Elon Musk raised prospect of Twitter takeover as early as March

Elon Musk first discussed taking Twitter private with the social media company’s board more than a week before his initial 9.2 per cent stake was disclosed as a passive holding and more than two weeks before going public with a $44bn hostile bid, new regulatory filings show.

The future of the $44bn deal was hanging in the balance on Tuesday after Musk mocked Twitter’s chief executive Parag Agrawal and said the deal “cannot move forward” without further clarity on the scale of its fake-account problem.

Twitter on Tuesday insisted it will follow through on the deal: “The board and Mr Musk agreed to a transaction at $54.20 per share. We believe this agreement is in the best interest of all shareholders. We intend to close the transaction and enforce the merger agreement.”

Documents published by Twitter on Tuesday outlined the chronology of Musk’s efforts to acquire the social media company, showing how the billionaire had already held several days of negotiations about joining the board and had started to discuss a takeover as early as March 27.

Twitter’s latest filing raises fresh questions about whether the billionaire Tesla CEO complied with US disclosure rules. Any investor owning more than 5 per cent of a publicly listed US company is required to disclose the stake to inform other shareholders that they may seek to control or influence the company. Musk did not respond to a request for comment.

Musk revealed he had become Twitter’s largest shareholder on April 4 but indicated he would be a passive investor, declaring in a filing that he had “no present plans or intentions” to make a bid. He amended that filing a day later to reflect that he was an active investor but restated that he had “no present plans” for a takeover offer.

The Twitter filings recount how Musk had already told the board on March 27 he was considering “various options with respect to his ownership, including potentially joining the Twitter board, seeking to take Twitter private or starting a competitor to Twitter”.

On April 9, Musk told the social media company he would not be joining its board “and would be making an offer to take Twitter private”, the filings on Tuesday showed.

There was no explicit mention of an intention to bid in Musk’s filing dated April 11, which referenced only the possibility of discussing “potential business combinations and strategic alternatives” with Twitter’s board and management team “from time to time”. His hostile bid for the company was formally unveiled on April 14.

20% fake/spam accounts, while 4 times what Twitter claims, could be *much* higher.

My offer was based on Twitter’s SEC filings being accurate.

Yesterday, Twitter’s CEO publicly refused to show proof of <5%.

This deal cannot move forward until he does.

— Elon Musk (@elonmusk) May 17, 2022

Musk raised doubts on Monday about completing the deal at $54.20 a share when he said lowering the offer price was “not out of the question”. 

The merger agreement requires Musk to fund his equity commitment and close the transaction if all other closing conditions are met, leaving the possibility of litigation between Musk and Twitter if the Tesla chief executive decides to not follow through. If the deal falls apart for other reasons, Musk would owe a $1bn termination fee.

The new filings also detail Musk’s conversations with Twitter co-founder Jack Dorsey ahead of the $44bn takeover offer.

Conversations between the two billionaires, who are friends, first took place on March 26 when Musk contacted Dorsey to discuss the future of the company, the filings show. That was several days before he disclosed his stake.

Dorsey told Musk on April 5 that “Twitter would be better able to focus on execution as a private company”, according to Twitter’s filing. Four days later, Musk backed out of a plan to join Twitter’s board and instead told its directors that he would make an offer to take it private.

Tuesday’s filing showed that Agrawal was entitled to receive $60mn and Twitter chief financial officer Ned Segal could get $46mn as a “golden parachute” if they were involuntarily terminated after the deal closed.

Goldman Sachs will earn $80mn from advising Twitter and JPMorgan will make $53mn, according to the company’s filings.

Twitter’s share price had already been trading below Musk’s offer but had fallen sharply after the billionaire said the takeover might fall through. Twitter stock was trading 3 per cent higher by lunchtime in New York on Tuesday at $38.63.

There has also been turmoil within Twitter in the wake of Musk’s offer. Last week Agrawal fired two senior leaders and announced a pause on most hiring. On Tuesday, a Twitter spokesperson confirmed a Bloomberg report that three more senior employees were leaving the company: Max Schmeiser, head of data science; Katrina Lane, its vice-president of Twitter Service; and product management vice-president Ilya Brown.

Additional reporting by Hannah Murphy