What Happens Next With Elon Musk’s Bid to Buy Twitter

Elon Musk recently jested to his 80 million followers on Twitter about turning the social media company’s San Francisco headquarters into a homeless shelter. That’s not normally something a company’s largest individual shareholder teases about but, for Musk, it’s a typically impish quip.

The brash billionaire’s bid this week to buy all of Twitter could easily be seen as yet another attempt at trolling, considering how much he’s teased publicly about where he believes the social media platform needs improvement.

But the offer is no joke. “Twitter has extraordinary potential. I will unlock it,” he told Twitter’s board members in a filing with the U.S. Securities and Exchange Commission.

Musk says he’s willing to put up nearly 17% of his roughly $260 billion net worth to take the company private and implement what he sees as much-needed changes that would help promote free speech around the world.

How much is Musk willing to pay?

He said in the filing that his “best and final” offer is $43 billion in cash. Asked if the funding was secured on a live TED interview on April 14, Musk, the world’s wealthiest person, said, “I have sufficient assets… I can do it.” All-cash offers aren’t unusual in corporate mergers and acquisitions, but it’s rare for an individual to leverage their personal assets to make a cash purchase of this size on their own.

Is that a good offer?

Well, Twitter’s market valuation this week is around $36 billion, and Musk is offering to pay $7 billion more than that. His bid amounts to roughly $54.20 per share—that’s 54% higher than Twitter’s share price the day before he began investing in Twitter and a 38% premium over the stock’s value the day before his investment was made public earlier this month. Although that’s lower than the company’s all-time highest closing price of $73.34, just a year ago. He first disclosed that he’d purchased a stake of about 9% on April 4. So, in addition to controlling Tesla Inc., Musk is already Twitter’s largest individual shareholder. At least one of the company’s major shareholders, Saudi Arabian investor Prince Alwaleed bin Talal, said Musk’s bid undervalues the company. But the prince was merely musing about Twitter’s potential value, not what it’s actually worth now.

Why does Musk want Twitter?

Beyond his humorous tweets, here are some of Musk’s thoughts about the platform: “I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” he wrote in the SEC filing. “However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.”

Why does he want to make Twitter a private company?

From the sound of it, Musk wants to make big, transformative alterations to Twitter, and there’s a general belief in corporate management circles that the best way to implement substantive change at a public company is to take it private. That way, executives have more freedom to make decisions without the pressure of delivering ever-improving quarterly results to investors and analysts.

Will Twitter’s board take the offer seriously?

Yes, Twitter’s board of directors said it is working with outside advisors to consider Musk’s proposal. But the Wall Street Journal reported that the company is also weighing a so-called poison pill plan that would prevent Musk from acquiring more than a 15% stake in Twitter. In the meantime, the company has also planned an all-hands meeting with employees to discuss the matter. An answer from Twitter’s board could come in as little as a few days.

What happens next?

If Twitter rejects Musk’s bid, Musk said in a live TED interview on April 14 that he “has a plan B,” but he didn’t elaborate. He said in the interview that he would try to keep as many shareholders as is legally possible for a private company, which is typically 500. The company currently has over 1,700 individual and institutional shareholders. Shareholders who don’t make the cut will simply walk away with $54.20 for each Twitter share they own. Investors seem largely unimpressed by the end of the regular trading day Thursday—Twitter’s stock was down about 2%.