Musk's plan for Twitter explained in numbers 5:56
New York (CNN Business) --
Ten days after Elon Musk revealed he would become Twitter's largest shareholder, the world's richest man has made an offer to buy the company outright.
On Thursday, Musk offered to acquire all the shares of Twitter he does not own for a valuation of $41.4 billion, according to a filing with the Securities and Exchange Commission.
Now, the ball is in Twitter's court.
Twitter's board of directors, on which Musk turned down a seat last weekend, will have to consider whether to come to the table to discuss a deal with Musk -- a successful but sometimes erratic businessman who recently suggested Twitter might be dying and that you should consider dropping the "w" from your name—or pursue other avenues, including possibly finding alternative buyers.
Elon Musk offers to buy Twitter
"The board has three options: One, they can go it alone and say, 'Get lost, we're good,'" said Donna Hitscherich, a senior professor at Columbia Business School.
"Two, they can commit to Musk, either at this price or another price. Three, they can find someone they like better."
However, with all three options, Twitter and its employees seem to suffer from a certain number of concerns in the coming days and weeks.
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Twitter's board is said to have called a meeting at 10 am ET on Thursday to discuss the offer, according to a CNBC report.
The company will also hold a general staff meeting to discuss Musk's takeover bid, a Twitter source told CNN Business.
An internal message from Twitter CEO Parag Agarwal to staff read: "It's important we all come together today as #OneTeam. Join us at 2:05pm PST for a general meeting. We'll discuss today's news and what follows".
Twitter declined to comment on the timing of the board meeting and reports of a general meeting.
Musk's plan for Twitter explained in numbers 5:56
In his letter to the company announcing his offer, Musk said he believes "Twitter needs to become a private company."
And he added: "Twitter has extraordinary potential. I will unlock it."
Musk recognized the uncertain road ahead.
"I'm not sure I can afford it," he said in an interview with TED on Thursday afternoon.
The board, which has a fiduciary duty to recommend what's best for its shareholders, may find that Musk's offer is a good one and worth accepting.
Musk's offer of $54.20 per share is an 18% premium over Wednesday's closing price and is 38% higher than the closing price on April 1, the last trading day before Musk revealed his share of more than 9% in Twitter.
"The offer looks very attractive, it's well priced and the board, with all its fiduciary duties, will have to take a hard look at it to see if it's a fair price and, of course, if the acquisition makes sense for everyone in the long run," said Mike Useem, a management professor at the Wharton School of the University of Pennsylvania.
He added that the board may also consider what a takeover by the CEO of Tesla and SpaceX could mean for employees and users of the platform, some of whom have raised concerns about Musk's influence.
But the effect on shareholders will likely be the board's top priority.
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Elon Musk is a wild card that could make life difficult for the new Twitter CEO
Still, it's unlikely the board would just say, "Yes, thank you very much and accept the offer," said Kenneth Henderson, a partner at law firm Bryan Cave Leighton Paisner.
As part of its process to consider the deal, the board will likely analyze and discuss with lawyers and bankers how Musk's offer compares to the company's potential long-term value if it continues on its current path as a public company with its existing strategy. .
"In our view, the deal is not going through at this level, and Twitter's board of directors will not view this offer, or Mr. Musk leading a change at the company, as being in the best interest of the company or shareholders." "Wedbush analyst Ygal Arounian said in a note to investors on Thursday.
Although higher than his recent trading prices, Musk's offer is well below the nearly $72 that Twitter shares were trading for last July after a strong earnings report.
It seems that not all Twitter shareholders are enthusiastic about the idea of a Musk acquisition.
Saudi billionaire Prince Alwaleed bin Talal, who runs the investment firm Kingdom Holding Company in Saudi Arabia, another big Twitter shareholder, tweeted on Thursday that the offer "is nowhere near the intrinsic value of @Twitter given its growth prospects.. I decline this offer."
Shares of Twitter fluctuated a bit on Thursday but remained almost flat around $46, well below Musk's offer price, suggesting some possible doubt about the deal or investor skepticism about its completion. .
(It may also suggest some skepticism about how serious Musk is about completing the deal, who ended up in trouble with regulators in 2018 after falsely suggesting he had raised funds to take Tesla private.)
If the board doesn't want to play ball with Musk, it may have a few other options.
Musk's offer may open the door for other potential Twitter owners to bid on their own, possibly at a higher price.
Twitter has been a takeover target in the past, but some of its potential buyers, its biggest rivals, may be restricted from bidding due to recent antitrust scrutiny.
The board could also quickly implement what's called a "poison pill," a corporate anti-takeover tactic that essentially reserves the right of all shareholders other than a hostile party to buy more shares at a deep discount, effectively diluting the stake. of the hostile party in the company.
Such a move would likely be triggered if Musk, perhaps looking for other ways to tighten his grip on the company or circumvent the board of directors, decided to make a "takeover bid" to buy shares en masse directly from shareholders.
And while it wouldn't necessarily stop Musk in his tracks, it could help him get to the negotiating table to discuss a higher price, Henderson said.
Still, it might be in the board's best interest to play nice with Musk as much as possible.
Musk suggested in his presentation that Thursday's offer was his "last and best" and that if the board did not accept, "I would need to reconsider my position as a shareholder."
If Musk dumps his shares, that could be bad news for Twitter's share price and for the company's management team.
Musk could also benefit from an amicable process.
"It's better to do it amicably because ... [Musk] would like to be able to do the due diligence and understand the business," Hitscherich said.
Elon Musk offers to buy Twitter 1:14
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