To Seize Twitter, Elon Musk Showcases New Kind Of Takeover Warfare

The billionaire is waging a extremely public assault towards the corporate, weaponizing its personal platform towards it. His marketing campaign defies most of the conventions round buyout battles.

To perceive what makes Elon Musk’s extremely seen and dramatic try to take over Twitter so unconventional, it helps to have a look at what occurred the final time Twitter encountered one other sudden investor within the firm.

That wasn’t very way back, and the scenario did play out conventionally. In March 2020, Elliott Administration introduced it had bought about 4% of Twitter shares. Elliott is a so-called activist-investing agency. It acquires stakes in public firms, then advocates for change, hoping it is going to enhance the funding’s worth. Elliott’s funding made an preliminary splash within the media, prompting a sequence of swiftly held closed-door conferences between Elliott and Twitter administration. A peace deal adopted. Twitter handed Elliott a board seat and agreed to lift targets for consumer and income development. By the next summer season, issues had been ok between Twitter and Elliott for the 2 to contemplate combining for a bid on TikTok. (Ultimately, after all, nobody received to purchase TikTok.) With Twitter refill 175% from Elliott’s preliminary funding, it gave again its board seat in April 2021.

When Musk arrived final month, Twitter tried the identical method. CEO Parag Agrawal repeatedly spoke with Musk and provided him a board seat. However not like Elliott, Musk turned it down—doing so visibly on Twitter after a weekend of tweets criticizing the corporate’s enterprise mannequin. Two tweets instantly solicited his 81 million followers for his or her opinions. Days later, he introduced he didn’t need to simply personal half of Twitter, he wished to purchase all of it. Additional growing the general public spectacle, he revealed the textual content messages he had despatched Chairman Bret Taylor. Twitter responded by adopting a poison capsule, a typical protection towards a hostile takeover invented throughout the Michael Milken-Ivan Boesky Nineteen Eighties (earlier than company raiders turned activist buyers).

Musk continued on. In lower than every week, he has used a TED Talks stage to label the SEC regulators who’d must approve his acquisition as “bastards,” assailed Twitter’s board on Twitter, recirculated a pro-Musk meme initially revealed by the enterprise capitalist Marc Andreessen and cryptically referenced the Elvis Presley tune “Love Me Tender.” (A bid for a corporation is, formally, a “tender supply.”)

“A wise activist can leverage the facility of social media and different types of distribution to attach past conventional strategies,” says Connor Haley, founding father of activist agency Alta Fox Capital. He hasn’t gone full Musk in his newest marketing campaign towards Hasbro. However he has acknowledged how the web and social media give him an intimate skill to achieve the corporate’s shareholders and prospects, bolstering his proposals for the enterprise, which embrace spinning off its trading-cards unit. “I feel you will more and more see activists take this route in the event that they actually need to drive long-term worth creation.”

Musk, who acquired a 9.2% stake in Twitter in early 2022, proposes to pay $43 billion for the corporate, a 38% premium from the share-price degree when he introduced his intentions final Thursday. The poison capsule measure is a robust indication Twitter’s board doesn’t like his supply, although it has but to formally flip it down. Musk has employed Morgan Stanley to advise him; Twitter has responded by hiring each Goldman Sachs and JP Morgan to counsel it. Agrawal, in the meantime, has urged employees to stay resilient however warned them to arrange themselves for a interval of distractions. The corporate receives some substantial safety by the poison capsule, which is able to let Twitter promote discounted inventory, lowering Musk’s possession. Typically, activists will depart after an organization reaches for a poison capsule, unwilling to bear the heavy monetary prices of retaining their massive shareholding after the capsule is enacted.

Nonetheless, Musk’s takeover try is, actually, not like every other within the 40 years or so these items have been happening. Superficially, there may be the matter of his wealth. Whereas the buyout sport has lengthy attracted moneyed contributors, none actually maintain a candle to Musk (internet price: $264.6 billion). Much less superficially, there’s the matter of how he has waged his conflict: weaponizing the very product he hopes to amass, turning Twitter into the primary staging floor for his offensive towards the corporate. It’s as if Henry Kravis had pressed his bid for RJR Nabisco by standing outdoors its gates and pelting the boardroom home windows with stale Milk-Bone canine biscuits.

“That is completely bizarre and strange. Positive you’ve received another takeovers these days, like Jos. A. Financial institution making an attempt to merge with Males’s Warehouse,” says Carliss Chatman, a professor of company legislation at Washington and Lee. (She has a preferred Twitter account, the place she has chronicled Musk’s tried takeover and different C-suite dramas.) “However that is some wealthy megalomaniac making an attempt to purchase one thing and treating all of it like taking part in with a toy.”

In digitizing the company raid, Musk is constructing on the work of others. Within the mid-2000s, investor Eric Jackson successfully used casual YouTube movies to advertise his case towards Yahoo within the mid-2000s, certainly one of many issues that went mistaken for Yahoo round then. In 2017, billionaire Invoice Ackman purchased advertisements on Fb and Twitter to publicize his stance towards ADP. Across the identical time, Elliott expensively mailed out 1000’s of greeting playing cards containing a video display screen and a pre-loaded video detailing its qualms with Arconic, an aerospace-parts maker. One other blueprint for Musk to comply with got here final 12 months, when the Chewy.com founder Ryan Cohen marshaled collectively 1000’s of Twitter- and Reddit-based retail buyers to overturn administration at GameStop and buoy the inventory value.

Activists have routinely arrange web sites detailing their funding concept for the higher a part of twenty years, although they are usually no extra revolutionary than the location arrange by your native congressperson. And even then, they nonetheless depend on press releases and the standard media to unfold their messages. Working example: Elliott Administration’s Jesse Cohn, who leads its activist investments and sat in Elliott’s seat on the Twitter board, has tweeted simply 34 occasions in six years. He has solely 7,424 followers and likes to incorporate hyperlinks to official PR releases.

Since Thursday, Musk has appeared to accentuate his marketing campaign, focusing on a lot of it at Twitter’s administrators. (Boards and buyout buyers like Musk by no means get alongside throughout a hostile takeover. However they often snip at one another through SEC doc or media launch. Doing so over social media offers Musk the flexibility to extra instantly construct help—doubtlessly at a price extra viral than a PR launch may probably generate.)

In a tweet alternate with crypto billionaire Cameron Winklevoss, Musk steered the administrators may face “titanic” legal responsibility in the event that they reject his bid, seeming to advocate for shareholder lawsuits towards the board. He highlighted one other consumer’s put up that screenshotted director Robert Zoellick’s clean Twitter feed. (Zoellick, the World Financial institution’s former president, joined each the board and Twitter in 2018 and has by no means tweeted.) Musk additionally criticized the board members’ small shareholdings in Twitter inventory, implying that in the event that they held extra, they’d higher perceive why they need to take his deal.

Activists usually reveal from the beginning how they plan to finance unsolicited takeovers, one thing they see as essential to win help from an organization’s buyers, who could also be skeptical of their advances. This hasn’t been the case for Musk. He hasn’t detailed precisely how he’ll fund his bid, and whereas he’s extremely rich, his fortune is illiquid, tied to Tesla inventory. He could must borrow towards these shares to lift cash or herald companions to the transaction, lowering his prices. Personal fairness companies Apollo and Thoma Bravo are reportedly focused on becoming a member of him.

It is too early to inform whether or not Musk will win by means of this technique. However he’s undoubtedly attracting consideration and help. The latter has come from the standard corners of Twitter—“If the sport is truthful, Elon will purchase Twitter,” Musk’s former PayPal colleague David Sacks tweeted—and fewer regular ones. Alexis Ohanian, the Reddit cofounder, mentioned on Twitter that he has been prompted to analysis poison drugs for the primary time, deciding “they’re actually not a great look,” an announcement that may be considered as pro-Musk, anti-Twitter board.

Musk appears to be gaining a modicum of help from throughout the firm. Twitter’s cofounder and twice-former CEO Jack Dorsey appeared to sign he agreed with Musk this weekend. Dorsey was ousted by an earlier iteration of the board in a 2008 coup that ended his first run as Twitter CEO; he remained a director. He returned in 2015 and stepped down as CEO in November. Whereas he stays a board member till subsequent month, Dorsey on Saturday nonetheless referred to as the board “constantly the dysfunction of the corporate.”

Twitter buyers more and more appear to suppose one thing could in actual fact occur. After the Dorsey tweets and Musk’s frenzied weekend, the inventory rose 7.5% on Monday to $48.45. They aren’t but totally offered on Musk’s skill to tug it off. In the event that they had been, the inventory would commerce for no less than $54.20, the value steered by Musk.

Twitter HQ has appeared pained to satisfy Musk on this novel battleground, mockingly, one it helped create. (It declined to remark for this story.) Whereas Musk on Monday tweeted about how he meant to chop board members’ pay to $0 if he takes management, Twitter made a prolonged submitting with the SEC detailing its poison capsule measure.

Musk has provided $54.20 a share for the corporate, the “420” a part of the determine a weed-culture reference and a preferred on-line joke. Within the new submitting on the poison capsule, Twitter mentioned shareholders may purchase new shares for $210, fairness price double that quantity: $420. Possibly a coincidence. Or possibly Twitter realizes Musk has unavoidably modified the sport’s guidelines, and to win, it wants to determine how you can play.


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