, which has never made a profit“, Recalls La Tribune Jacques-Aurélien Marcireau, co-director of equity management at Edmond de Rothschild Asset Management.
Due to the social network’s special place in society, the analyst believes that the bonus offered by Musk has “nothing pharaonic“and he thinks it won’t be enough to convince investors.”Furthermore, we observe that when the offer was made public the stock was down [en repli de -1,68% à la clôture de Wall Street, ndlr]. This means that people don’t believe in the offer, or at least they don’t believe that all shareholders will give up“, he argues.
A “white knight” in the second curtain?
Regardless of the outcome of the takeover, the current Twitter board will be weakened. The billionaire stated that his offer was final and that he would review his place as a shareholder in the company if his move failed. “Elon Musk then threatens to sell his 9.2% stake, which would cause the stock to collapse“, Jacques-Aurélien Marcireau points out.
At this time, another buyer could take on the role of “white knight” and come up with a more tempting counter offer. “But there are not many logical buyers: we need a large technological player, massive but not big enough to trigger the antitrust“, points out the analyst. In other words, the acquisition of Twitter is unthinkable for Gafam (Google, Apple, Facebook, Amazon, Microsoft) but can be considered by second-line players as the champion of management software. Salesforce, who had already tried their luck in 2019. But this white knight has yet to find him an economic interest, which is now questionable.
For billionaire investor Mark Cuban, this outcome would be inevitable sooner or later anyway. “Without a dominant shareholder on the board and without major activist shareholders, if the company doesn’t grow rapidly, Twitter’s days as an independent company are likely to be numbered.“, Diagnostics to Bloomberg.
The regulator, host of the follow-up to the Twitter / Musk soap?
Another actor could invite himself into this soap opera: the Securities and Exchange Commission (SEC), the American financial policeman. Earlier this week, Twitter shareholders already kidnapped him against Musk for failing to fulfill his obligations to him when he entered the capital. But the authority has enough to open a major case against Elon Musk.
“On the stock exchange, when the threshold of 5% of the shares is exceeded, one is forced to declare one’s intentions. Either we present ourselves as a passive shareholder, who will be content to vote and receive dividends, or as an active shareholder, brought to sit, or even to make a hostile takeover bid.“, Jacques-Aurélien Marcireau develops.
Before exclaiming:nIt took Elon Musk only a long time to come forward to the regulator, but when he finally did, he presented himself as a passive investor! Show complete contempt for the regulator. The SEC cannot stand by or it will set a dangerous precedent“.
In other words, the soap opera Elon Musk vs Twitter is likely to keep us in suspense for a while longer …