The social media company Twitter initiated discussions with Elon Musk on Sunday, according to sources familiar with the subject, after Musk wooed shareholders with specifics of his $43 billion takeover bid.
According to the sources, the company’s decision to talk with Musk, which was made earlier on Sunday, did not imply that it would accept his $54.20 per share offer. That it was being investigated, however, indicated that Twitter was looking into the possibility of a sale to Musk on favourable terms.
Musk, the CEO of Tesla, has been meeting with Twitter shareholders in recent days, hoping to garner support for his takeover attempt of the company. He has said that Twitter must be turned private in order to flourish and develop into a true forum for free expression.
A group of Twitter shareholders asked the company to engage in negotiations after Musk unveiled a comprehensive finance plan for his offer on Thursday, urging the company not to let the potential for a deal pass them by.
According to the sources, Musk’s insistence that he was making his “best and last” proposal was a stumbling block in the discussions, but the board had opted to engage with Musk in order to acquire more information and maybe get better terms in the future.
One of the people told Reuters that Twitter wants to know more about any ongoing investigations against Musk by authorities, including the US Securities and Exchange Commission (SEC), that may jeopardise the transaction.
Financial advisors believe that Tesla CEO Elon Musk, who recently settled charges that he misled investors by claiming that he had secured funding to take the company private four years ago, may have violated Securities and Exchange Commission disclosure rules during his acquisition of a stake in the social media company Twitter earlier this year.
According to the person, Twitter was also investigating if authorities in any of its key markets would object to Musk having a majority stake in the firm. According to the sources, if Twitter were to determine that a sale to Musk would be hazardous, the company may demand a significant breakup fee from Musk.
Following Musk’s approach, the social media business implemented a poison pill to prohibit him from increasing his more than 9 percent ownership in the company to more than 15 percent without first striking an agreement with the board of directors. Musk responded by threatening to make a tender offer, which he might use to garner support from shareholders for his takeover proposal.
According to the sources, Twitter’s board of directors was concerned that if it did not attempt to negotiate a deal with Musk, a large number of shareholders would support him in a tender bid. However, even though the poison pill would prohibit them from tendering their shares, the firm was concerned that its bargaining position would be significantly weakened if it was revealed to be acting against the wishes of a large number of its shareholders.
Requests for comment from Twitter and Musk’s representatives were not immediately returned by the company.