How Twitter’s advice went from fighting Elon Musk to accepting him

Twitter’s advice had come to the end of the road.

It was April 24th. Ten days earlier, Elon Musk, the richest man in the world, had created a unsolicited offer to purchase Twitter for $ 54.20 per share. Alarmed by the out-of-the-ordinary proposal and unsure if the offer was real, the social media company had adopted a “poisonous pill”, A defensive maneuver to prevent Musk from accumulating more of his shares.

But that Sunday, Twitter was running out of choices. Mr. Musk had lined up funding for his offer and was prodding the company with his tweets. And after hours of debating and reviewing Twitter’s plans and finances, the questions the 11 board members were struggling with: Could the company be worth more than $ 54.20 per share? would any other bidder emerge? – all led to an unsatisfactory answer: no.

Less than 24 hours later, the $ 44 billion blockbuster deal was announced.

“What I will tell you is that, based on the analysis and perception of risk, certainty and value, the board of directors unanimously decided that Elon’s offering represented the best value for our shareholders”, said Bret Taylor, president of Twitter. of 7,000 employees on Monday in a call the New York Times heard.

A central mystery of Mr. Musk’s acquisition of Twitter is how the company’s board of directors went from installing a poisonous pill to agreeing to sell it to him in just 11 days. In most mega deals, adopting a poisonous pill leads to a long struggle. The tactic is a clear signal that a company intends to fight. The negotiations then drag on. Sometimes the buyers leave.

But interviews with a dozen people close to the transaction, who weren’t allowed to speak publicly, show how few options the Twitter board had.

And while there are many types of buyers that bargain consultants are willing to fend off – the hostile ones, the aggressive ones, the ones who cut back and then are willing to negotiate – Twitter faced a buyer in Mr Musk who wasn’t in any deal playbook. . In essence, he was an “unknown quantity” buyer, one who would not budget the price and was ready to publicly destroy the company and exercise his sizable fortune to get a deal with limited diligence.

“Normal buyers might actually say, ‘Well, you know, we actually want to talk to the people inside and see how the company is doing and get more data than is publicly available,’” said Edward Rock, professor. of corporate governance at the New York University School of Law. “What was interesting,” he said, is that the Twitter board “reached an agreement in a short period of time – and such an unconditional agreement.” He called the speed of the deal “unusual”.

Twitter declined to comment on its board of directors’ discussions. Mr. Musk did not respond to a request for comment.

The groundwork for a deal was laid in January, when Mr. Musk began buying Twitter stock, only to accumulate. a share exceeding 9 per cent in the company. When he disclosed his holdings in a securities deposit in early April, Twitter offered him a seat on the board. Mr. Musk briefly agreed to the idea earlier changing your mind.

Instead, on the evening of April 13, Mr. Musk sent a text message to Mr. Taylor, who has been the president of Twitter since 2016. (Mr. Taylor is also co-CEO of software company Salesforce.)

“I will send you an offer letter tonight, it will be public in the morning,” Mr. Musk wrote to Mr. Taylor. The exchange was entered in a securities deposit.

The next morning, a simple letter of offer came from Mr. Musk. He stated his intention to buy Twitter for $ 54.20 a share, but had few details about his plans for the company or financing.

Mr. Musk hired investment bank Morgan Stanley, leveraging the services of two bankers, Anthony Armstrong and Michael Grimes. Mr. Grimes, who heads Morgan Stanley’s technology banking practice, led the 2012 public offering of shares of Facebook and other technology companies, while Mr. Armstrong was a longtime technology banker who had recently been promoted to vice president of technology. ‘agency.

The Twitter board did not know how to handle Mr. Musk’s offer, people familiar with the discussions said. Mr. Musk had no history of a buying company and had not made any deals, including one in 2018 when he tweeted that he would take his own carmaker, Tesla, as private, but then he did not.

The day after Musk’s offer went public, the Twitter board unanimously voted to slow it down by authorizing the poisonous pill. To defend itself, Twitter turned to Goldman Sachs, its longtime banker, and JPMorgan Chase. For legal advice, he added Simpson Thacher & Bartlett law firm to complement his longtime law firm, Wilson Sonsini.

JPMorgan declined to comment. Morgan Stanley, Goldman Sachs and Simpson Thacher did not immediately comment.

Mr. Musk was undeterred. His bankers began seeking to raise tens of billions of dollars in funding for a deal on Twitter. His advisors presented potential financiers with a few pages that vaguely outlined Mr. Musk’s goals. The billionaire also spoke directly to the banks, a person familiar with the calls said.

This helped persuade Citigroup, Bank of America, BNP Paribas and other banks to invest their money. Despite the lack of details on Mr. Musk’s plans, lenders have been reassured in part by the entrepreneur’s past successes and wealth, the person said.

Mr. Musk also campaigned on Twitter for a deal. He hinted that he would take his proposal directly to shareholders in a so-called takeover bid if the company’s board of directors did not accept his offer. April 16th, hey tweeted, “Love me dearly.” Three days later, hey tweeted “____ is the night”, a reference to F. Scott Fitzgerald’s novel, “Tender Is the Night”.

The Twitter card was fractured. On April 16, Jack Dorsey, a Twitter founder who he resigned as chief executive officer in November and is a member of the board, tweeted that the board had been the “consistent dysfunction of society”. When a Twitter user asked him if he was allowed to say this, Mr. Dorsey replied “no”.

Mr. Dorsey’s criticisms ranked other board members and Twitter executives, two people who worked on the deal said. Mr. Taylor asked Mr. Dorsey to stop tweeting negatively, one person said. Mr. Dorsey continued publication of references to the Twitter board.

A spokesperson for Mr. Dorsey declined to comment. A spokesperson for Mr. Taylor declined to comment.

On April 21, Mr. Musk took sides $ 46.5 billion in funding. He had secured pledges from Morgan Stanley and other lenders for 13 billion dollars in debt financing, while another group of banks has pledged 12.5 billion dollars in loans against his shares in Tesla. Mr. Musk added that he would use another one 21 billion dollars in cash to buy the rest of Twitter’s capital.

The funding forced Twitter’s board of directors to take Mr. Musk seriously. No other offers for the company had emerged, said two people familiar with the resolutions.

On Twitter, Mr. Taylor weighted uncertainty of employees and the social implications of a deal with respect to the council’s fiduciary duty, people familiar with the situation said. This meant making a decision based on whether Twitter could reasonably achieve better value than what Mr. Musk had proposed.

Mr. Taylor and other board members discussed whether Twitter’s user and revenue growth prospects were realistic. The San Francisco company, which hadn’t made a profit for eight of the past 10 years, had set aggressive business goals.

Twitter had also initially benefited from the pandemic, attracting a wave of new users and sending its shares at over $ 77 in February 2021. But its advertising activity lagged behind that of its competitors, and as the pandemic progressed, its advertising activity lagged behind its competitors. its shares fell below $ 40.

However, some council members were wary of having a savior-like figure like Mr. Musk, especially since Twitter had already relied on such figures – including Mr. Dorsey – to right the ship, two people said.

Mr. Musk has begun preparing to launch a takeover bid for Twitter, a person familiar with the discussions said. He had a potential ally on the Twitter board Egon Durban, a co-CEO of private equity firm Silver Lake, who had worked with Mr. Musk in his failed 2018 attempt to take Tesla private. But Mr. Durban made it clear to the board that Silver Lake was not partnering with Mr. Musk to provide funding for an acquisition, two people said.

Through a spokesperson, Mr. Durban declined to comment.

On Saturday, Mr. Musk spoke to Mr. Taylor and threatened to take his offer directly to Twitter shareholders, without explicitly saying he would initiate a hostile offer, a person familiar with the call said.

On Sunday, Twitter’s board of directors concluded that it needed to make a deal with Mr. Musk. The company could not reach $ 54.20 per share alone, the board members agreed, and no white knight would come.

Mr. Taylor told Mr. Musk that Twitter would proceed with a sale, a person familiar with the call said. Even so, Mr. Musk sent a letter to Mr. Taylor threatening a hostile offer.

Twitter consultants have banked on protections for the deal, such as a dissolution fee if Mr. Musk were to leave and a six-month timeline to close the deal, which could be especially important if tech stocks continue to decline. Mr. Musk’s advisers reinforced the financial details, with the billionaire personally signing each point, a person familiar with the negotiations said.

After the deal was announced on Monday afternoon, Mr. Musk took a winning spin.

“Yup!!!” she tweeted, posting emojis of rockets, stars and hearts.

Anupreeta Das, Maureen Farell Other Kate Conger contributed to the report.