Twitter Board Unanimously Recommends That Shareholders OK Elon Musk Takeover

Many mergers and acquisitions proceed smoothly toward their conclusion. Elon Musk’s proposed $44 billion takeover of Twitter is not one of those. Twitter’s board of directors revealed in a Schedule 14A filing with the Securities and Exchange Commission that it unanimously recommended that shareholders approve the transaction. The board said in a letter to shareholders, included in the filing, that it “determined that the merger agreement is advisable and the merger and the other transactions contemplated by the merger agreement are fair to, advisable and in the best interests of Twitter and its stockholders. Twitter's board of directors unanimously recommends that you vote ‘for’ the adoption of the merger agreement.” Musk said Tuesday at a Bloomberg event that there were three matters that needed to be resolved before he would proceed with the acquisition. He reiterated his concerns over bots and fake accounts on the social network, saying of the company’s claim that they represent fewer than 5% of monetizable daily active users that this was “probably not most people’s experience when using Twitter” and adding, “We’re still awaiting a resolution on that matter, and that is a very significant matter.” Musk also said the portion of debt required to finance the deal remained uncertain. He received $7.1 billion in equity financing commitments, which were revealed in an amendment to his Schedule 13D form filed with the SEC in May, but the remainder will have to come from bank loans. Finally, Musk cited shareholder approval, with a vote expected in late July or early August. He said at the Bloomberg event, “Will the debt portion of the round come together? And then will the shareholders vote in favor?” Musk purchased 9.2% of Twitter’s stock March 14, although he did not file a Schedule 13G form with the SEC until April 4. The day after the Schedule 13G was revealed, Musk was added to Twitter’s board of directors, only to inform CEO Parag Agrawal April 10 that he would not join the board after all. Twitter revealed April 25 that it officially entered into an agreement to be acquired by an entity wholly owned by Musk, with the transaction valued at approximately $44 billion, or $54.20 per share in cash, which would make Twitter a private company upon closure of the deal. Musk revealed in an SEC filing May 5 that he would serve as Twitter’s interim CEO once the transaction closed. The Federal Trade Commission revealed the following day that it was conducting an antitrust review of the agreement over concerns that free speech could be threatened. A 5:44 a.m. ET tweet from Musk May 13 questioned Twitter’s assertion that spam and fake accounts represent fewer than 5% of its monetizable daily active users. Agrawal responded in a lengthy tweet thread May 16, in which he admitted that spam affects Twitter’s user experience, noted that the platform suspends more than 500,000 spam accounts per day and added, “Unfortunately, we don’t believe that this specific estimation can be performed externally, given the critical need to use both public and private information (which we can’t share). Externally, it’s not even possible to know which accounts are counted as mDAUs on any given day.” Musk responded with the poop emoji heard round the tech world. And earlier this month, Musk threw something a little more substantial than a poop emoji at Twitter, sending a letter to the company, also filed with the Securities and Exchange Commission, in which he threated to cancel the acquisition due to his uncertainty about the extent of fake accounts, bots and spam on the platform. Shirin Ghaffary of Recode shared a leaked transcript of Musk’s first town hall meeting with Twitter employees last week, in which he answered pre-selected questions. Highlights follow: On free speech: ‘I think it’s essential to have free speech and to be able to communicate freely. Now, you know, the free speech stuff: It’s free speech within the context of the law. So, I’m not talking about suggesting that we just flout the law, because we’ll just get shut down in that case. And I think also, there’s freedom of speech or freedom of reach. And freedom of speech is one thing, because, like, anyone could just go into the middle of Times Square right now and say anything they want, they could just walk into the middle of Times Square and deny the Holocaust, OK? You can’t stop them, they will just do that. But that doesn’t mean that needs to be promoted to millions of people. So, I think people should be allowed to say pretty outrageous things that are within the bounds of the law, but then that doesn’t get amplified, it doesn’t get, you know, a ton of reach.” On growing Twitter’s user base: “So currently … it is a small percentage of the world that is on Twitter—say, like daily active users, if you presume that that’s, say, 200 million, you’ve got 8 billion people on Earth, that 7.8 billion who are not on Twitter. So that’s a pretty big number … I think there’s also a lot that should be done in terms of enhancing the core technology and operating of Twitter. Like right now, if somebody does, say, a video, like a content creator does a video, then they can put that video on YouTube and just put a link to it from Twitter because they’re able to monetize their content on YouTube, but not on Twitter. And I think it’s gonna be really important for you to want to put the content on Twitter, which we do, then there has to be a mechanism for content creators to monetize that content. And so, they could dual-post and they can post it to YouTube and to Twitter. But I think it’s crazy right now that content creators will use Twitter to drive traffic to their YouTube video because that’s how they make a living. And that really should be on Twitter … Why aren’t more people using Twitter? And why do people click away from Twitter? If we can address those reasons, then they will use Twitter more, and they’ll get greater value from the service. And, you know, if I think of, like, WeChat in China, which is actually a great, great application, but there’s no WeChat movement outside of China. And I think that there’s a real opportunity to create that. You basically live on WeChat in China because it’s so useful and so helpful to your daily life. And I think if we could achieve that, or even close to that with Twitter, it would be an immense success.” On remote work: “Now, Tesla makes cars, and you cannot make cars remotely, obviously. You have to make cars in a big factory, and the supply chain, and you have to bring in the parts, and assemble them, and then transport the car to the owner. All of these things must be done in person because it’s physically impossible to do them remotely. There are some roles at Tesla where the work can be done remotely, like, say, software or design—I think that’s still a case where you want to aspire to do things in person, but if somebody is exceptional at their job, then it’s possible for them to be effective, even working remotely. So, with Tesla, I have simply asked for a list—that the manager has to confirm—that they’re an excellent contributor, and if they do, they’re allowed to work remotely. So, it’s pretty basic, I think. There is a hit one takes, remotely, because it does reduce esprit de corps and it kind of matters to be in person, at least some of the time. So, one of the things I’ve said is that even if somebody’s working remotely, they have got to show up at the office occasionally so that they recognize their colleagues and don’t walk down the street and pass your colleagues and you don’t recognize them. That would not be good.:” On potential layoffs: “The company does need to get healthy. Right now, the costs exceed the revenue. So, that’s not a great situation to be in. And so there would have to be some rationalization of headcount and expenses to have revenue be greater than cost. Otherwise, Twitter is simply not viable or can’t grow. So, yeah, I think it would just be dependent on you know, like I said, anyone who’s obviously a significant contributor should have nothing to worry about. I do not take actions that are disruptive to the health of the company.” Finally, on life elsewhere besides Earth: “And then the final goal of SpaceX is, you know, are we able to make life multiplanetary and thus improve the probable lifespan of consciousness? Like you’ve already said, what is the unifying philosophy for me? It is, we should take the set of actions most likely to extend the scope, scale and lifespan of consciousness as we know it. What sort of actions improve things at a civilizational level and improve the probable lifespan of civilization? Civilization will come to an end at some point, but let’s try to make it last as long as possible. And it would be great to understand more about the nature of the universe. Why we’re here, meaning of life, where are things going, where we come from? Can we travel to other star systems and see if there are alien civilizations? There might be a whole bunch of long-dead, one-planet civilizations out there that existed 500 million years ago. Think about the span of human civilization from the advent of the first writing, it’s only about 5,000 years.”

Merger & Acquisition News

Twitter Board Unanimously Recommends That Shareholders OK Elon Musk Takeover

However, Musk raised concerns about bots and fake accounts (again), financing and receiving that shareholder approval

David Cohen

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David Cohen