(Reuters) – Many traders, analysts and funding bankers anticipate Twitter Inc’s board of administrators to reject Elon Musk’s $43 billion acquisition supply within the coming days as insufficient, however how would the social media firm then proceed?
Twitter shares dropped on Thursday after Musk unveiled his supply, because the market deemed it too low and too skinny on financing particulars. Twitter’s board is presently evaluating the bid and plenty of traders and analysts say {that a} rejection is probably going, barring any adjustments to the supply from Musk.
Here are some choices accessible to Twitter’s board ought to it resolve to show down Musk’s supply:
BUY MORE TIME
Twitter’s board could resolve to not interact in sale talks with Musk and as a substitute give extra time to its new Chief Executive Parag Agrawal to satisfy the corporate’s operational targets. The board adopted a one-year poison capsule final week that stops Musk from proudly owning greater than 15% of the corporate with out its consent, successful itself a while. It additionally faces no short-term problem as a result of the deadline for traders to place ahead their very own board nominees at its annual shareholder assembly in May handed with none rival slate filed.
Agrawal, beforehand Twitter’s chief know-how officer, succeeded Jack Dorsey on the helm of the corporate on the finish of November.
Agrawal stated in February that he was sticking with the bold income and consumer development targets that the corporate introduced final yr, regardless of investor skepticism that has weighed on Twitter’s shares. Those targets embrace reaching 315 million common ‘monetizable’ every day energetic customers — registered customers that see advertisements on the platform — and producing not less than $7.5 billion of annual income by the tip of 2023. Twitter posted $5.1 billion of income in 2021 and averaged 217 million monetizable every day energetic customers within the fourth quarter of 2021.
Musk has given conflicting alerts on what he would do if his bid fails. He stated final week that he would rethink his place as Twitter’s shareholder if his supply is rejected. This might point out that Musk would then promote his greater than 9% stake in Twitter and stroll away. However, Musk additionally tweeted final week that Twitter shareholders ought to get a say on his proposed deal no matter what the corporate’s board thinks. This was interpreted by some traders as a touch that he could be keen to press on with a hostile bid.
TRY TO NEGOTIATE WITH MUSK
Twitter can supply to open its books to Musk, hoping that this is able to result in a greater supply. This would check Musk’s description of his $54.20 all-cash bid as his “finest and last supply”. The Tesla Inc chief govt, whose internet price is pegged by Forbes at $265 billion, has not specified how a lot of his personal fortune he could be keen to contribute in the direction of a deal to accumulate Twitter.
It is feasible that Musk finally ends up partnering with personal fairness companies, sovereign wealth funds or different deep-pocketed traders to scale back his personal fairness verify in any transaction. He stated final Thursday that he wished as many current Twitter shareholders to roll their stakes in a deal as legally attainable.
SOLICIT BIDS FROM OTHER PARTIES
Twitter’s board can discover strategic options, which might contain contacting corporations, personal fairness companies and different potential suitors to gauge their curiosity in a deal. The advantage of this selection is that it might determine a greater deal or put stress on Musk to boost his supply. The draw back is that it might elevate the hopes of many traders that Twitter will promote itself, pressuring it to barter a deal from a place of weak point, on condition that its shares are buying and selling at just a bit over half of what they have been price a little bit over a yr in the past.
One potential bidder, buyout agency Thoma Bravo LP, contacted Twitter final week to precise its curiosity in a suggestion that will problem Musk, Reuters reported. Other personal fairness companies might enter the fray, and a few know-how and media corporations can also select to courageous the regulatory scrutiny that will include such a deal.
It is feasible that any different transaction that Twitter opts for wouldn’t be an acquisition. In 2020, the corporate agreed to promote $1 billion in convertible bonds to personal fairness agency Silver Lake, a transfer that helped it fund a $2 billion share buyback. Twitter might select to pursue an analogous deal now with one other social gathering, elevating more money and avoiding an outright sale.
(Reporting by Greg Roumeliotis in New York; Editing by Aurora Ellis)
