Tesla CEO Elon Musk speaks during the unveiling of the new Tesla Model Y in Hawthorne, California on March 14, 2019. (Photo by Frederic J. BROWN / AFP) (Photo credit should read FREDERIC J. BROWN/AFP via Getty Images)
A private equity firm has approached Twitter with plans to challenge Elon Musk’s $41 billion offer for outright takeover of the company.
Thoma Bravo, a technology-focused private equity firm, informed Twitter that it is exploring the possibility of putting together a bid.
According to Reuters, it is not yet clear how much Thoma Bravo would be prepared to offer and there is no certainty that such a rival bid will materialize.
Thoma Bravo has more than $103 billion in assets under management.
Prior to this, Twitter announced plans to thwart Elon Musk’s bid to take over ownership of the company using a business strategy known as the ‘Poison Pill’.
The board set up a shareholder rights plan, exercisable if a party acquires 15% of the stock without prior approval, lasting for one year only.
This was disclosed in a statement by the company’s board.
“The Rights Plan does not prevent the Board from engaging with parties or accepting an acquisition proposal if the Board believes that it is in the best interests of Twitter and its shareholders,” the company said.
Simply put, the poison pill would prevent anyone from amassing more than 15% stake in the company by allowing other shareholders to buy additional shares at a discounted price.
This means that for the duration of a year, every other shareholder apart from Musk will be able to purchase shares at a discounted price.
The new plan will limit Musk’s ability to acquire more stake in the company but would not bar him from taking his offer directly to shareholders through a tender offer.
While the poison pill would prevent most Twitter shareholders from selling their shares, the tender offer would allow them to register their support or disapproval of Musk’s offer.
It would appear that this is what the Tesla CEO is working towards as he had expressed that the decision on whether or not to take the company private should be decided by its shareholders.
“Taking Twitter private at $54.20 should be up to shareholders, not the board,” he tweeted on Thursday.
Below the tweet, he posted a poll for his 82 million followers to vote on if they supported his opinion, to which 83% voted Yes.
Earlier today, while replying to a Twitter user who had posted an image showing how much stake in Twitter its board members have, Musk said the board members’ economic interests are not aligned with its shareholders because of how little their collective stake is.
“Wow, with Jack departing, the Twitter board collectively owns almost no shares! Objectively, their economic interests are simply not aligned with shareholders,” he tweeted.
Musk offered to buy Twitter entirely for $41 billion on Thursday, at a price of $54.20 per share.
“Since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.
“My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder,” Musk said in a letter to Twitter Chairman, Bret Taylor.
Musk became the largest shareholder in Twitter after acquiring a 9.2% stake in the company. Following that, Twitter CEO, Parag Agrawal, revealed that Musk would be joining the board of Twitter as a member, to which Musk replied that he was looking forward to it.
Musk, who is currently the richest person in the world, later made a U-Turn and rejected the offer to join the board. The move meant that he could buy as many shares in the company as he wanted because he would not be subject to an agreement that Twitter has with its board members that limits them to owning a maximum of 14.9% stake in the company.
Afterward, Musk was sued by former Twitter shareholders who claim that they missed out on the jump in the company’s stock price because he delayed in revealing that he had acquired a large stake in the microblogging platform.
The shareholders filed a proposed class action in Manhattan federal court, New York, where they said Musk made “materially false and misleading statements and omissions” by not revealing he had invested in Twitter by March 24 as federal law requires.
Following Musk’s disclosure of how much Twitter stake he purchased, its shares rose from $39.31 to $49.97 which investors saw as a vote of confidence from him.
