Elon Musk shocked the world when he tweeted that he made a non-binding offer to the SEC to buy Twitter's existing common stock at $54.30 per share. Musk canceled plans to join the board three days ago, which would limit his ability to increase his 9% stake.
Although the initial announcement came more than a week ago, various news outlets are reporting that Twitter and Elon Musk have resumed talks to finalize the acquisition. Twitter made the news on April 25, 2022, shortly after the board unanimously approved the acquisition price of $54.30 per share and recommended it to Twitter shareholders.
What this means for Twitter shareholders
Musk's interest in buying Twitter likely has a lot to do with the fact that he already has ties to the network. More than 83 million people follow him on Twitter, where he frequently comments on free speech and censorship. So far, the billionaire has made it clear that he intends to take the company private, offering to buy all existing shares of the company at $54.30 per share.
Twitter stock recently traded between $31.30 and $73.34 per share following Musk's acquisition. Current owners who acquire equity can receive about 10% of the investment. To get back to where it was before Elon Musk's announcement, the company's stock price could fall by 30%.
Musk announced on Twitter that he would work to retain "as many shareholders as the law allows." But what exactly does Twitter privatization mean?
Under the deal with Musk, Twitter's board will vote on whether to accept or reject the deal. Any investor who holds voting shares of the Company shall have the right to vote. Still, institutional shareholders, who tend to own more shares, will therefore represent a higher proportion of the vote.
If the takeover bid is accepted, Twitter will extend the deadline for shareholder contributions by at least 20 days. This tender offer to acquire all the issued shares of the Company is called a tender offer. It symbolizes the company's desire to buy all of its stock at a previously agreed price, which in this case was Musk's $54.30 per share offer. Basically, a public offering is a public request by shareholders to trade their shares at a fixed price.
If the acquisition is completed, Twitter will be delisted and its shares will no longer be available for public trading. When the company eventually transforms into a private entity, investors will see a reflection of the cash value of their equity in the accounts originally used to purchase the securities.
Tesla CEO Elon Musk and Twitter Inc. CEO Jack Dorsey have agreed to sell Twitter for an undisclosed price. Musk has previously expressed concerns about the company's performance and scrutiny, and may be preparing to make major changes.
Investing in a company that is going private or not is a personal decision based on your level of risk. Consider talking to a professional who can help you weigh the pros and cons.