The billionaire is making a very open attack on the company and weaponizing its own platform against the company. His campaigns defy many of the conventions associated with buyout battles.
teao Understand what makes Elon Musk’s very striking and dramatic Twitter takeover attempt is so unusual that it helps Twitter take a look at what happened the last time it met another unexpected investor in the company.
It wasn’t that long ago, and things were customary. In March 2020, Elliott Management announced that it had purchased about 4% of its Twitter stock. Elliott is a so-called activist investment firm. He takes a stake in a public company and then advocates for change in the hope that it will increase the value of his investment. Elliott’s investment was first known to the press, and a quick closed meeting between Elliott and Twitter executives was held. A peace agreement followed. Twitter has agreed to handing over board seats to Elliott and raising its user and revenue growth targets. By next summer, the situation between Twitter and Elliott was good enough to consider combining for a bid on TikTok. (Of course, no one bought TikTok in the end.) Elliott’s initial investment saw Twitter share rise 175%, giving him back his board seat in April 2021.
When Musk arrived last month, Twitter took the same approach. CEO Parag Agrawal spoke repeatedly with Musk and offered him a seat on the board. But unlike Elliott, Musk visibly declined on Twitter after a tweet weekend criticizing the company’s business model. Two tweets solicited input directly from 81 million followers. A few days later, he just announced that he didn’t want to own it. part On Twitter, he wanted to buy everything. Further raising public interest, he posted a text message to Chairman Bret Taylor. Twitter responded by adopting poison, a common defense against hostile takeovers invented during the 1980s (before corporate intruders became activist investors) by Michael Milken-Ivan Boesky.
@elonmusk
Twitter
Musk continued. In less than a week, he used the TED Talks stage to classify the SEC regulators who had to approve his takeover as “bad guys.” Andreessen secretly referred to Elvis Presley’s song “Love Me Tender”. (A bid for a company is officially an “open offer.”)
Connor Haley, founder of activist firm Alta Fox Capital, said, “Smart activists can leverage the power of social media and other forms of distribution to connect beyond traditional methods. He didn’t use the full Musk in his recent campaign against Hasbro. However, he recognized how the internet and social media could give him the intimate ability to reach out to the company’s shareholders and customers, and reinforced his offer for the business, including spinning off the trading card division. “I think we will see more and more activists taking this path if they really want to create long-term value.”
Musk, who bought a 9.2% stake in Twitter in early 2022, offered to pay the company $43 billion, a 38% premium to its share price when it announced its intentions last Thursday. The poison action is a strong indication that Twitter’s board hasn’t officially rejected his offer yet, but he doesn’t like his offer. Musk hired Morgan Stanley to provide advice. Twitter hired Goldman Sachs and JPMorgan to provide advice. Meanwhile, Agrawal urged employees to remain resilient, but warned against periods of distraction. The company receives significant protection from the poison that could reduce Musk’s ownership by allowing Twitter to sell discounted shares. Often activists leave the company after they tamper with the poison, and are reluctant to bear the huge financial cost of maintaining a large stake in the drug once it is enacted.
Still, Musk’s takeover attempt has truly gone on unlike anything else in over 40 years. On the surface, he has problems with his wealth. Although the buyout game has long attracted lucrative players, no one holds a candle to Musk (net worth: $264.6 billion). Less superficially, it’s about how he waged war. It’s weaponizing the very product he’s trying to get and using Twitter as the main stage for his attacks on the company. It’s as if Henry Kravis was standing outside the door of the RJR Nabisco and banging on the conference room window with an old Milk-Bone dog biscuit, squeezing his bid for the RJR Nabisco.
“This is completely strange and unusual. Of course, recently, Jos. We’re trying other acquisitions, like A. Bank is trying to merge with Men’s Warehouse,” says Carliss Chatman, a professor of corporate law at Washington and Lee. (She has a popular Twitter account, where she chronicles Musk’s takeover attempts and other senior management dramas.) “But this is where some wealthy megalomaniac is trying to buy something and treats everything like playing with toys. will.”
To digitize corporate raids, Musk is building on the work of others. In the mid-2000s, investor Eric Jackson effectively used unofficial YouTube videos to promote his own claims against Yahoo in the mid-2000s. In 2017, billionaire Bill Ackman bought ads on Facebook and Twitter to promote his stance on his ADP. Around the same time, Elliott worked with aerospace component manufacturer Arconic to mail thousands of greeting cards with video screens and preloaded videos. Another blueprint for Musk to follow is that last year, Chewy.com founder Ryan Cohen gathered thousands of Twitter- and Reddit-based individual investors to overturn GameStop’s management and boost stock.
Activists have regularly installed websites detailing their investment ideas over the past two decades, but they tend not to be as innovative as those created by local legislators. Nevertheless, they still rely on press releases and traditional media to spread the message. Case in point: Elliott Management’s Jesse Cohn, who led activist investment and sat on Elliott’s Twitter board, tweeted only 34 times in six years. He has 7,424 followers and loves to include links to official PR releases.
@elonmusk
Twitter
Starting Thursday, Musk appears to have stepped up his campaign to target Twitter board members. (Boards and buyout investors like Musk never get along in a hostile takeover process. But they usually slander each other through SEC documents or media announcements. Doing so via social media allows Musk to build support more directly. .more than a PR release can generate.)
In a tweet exchange with cryptocurrency billionaire Cameron Winklevoss, Musk suggested that directors could face “huge” liability if they reject their bid while appearing to be defending a shareholder lawsuit against the board. He highlighted another user’s post that screenshotted an empty Twitter feed directed by Robert Zoellick. (Former World Bank President Zoellick joined the board and Twitter in 2018, and has never tweeted.) Musk also criticized board members for holding small stakes in Twitter stock, saying that if they hold more, they will see why He hinted that they would better understand why they do it. Make his deal.
Activists usually disclose plans from the outset to finance unwanted acquisitions. This is what we believe is necessary to win the support of company investors who may be skeptical of the company’s development. This is not the case with Musk. He didn’t elaborate on how he will finance the bid, and although he is incredibly wealthy, his fortune is tied to Tesla stock and is not liquid. He may need to borrow on those stocks to raise funds or bring partners to trade. Private equity firms Apollo and Thoma Bravo are known to be interested in joining him.
It’s too early to say whether Musk will win with this strategy. But he is definitely getting attention and support. The phrase comes from a common Twitter corner tweeted by Musk’s former PayPal colleague David Sacks: “If the game is fair, Elon will buy Twitter.” Reddit co-founder Alexis Ohanian said on Twitter that he was the first to be prompted to study poison, when he decided that “poison really doesn’t look good.” board.
Musk seems to be gaining some support within the company. Twitter’s co-founder and two-time former CEO Jack Dorsey seemed to be signaling his agreement with Musk this weekend. Dorsey’s 2008 coup d’état ended his first Twitter CEO tenure when the board was re-established. He remained as director. He returned in 2015 and stepped down as CEO in November. He remains a director until next month, but on Saturday Dorsey called the board “consistently dysfunctional of the company.”
Twitter investors increasingly seem to believe that something can really happen. After a Dorsey tweet and Musk’s frantic weekend, the stock rose 7.5% to $48.45 on Monday. They haven’t been fully sold to Musk’s abilities yet. If so, the stock would trade for at least $54.20, the price suggested by Musk.
@elonmusk
Twitter
Twitter HQ ironically looked painful to see Musk on the new battlefield it created. (He declined to comment on the article.) On Monday, Musk tweeted about plans to cut board member salaries to $0 if he came to power, but Twitter released a lengthy document detailing the poison action to the SEC. submitted to
Musk has offered the company $54.20 of stock, the “420” part of the picture is a weed culture reference and a popular online joke. In a new document on poison, Twitter said shareholders could buy the new shares for $210. Maybe it’s just a coincidence. Or Twitter may have realized that Musk inevitably changed the rules of the game and had to figure out how to play to win.
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