Industry insights

What does it mean for Twitter to go private? The full story

elon musk buys twitter

Elon Musk shocked the world after he acquired nearly 10% of social media giant Twitter. His purchase was apparently motivated by the results of a poll hosted on the site, where he asked users if they felt that Twitter stood for free speech. A majority of users said no.

After making that $2.8 billion purchase, Musk was invited to join Twitter’s board – an invitation he initially accepted, and then subsequently declined. One can speculate that Musk’s decision to not join the board had to do with certain irreconcilable differences between the board and the world’s richest man. 

Unsurprisingly, days later, Musk announced his intention to acquire Twitter in an all-cash $44 billion deal, which comes out to $54.20/share. Initially, the board shirked the proposal. However, once Musk secured $46 billion worth of financing, they were essentially forced to sell the company. Not doing so could trigger a swath of lawsuits, alleging that the company did not put its shareholder interests first.

So, Elon Musk is bound to become the owner of Twitter – and he probably needed some help to do that. After all, that $46 billion worth of financing didn’t just come out of nowhere. But even with that money and a signed agreement, there are a lot of questions up in the air: what now? 

Well, Musk is not the owner of Twitter yet. Before he’s in control, Twitter must first grapple with a healthy amount of paperwork and preparation for its delisting from public markets. That’s expected to take about six months. On the path to that delisting, it’s likely that regulators will want to ask some questions about the deal. Even now, Senate Democrats are mulling calling Elon Musk before Congress to explain the deal and his intentions with the company.

That’s one reason why this deal still stands at slim odds of approval, at least according to the Bloomberg Terminal, which is the software which reigns supreme at hedge funds and trading firms across America. They’re not alone in their predictions; even though Musk has offered $54.20/share in his takeout offer, Twitter shares are trading well below that – on Apr. 29, 2022, Twitter stock was below $50/share. 

Such a discounted rate may indicate a lack of confidence in the deal closing… but if Twitter and Musk navigate regulators, paperwork, and other landmines, investors will get their $54.20 in cash and Musk will get his Twitter.

And for most investors, that’ll be the end of it.

For Twitter users, on the other hand, it’ll be just the beginning. Little is known about Musk’s plans for Twitter after his takeover, other than the fact that he has already discussed layoffs with bankers according to a report. He also has indicated his support for reducing content moderation and creating policies which will promote “free speech” on the site. That term means something different to different groups of people – but there’s little consensus on whether Musk’s buyout will ultimately be good or bad for Twitter, but we’ll stay up to date on the acquisition and other developments.

The preceding article is not a recommendation to buy, sell, or hold any security. All links to third-party sources represent the opinions of such sources. Front does not own or purport to  either align or disagree with such sources or content. 

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