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Elon Musk under pressure after Twitter board endorses $US44 Billion deal

Despite disagreements about the social media platform’s robot users, Twitter’s board has increased pressure on billionaire suitor Elon Musk by unanimously supporting his $US44 billion ($63 billion) offer for the company. Twitter advised shareholders to vote in support of the Tesla founder’s bid for the firm in regulatory documents made on Wednesday (AEST) on the premise his offer was “fair [and] advisable”.

However, Mr. Musk is still raising concerns about the agreement, claiming on Wednesday that three “unresolved factors” prevented it from moving forward. Analysts claim that Mr. Musk is putting up barriers in order to kill the merger after his financial plan, which involves a sizable loan secured by his Tesla shares, began to unravel in May. In light of this, Twitter’s endorsement will put pressure on the billionaire to either go with the acquisition or back out and pay exorbitant breakaway costs.

Twitter shares were trading significantly below Mr. Musk’s asking price on Wednesday, indicating that investors are not certain the acquisition will be approved.

Elon Musk lists challenges

According to Mr. Musk, his offer is being blocked by three obstacles. The first is a long-running argument about the number of robot users on Twitter, with Mr. Musk being unconvinced about Twitter’s assertion that merely 5 percent of its user base are bots. Twitter must demonstrate that 95% of its users are human before Mr. Musk would purchase it. Mr. Musk said on Wednesday at the Qatar Economic Forum, “We’re still waiting for resolution on that problem” (Australian time).

“That is a really serious matter.”

The second obstacle, according to Mr. Musk, is whether the debt component of his offer will be successful. With an additional $US7.1 billion ($10.2 billion) in equity financing from other investors and an unknown loan package supported by his Tesla shares, the billionaire had agreed to pay $48,3 billion in cash for Twitter.

The debt side has been entangled in doubt as a worldwide sharemarket collapse cuts into Tesla’s stock value, lowering Mr Musk’s wealth and eroding his loan collateral with banks. While Mr. Musk acknowledged on Wednesday that there is still “a concern” about whether the loan would “come together,” CNBC reported in early June that discussions with lenders had been suspended.

Without this money, Mr. Musk would either need to raise more financing or significantly reduce his offer for the firm, which would require changing the terms of the sale. The third obstacle to the acquisition is whether shareholders will support it; the board of Twitter has not yet arranged a meeting of investors to approve the acquisition. These problems, according to Mr. Musk, must be

Twitter intensifies the debate

Twitter’s action on Wednesday, on the other hand, indicates the firm intends to go forward and convene a shareholder vote, which may overcome Mr. Musk’s third obstacle. Professor Angel Zhong, an associate professor at RMIT University, said that by endorsing the transaction, Twitter had eliminated a barrier and placed pressure on Elon Musk to decide.

“Twitter’s attempts to remove barriers make it harder for Musk to walk away from the transaction without any penalty,” she added. If the co-founder of Tesla attempts to scuttle the agreement without a plausible excuse, he will be responsible for more than a billion dollars in breakaway costs.

Additionally, Mr. Musk is finding the proposal less appealing since his offer of US$54.20 ($78) per share is greater than Twitter’s current market price of US$38.90 ($56). This, according to Dr. Zhong, gives Twitter the power to compel Mr. Musk to either pay a 13% premium for the social media behemoth or face substantial penalties for walking away.

She said, “Musk has no choice but to finalize the purchase at an exorbitant price if the quantity of phony accounts checks out. “It’s widely believed that he is using this as a pretext to gain time,” Twitter’s present share price also reflects investor doubt that the acquisition will really materialize, with market observers anticipating a prolonged court struggle over the terms of the merger agreement.

In an earlier statement, Mr. Musk said he wanted to acquire Twitter so that it would forever be a venue for free expression, and he implied that he would lift any restrictions on controversial users like former US President Donald Trump. The social media giant’s major investors have long complained that the billionaire wants to quickly increase Twitter’s user base and boost the platform’s monetization.

Source: TheNewDaily

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Written by Alex Bruno

Alex is a writer with a passion for space exploration and a penchant for satirical commentary. He has written extensively on the latest discoveries in astronomy and astrophysics, as well as the ongoing efforts to explore our solar system and beyond. In addition to his space-related work, Alex is also known for his satirical writing, which often takes a humorous and irreverent look at contemporary issues and events. His unique blend of science and humor has earned him a dedicated following and numerous accolades. When he's not writing, Alex can often be found stargazing with his telescope or honing his comedic skills at local open mic nights.

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