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Tesla CEO Elon Musk’s Acquisition of Twitter May Have Been a Poison Pill
Elon Musk, CEO of Tesla, is a prolific Twitter user. His recent announcement that he owned a large stake in Twitter led to an unsolicited takeover offer. Although Musk did not provide any details on his financing plans, the deal came together quickly. In the process, Musk also waived the opportunity to review Twitter’s books and finances. In other words, this deal may have been a “poison pill.”
Elon Musk’s plan to buy twitter
The proposed acquisition of Twitter by Elon Musk has caused quite a stir on the web, but one of its most vocal critics is Tesla CEO Elon Musk. Twitter’s service is like a de facto town square and failing to uphold basic principles of free speech is a major affront to democracy. Musk’s offer to purchase Twitter includes $25.5 billion in debt financing and an equity commitment of $21 billion from Musk. However, the company has since brought on other equity investors and replaced the margin loan with preferred equity investors.
Some Twitter employees are worried about whether Musk will change the culture at the company. Musk has made it clear that he plans to make the algorithms used to determine who posts on Twitter public, but they may not be suitable for everyone. He also has expressed a willingness to sell off some of Twitter’s intellectual property, which could lead to increased mistrust in the company. The plan to buy Twitter has been criticized as “unfair,” though Musk has not explicitly said it.
Musk’s promises to address algorithmic issues
Elon Musk’s recent acquisition of Twitter has sparked a debate about the algorithms behind the site. Although Twitter has released some of its code in a repository known as “the algorithm,” this repository has vanished since Musk announced his acquisition. What does this mean for Twitter users? What does it mean to make the platform more transparent? How does Musk intend to resolve the controversy? What steps can he take now to make Twitter more transparent?
As the owner of the leading social media company, Zuckerberg must consider how his actions impact users. He has promised to keep AI beneficial to humanity, but this will likely reduce the virality of his tweets. Musk’s vision for humanity is likely to shape the site’s user experience. The CEO is notorious for being relentless, as is Jeff Bezos, whose sci-fi ambitions include returning American astronauts to the moon.
Musk’s poison pill
Earlier this month, Tesla CEO Elon Musk hinted that he may bypass the board and make his own takeover bid. The billionaire CEO said he would be indefensible not to put the proposal to a vote, and on Thursday polled Twitter users on whether the board should let shareholders decide. Nearly eighty percent of people said yes. Musk could run his own slate of board members and eliminate the poison pill.
Musk’s Twitter poison pill, which takes effect when he acquires 15% of the company, would prevent him from increasing his stake further. He already owns 9.2 percent of the company, so the poison pill would significantly dilute his current stake. If Twitter’s board approves the plan, the company could then consider negotiating directly with Musk. However, if Musk’s Twitter takeover fails, the poison pill will protect all current shareholders.
Musk’s lawyer
Tesla’s recent acquisition of SolarCity and its subsequent lawsuit against investors in Delaware has left many wondering whether Musk’s tweets are legally binding. The answer to that question depends on the exact nature of Musk’s business. Twitter’s lawyers may be in a tricky position, but they have precedent on their side. Professor Donna Hitscherich of Columbia Business School says that a court can force a buyer to complete a transaction even if it isn’t in the best interest of either party.
The Delaware Chancery Court has prevented companies from walking away from a deal, and has even ruled against Tyson Foods’s attempt to do so in 2001. Moreover, the Delaware Chancery Court has required buyers to pay damages if they breach their agreements. Musk’s Twitter contract would cap damages at $1 billion, which could put him on the hook for a breakup fee. The case may be resolved through settlement, or by a court-ordered breakup fee.
