Elon Musk raised prospect of Twitter takeover as early as March

Filing shows billionaire discussed bid with board days before announcing passive stake

Elon Musk first discussed taking Twitter private with the social media company's board more than a week before his initial 9.2 per cent stake was disclosed as a passive holding and more than two weeks before going public with a $44 billion hostile bid, new regulatory filings show.

Documents published by Twitter on Tuesday outlined the chronology of Mr Musk’s efforts to acquire the social media company, showing how the billionaire had already held several days of negotiations about joining the board and had started to discuss a takeover as early as March 27th.

Twitter’s latest filing raises fresh questions about whether the billionaire Tesla chief executive complied with US disclosure rules. Any investor owning more than 5 per cent of a publicly listed US company is required to disclose the stake to inform other shareholders that they may seek to control or influence the company. Mr Musk did not respond to a request for comment.

Mr Musk revealed he had become Twitter’s largest shareholder on April 4th but indicated he would be a passive investor, declaring in a filing that he had “no present plans or intentions” to make a bid. He amended that filing a day later to reflect that he was an active investor but restated that he had “no present plans” for a takeover offer.

The Twitter filings recount how Mr Musk had already told the board on March 27th he was considering “various options with respect to his ownership, including potentially joining the Twitter board, seeking to take Twitter private or starting a competitor to Twitter”.

‘Strategic alternatives’

On April 9th, Mr Musk told the social media company he would not be joining its board “and would be making an offer to take Twitter private”, the filings on Tuesday showed.

There was no explicit mention of an intention to bid in Mr Musk’s filing dated April 11th, which referenced only the possibility of discussing “potential business combinations and strategic alternatives” with Twitter’s board and management team “from time to time”. His hostile bid for the company was formally unveiled on April 14th.

The future of the $44 billion deal was hanging in the balance on Tuesday after Mr Musk mocked Twitter's chief executive Parag Agrawal and said the deal "cannot move forward" without further clarity on the scale of its fake-account problem.

Mr Musk raised doubts on Monday about completing the deal at $54.20 a share when he said lowering the offer price was “not out of the question”.

Twitter on Tuesday insisted it would force Mr Musk to pay the agreed $54.20, saying: “Twitter is committed to completing the transaction on the agreed price.”

The merger agreement requires Mr Musk to fund his equity commitment and close the transaction if all other closing conditions are met, leaving the possibility of litigation between Mr Musk and Twitter if the Tesla chief executive decides to not follow through. If the deal falls apart for other reasons, Mr Musk would owe a $1 billion termination fee.

Billionaire friends

The new filings also detail Mr Musk's conversations with Twitter co-founder Jack Dorsey ahead of the $44 billion takeover offer.

Conversations between the two billionaires, who are friends, first took place on March 26th when Mr Musk contacted Mr Dorsey to discuss the future of the company, the filings show. That was several days before he disclosed his stake.

Mr Dorsey told Mr Musk on April 5th that “Twitter would be better able to focus on execution as a private company”, according to Twitter’s filing. Four days later, Mr Musk backed out of a plan to join Twitter’s board and instead told its directors that he would make an offer to take it private.

Tuesday's filing showed that Agrawal was entitled to receive $60 million and Twitter chief financial officer Ned Segal could get $46 million as a "golden parachute" if they were involuntarily terminated after the deal closed.

Goldman Sachs will earn $80 million from advising Twitter and JPMorgan will make $53 million, according to the company’s filings.

Twitter’s share price had already been trading below Mr Musk’s offer but had fallen sharply after the billionaire said the takeover might fall through. Twitter stock was trading 3 per cent higher by lunchtime in New York on Tuesday at $38.63.

There has also been turmoil within Twitter in the wake of Mr Musk's offer. Last week Mr Agrawal fired two senior leaders and announced a pause on most hiring. On Tuesday, a Twitter spokesperson confirmed a Bloomberg report that three more senior employees were leaving the company: Max Schmeiser, head of data science; Katrina Lane, its vice-president of Twitter Service; and product management vice-president Ilya Brown. – Copyright The Financial Times Limited 2022