April 15, 2022

Elon Musk has now confirmed that he has offered to purchase Twitter for a whopping $41 billion (just under £31.5 billion), with the aim of making the company private.

Just over two weeks ago, Elon Musk became the largest shareholder of the company and, shortly after this happened, on April 5th Twitter announced he would be joining the board; only to contradict the announcement on April 11th.

There has been much speculation about this reversal, but it would appear that a seat on the Twitter board comes with a maximum share allowance of 15 percent of the company, a value that Musk believes too low.

Elon Musk sued by Twitter shareholders

Musk’s acquisition of 9.2% of the shares earlier this month has prompted other Twitter shareholders to sue him because he waited too long to disclose his stake in the company.

It is claimed that Musk has made ‘materially false and misleading statements and omissions’ by neglecting to reveal that he had invested in Twitter on or before March 24th (as required by US federal law) in a proposed class action filed in Manhattan federal court.

Twitter shares rose by 27% on April 4th, going up to $49.97 from $39.31 almost immediately after Musk disclosed his stake.

It is alleged that the delayed disclosure allowed Musk to buy more Twitter shares at lower prices, defrauding shareholders into selling said shares at ‘artificially deflated’ prices.

Musk (threatens?) to sell his shares

Since offering to purchase the company, it is still unclear whether Twitter will accept the proposed buy-out and Musk has announced that if the deal “doesn’t work” he would need to “reconsider” his “position as a shareholder”:

“…..If the deal doesn’t work, given that I don’t have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder.
i. This is not a threat, it’s simply not a good investment without the changes that need to be made.
ii. And those changes won’t happen without taking the company private….”

You can read the above quotation at the bottom of the SEC filing listed here:

https://www.sec.gov/Archives/edgar/data/0001418091/000110465922045641/tm2212748d1_sc13da.htm

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