Acquisition of Twitter by Elon Musk
initiated an acquisition of the American social media company Twitter, Inc. on April 14, 2022, and concluded it on October 27, 2022. Musk had begun buying shares of the company in January 2022, becoming its largest shareholder by April with a 9.1 percent ownership stake. Twitter invited Musk to join its board of directors, an offer he initially accepted before declining. On April 14, Musk made an unsolicited offer to purchase the company, to which Twitter's board responded with a "poison pill" strategy to resist a hostile takeover before unanimously accepting Musk's buyout offer of $44 billion on April 25. Musk stated that he planned to introduce new features to the platform, make its algorithms open-source, combat spambot accounts, and promote free speech, framing the acquisition as the cornerstone of X, an "everything app".
In July, Musk announced his intention to terminate the agreement, asserting that Twitter had breached their agreement by refusing to crack down on spambot accounts. The company filed a lawsuit against Musk in the Delaware Court of Chancery shortly thereafter, with a trial scheduled for the week of October 17. Weeks before the trial was set to begin, Musk reversed course, announcing that he would move forward with the acquisition. The deal closed on October 28, with Musk immediately becoming Twitter's new owner and CEO. Twitter was taken private and merged into a new parent company named X Corp. Musk promptly fired several top executives, including previous CEO Parag Agrawal. Musk has since proposed several reforms to Twitter and laid off half of the company's workforce. Hundreds of employees then resigned from the company after Musk issued an ultimatum demanding they commit to "extremely hardcore" work. Linda Yaccarino was appointed CEO of X Corp. In July 2023, the Twitter service was rebranded as X.
Reactions to the buyout were mixed, with praise for Musk's planned reforms and vision for the company, particularly his calls for greater free speech, but criticism over fears of a potential rise in misinformation and disinformation, harassment, and hate speech on the platform. Within the United States, conservatives have largely supported the acquisition, while many liberals and former Twitter employees have voiced concerns about Musk's intentions. Since becoming owner, Musk has faced backlash for his handling of the company and account suspensions, including the December 2022 suspensions of ten journalists.
Prelude
Background
Businessman Elon Musk published his first tweet on his personal Twitter account in June 2010, and had more than 80 million followers by April 2022. In 2017, in response to a tweet suggesting that he buy Twitter, Inc., Musk replied, "How much is it?" On March 24, 2022, Musk began tweeting criticisms of Twitter, polling his followers on whether the company adhered to the principle that "free speech is essential to a functioning democracy". Days later, he discussed the future of social media with Twitter co-founder and former CEO Jack Dorsey and explored the possibility of joining Twitter's board of directors with private equity firm Silver Lake co-CEO Egon Durban. He relayed this idea to Twitter board chair Bret Taylor and CEO Parag Agrawal, proposing to either take the company private or start a rival social media platform. Dorsey responded to Musk with a text message, saying he hoped Twitter could become open-sourced and that he had unsuccessfully pushed for Musk's induction into Twitter's board a year earlier, a move that had prompted his departure from his role as CEO.In September 2022, it was revealed that the CEO of Axel Springer, billionaire Mathias Döpfner urged Musk to buy Twitter through a text message exchange dated March 30, 2022. According to Wall Street Journal, "Before and during Mr. Musk’s breakneck takeover of Twitter, a close-knit group of libertarian-leaning activists and businessmen have been encouraging him to get involved. This group includes the so-called PayPal mafia—former executives at the online payments company who include Mr. Musk, the investor Peter Thiel and entrepreneur David Sacks—as well as ancillary figures like the venture capitalist Steve Jurvetson, an early Tesla investor who once served on the auto maker’s board; and Mr. Musk’s brother, Kimbal, a Tesla board member, according to people familiar with the matter." The WSJ also cited Seth Dillon, the CEO of the Babylon Bee, as a source of influence. The Nation notes the role of the Saudi government, which had close financial ties with not only Musk, but also other Silicon Valley elites such as Thiel, Ben Horowitz and their companies, Palantir and Andreessen Horowitz, as well as TWG Global.
Early developments
Musk began purchasing Twitter stock on January 31, 2022. On April 4, he announced that he had acquired 9.2 percent of the company's shares totaling $2.64 billion, making him the company's largest shareholder. Following the announcement, Twitter's stock experienced its largest intraday surge since the company's initial public offering in 2013, rising by as much as 27 percent. The next day, Twitter invited Musk to join the company's board, which Musk accepted. This had been recommended to the board by Twitter's Nominating and Corporate Governance Committee three days earlier, with some board members expressing concern about potential "adverse impacts on stockholder value". The position would have prohibited Musk from going beyond a 14.9 percent ownership stake and limited his ability to speak publicly about the company. That day, Musk phoned Dorsey, who declined Musk's suggestion for him to remain on the board.On April 11, after publishing several tweets critical of the company, Musk announced he had decided not to join the board. Instead, he informed Twitter that he intended to make an offer to take the company private. On April 12, Twitter's board met with lawyers and financial advisors to deliberate the ramifications of such a deal as well as their options, while a company shareholder sued Musk for allegedly manipulating the company's stock price and violating Securities and Exchange Commission rules.
Buyout offer
Takeover bid
On April 14, 2022, Musk made an unsolicited and non-binding offer to Twitter to purchase the company for $43 billion, or $54.20 per share, and take it private. Though the offer was made to company management, the bid was described as a hostile takeover attempt because of the implied threat to purchase the outstanding stock if management declined. The board responded that it would "carefully review the proposal".In a TED interview, Musk said he aimed to make Twitter a "platform for free speech around the globe", hailing free speech as a "societal imperative for a functioning democracy" and insisting that he had not made the offer to increase his wealth. Critics noted that he showed more interest in altering Twitter's moderation policies than in fighting government censorship. According to The Washington Post, the banning of accounts such as The Babylon Bee had prompted Musk to initiate the acquisition. The price of $54.20 per share is believed to be a reference to 420, a slang term in cannabis culture for marijuana consumption.
On April 15, Twitter's board of directors announced a "poison pill" strategy which would allow shareholders to purchase additional stock in the event of a hostile takeover; the plan expired on April 14, 2023. On April 17, Taylor was urged by Twitter's largest institutional shareholders to "seriously consider" the offer. On April 20, Musk disclosed that he had secured financing provided by a group of banks led by Morgan Stanley, Bank of America, Barclays, MUFG, Société Générale, Mizuho Bank, and BNP Paribas, for a potential tender offer to acquire the company. The funding included $7 billion of senior secured bank loans; $6 billion in subordinated debt; $6.25 billion in bank loans to Musk personally, secured by $62.5 billion of his Tesla stock; $20 billion in cash equity from Musk, to be provided by sales of Tesla stock and other assets; and $7.1 billion in equity from 19 independent investors.
The initially proposed $13 billion in money borrowed by Twitter was equivalent to seven times the company's 2022 projected operating cash flow; some banks found that multiple too risky and opted to participate only in the $12.5 billion margin loan to Musk. The debt was estimated to cost Twitter approximately $1 billion in annual interest and fees. Two days after announcing his bid, Musk registered three holding companies under the name "X Holdings" in preparation for his takeover. Tesla shares fell 12 percent on the day after the acquisition was announced, amid smaller declines in the broader markets. Musk incurred a $21 billion paper loss that day.
Acquisition announcement
On April 23, Musk informed Taylor that his offer was "best and final", urging him to accept in a letter sent the following day. He said that Jack Accepted the deal and finaled it. Multiple outlets subsequently reported that Twitter was in final negotiations to accept Musk's offer, with a deal expected to be reached by the next day, though Reuters cautioned that the deal could still fall apart. On April 25, Twitter shares rose by 5 percent following reports that Twitter was poised to accept Musk's offer. Twitter advisors Goldman Sachs and JPMorgan Chase approved of the deal, deeming it fair from a financial perspective. Twitter's board publicly and unanimously accepted the buyout offer for $44 billion, and Twitter was to become a private company once the transaction was complete, sometime in 2022. Negotiations with Musk were led by the board's transaction committee, composed of Taylor, Martha Lane Fox, and Patrick Pichette. The deal would require shareholder and regulatory approval before it could be finalized, though analysts believed it was unlikely to be challenged by regulators.Musk was barred from disparaging the company or its employees when tweeting about the acquisition before the transaction closed. The agreement also stipulated that if Musk failed to close the acquisition, he would be required to pay Twitter a $1 billion breakup fee. Agrawal was set to receive $39 million from the buyout, while Dorsey would receive $978 million. Musk had privately selected a new CEO to replace Agrawal upon completion of the acquisition, though he was expected to serve as interim CEO in the months after its completion. Tesla's stock sank by more than $125 billion the next market day, causing Musk to lose about $30 billion of his net worth. Within three days after Twitter agreed to be acquired, Musk had sold $8.5 billion of his Tesla shares.
After the acceptance was announced, Musk said that his first goal would be to make the algorithm that ranks tweets in the content feed open-sourced, in an effort to increase transparency. He has also stated that he intended to remove spambots and "authenticate all real humans", suggesting that he might convert Twitter's San Francisco headquarters into a homeless shelter. Musk said he lacked confidence in Twitter's corporate management, telling banks that he had considered reducing executive and board pay. He published tweets critical of decisions made by Twitter executives such as Vijaya Gadde, who was subsequently harassed by Twitter users using racist and sexist language. On April 28, Twitter told advertising agencies that their work would not be seen next to offensive material. Musk also discussed with bankers with the ideas of cutting jobs and costs, encouraging influencers to be creative, and adding subscription services to Twitter.
On May 4, the Digital, Culture, Media and Sport Committee of the House of Commons of the United Kingdom summoned Musk to discuss the effect of his buyout on free speech and "online harms". Musk secured another $7.1 billion in funding the next day, including from Oracle Corporation co-founder Larry Ellison, Saudi prince Al Waleed bin Talal Al Saud, venture capital firms Andreessen Horowitz and Sequoia Capital, as well as sovereign wealth fund Qatar Holding. The equity infusion reduced his original $12.5 billion personal bank loan to $6.25 billion and his required cash equity contribution from $21 billion to just under $20 billion. On May 11, The Wall Street Journal reported that the SEC and Federal Trade Commission had launched investigations into events leading to the acquisition. The next day, Agrawal fired Twitter general manager Kayvon Beykpour and revenue product lead Bruce Falck.