Elon Musk was interested by beginning his personal social community

Before focusing on buying Twitter, Tesla CEO Elon Musk was thinking about starting his own social network.

From the beginning, Elon Musk wanted to buy Twitter, and not just sit on its board of directors or remain a significant shareholder, yes, but keep quiet. However, before focusing on buying the social network, the billionaire considered launching a competitive service before giving up on the project, according to new details of the proposed takeover mentioned in a document submitted in Securities Commission (SEC) United States.

This document, namely the proxy statement of the Twitter board of directors and the call to shareholders to approve the takeover of the social network by Elon Musk, sheds light on the initial search of the billionaire: Elon Musk really wanted to buy Twitter! And he thought about it for a long time. Like most of the other information in this file, the revelations of this power of attorney only slightly complicate the situation, as Elon Musk has put Twitter on hold. The billionaire claims that the business is nothing unless the social network proves its claims about spam and “bots” (in the sense of automated accounts). For its part, Twitter insists the deal must continue at the agreed price $ 54.20 per share.

What else do we learn from this power of attorney submitted to the SEC? Once it starts to accumulate what would be a stake more than 9% at the company, Elon Musk met with the CEO of Twitter, Parag Agrawaland the President of the Management Board, Bret Taylor, March 27 The billionaire told them that he had collected a large stake in the company. He then added that he was considering a number of options for the future: launching a competing service, joining Twitter’s board of directors or simply buying a social network. Elon Musk quickly gave up on the idea of ​​a competing application, and he didn’t want to join the board either. He accepted the position of director and then declined a few days later, telling Twitter that he intended to buy the company.

For now, it is not clear when exactly Elon Musk decided to continue with the unwanted takeover of Twitter. However, the power of attorney clearly states how long he has been thinking about it. For its part, Twitter did not publish almost any information about Elon Musk’s plans. In a public statement about the billionaire and his place on Twitter’s board of directors, Parag Agrawal warned employees and shareholders of “impending disruptions”. However, the message does not mention the fact that Elon Musk has already informed the CEO of Twitter, as well as the board of directors, about his intention to buy the company. Internally, however, the specter of takeover by Elon Musk has caught the attention of the board of directors and seems to have been a deciding factor in the way this same board has treated the billionaire from the start, especially in his offer. place on the board and try to limit how many Twitter stocks a billionaire can continue to buy.

The power of attorney also informs us that Elon Musk and co-founder of Twitter, Jack Dorsey, were close associates during this affair. They are friends, and no, that’s not a charming exaggeration. The power of attorney clearly shows the closeness between the two men. On page 43, regarding the board meeting on Twitter on April 3, it reads, “Mr. Dorsey has informed the Twitter board that he and Mr. Musk are friends.” Their relationship has been a source of complications for Twitter throughout this process, with Jack Dorsey publicly advocating for Elon Musk to privatize Twitter and criticizing the board (of which he is still based). It turned out that Jack Dorsey was the first person Elon Musk contacted regarding Twitter (March 26), and in another conversation, the billionaire asked the social media co-founder to reconsider his intention to step down from the board in May. Jack Dorsey refused and, at the same time, told Elon Musk that Twitter would be better off as a private company. Four days later, Elon Musk informed the board of directors of his intention to make Twitter private.

In short, Elon Musk and Jack Dorsey are friends and their friendship is, at least in part, the origin of the billionaire’s interest in Twitter.

The power of attorney also contains other valuable information:

  • Elon Musk has passed a background check. Some small speculations on the internet seemed to indicate that there would be problems during the checks carried out by Twitter, as the company believed the billionaire would join its board of directors.
  • Twitter didn’t put much effort into finding the ‘white knight’. On April 14, the day after Elon Musk publicly revealed his intention to buy Twitter, the company’s board met with bankers from Goldman Sachs and decided not to look for “strategic alternatives” to sales. In other words, the Board of Directors did not ask to find another customer with whom we will live easier. Why hasn’t Twitter officially asked for other offers? On Twitter’s business prospects, bankers and the board concluded: “It is unlikely that other parties will have an interest or opportunity to buy Twitter.” In other words, no one but Elon Musk would be willing to buy Twitter right now.
  • By the time Elon Musk’s offer appeared, Twitter already knew that the set goals would not be met, namely an increase in revenue to $ 7.5 billion by 2023.. According to internal projections, the company should reach 7.2 billion turnoverwhich would represent a significant increase over $ 5.1 billion in revenue by 2021. Twitter expects revenue to reach $ 10 billion in 2025 i $ 12.9 billion In 2027, Elon Musk would present much more ambitious goals to potential co-investors. According to New York Timesthe billionaire thinks he can increase Twitter traffic $ 28 billion by 2028, including $ 12 billion in advertising and $ 10 billion in subscriptions. Currently, Twitter’s revenue comes almost exclusively from advertising.
  • The proxy contains a section “Twitter Board Board Recommendation and Reasons to Merge”. In this section, the Board of Directors states the reasons why shareholders should approve the transaction, such as the difficulties Twitter has had in the past to increase users and revenue at the same time, the bankers’ conclusion that $ 54.20 per share is a good price, lack of interest other customers and a reasonable probability that the transaction will occur.

It’s funny how there’s the phrase “reasonable probability of completing a deal” since it seems much less likely that a deal will close today (at least $ 54.20 per share).

Hours before Twitter released the document on Tuesday morning (May 17th), Elon Musk said the deal could not be achieved until the company provided him with proof that less than 5% of the bill they are spam on the social network. The billionaire made the fight against spam one of his favorite topics of conversation, and on Friday, May 13, he said he was suspending the operation until he analyzed the spam company’s spam estimates in more detail.

During a technology conference held on Monday (May 16th), Elon Musk said he thinks the rate of fake Twitter accounts could reach 20%. For his part, Parag Agrawal posted a long message on Twitter describing the social network’s actions against bots and reaffirmed that the rate is below 5%. Elon Musk responded to this tweet with an emoji thumbnail.

Yes, Elon Musk, a billionaire who has been thinking about buying or bidding on Twitter for a long time, may be retiring. He seems to be using bots as an excuse to drop the deal, though he would be responsible for a $ 1 billion severance pay if both sides agree to terminate the deal, or as an excuse to force Twitter to renegotiate $ 54.20 per share.

Twitter could choose a completely different option and sue Elon Musk in court to force him to honor a contract he signed with the board to buy the company. While the board considered $ 54.20 per share cheap in April, the deal is much more attractive in May as stock prices on social media are falling. In a press release, Twitter said it is committed to completing the transaction at the agreed price and terms as soon as possible. »

Twitter investors are not thrilled with this situation. The company’s shares still hold 0.6% drop in early trading on Tuesday, May 17, after falling nearly 7% on Monday, May 16. The growing gap between the share price and Elon Musk’s offer indicates that investors are increasingly worried that the deal will fail.

This is all pretty ironic. A few weeks ago, Elon Musk really wanted this transaction to go through, unlike Twitter. Today, the billionaire is a bit cautious and seems less involved, while Twitter really wants to finalize this takeover, and the power of attorney explains the reason: “If the merger is not completed, and depending on the circumstances of this non-merger, the price of our ordinary shares may fall significantly.”

Article translated by Forbes US – Author: Abram Brown

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