EXPLAINED: WHAT’S NEXT FOR TWITTER AFTER IT AGREED TO ELON MUSK’S $44 BILLION BID?

Twitter’s acceptance of Elon Musk’s roughly $44 billion takeover bid brings the billionaire Tesla CEO one step closer to owning the social media platform.

The deal is expected to close sometime this year. But before that, shareholders still have to weigh in, and regulators in the United States and countries where Twitter does business before the deal is completed.

Offer accepted; now what?

The process is off to a good start for Musk, given that Twitter’s board has unanimously approved his offer and is recommending shareholders do the same.

Upon announcing the deal Monday, Twitter noted that the bid, which represents a 38 percent premium to the company’s closing stock price on 1 April, is a “substantial cash premium” and would be “the best path forward for Twitter’s stockholders.”

When Twitter’s board adopted an anti-takeover provision known as a “poison pill” just ten days ago, the move was widely seen as a telltale sign that the directors were gearing up to rebuff Musk’s opening offer or perhaps seek another suitor willing to pay more.

But the battleground shifted dramatically late last week when Musk disclosed he had lined up $46.5 billion — including $21 billion of his fortune — to pay for the purchase. Musk said other investors could contribute to the financing.

The locked-in financing underscored the seriousness of Musk’s pursuit. It appeared to open the door to other large Twitter shareholders interested in hearing more about his plans for the San Francisco company.

The details of those conversations aren’t known, but Musk could point to a more than 20-year history of the building and running several businesses — most notably as the longtime CEO of Tesla. The electric car maker is currently valued at $1 trillion — roughly 25 times more than Twitter.

“I think there is nothing better for Twitter than Elon Musk buying it, ideally replacing the board, and doubling down on investments into products and new revenue-generating sources,” said John Meyer, a technology entrepreneur, and investor. “Musk has the track record that he can do the impossible.”

It would be easy to see why other Twitter shareholders might welcome a shake-up and an opportunity to cash out of their investment. Before Musk disclosed his nine percent stake in Twitter earlier this month, the shares were trading below $40 — not that much more it its $26 price when Twitter went public in November 2013.

Since then, the tech-driven Nasdaq has more than tripled, even after a recent downturn. Twitter has been a laggard because the company has struggled to consistently post profits while generating lackluster revenue growth compared to the two dominant forces in digital advertising, Google and Facebook.

Meanwhile, Tesla’s stock is now worth nearly 300 times more than when it went public in 2010. And after struggling to make money for more than a decade, the automaker is now highly profitable, with a net income of $3.3 billion during the first three months of this year alone.

What happens next?

As is customary, once a company agrees to be acquired, the buyer gets to take a closer look at its books to make sure there aren’t any red flags that haven’t come up via its public filings.

This step in the process isn’t likely to cause any obstacles to the deal, said Angelo Zino, a tech analyst at CFRA.

“He’s acquiring this company, not from a financial perspective,” Zino said. “He’s going to do what he wants with it, and he’s probably going to make significant changes to the company’s business model.”

What say could regulators have?

Last year, Twitter generated $5 billion in revenue, with $2.8 billion from the US and the rest earned overseas, Zino said. The Federal Trade Commission in the US, and the European Commission in the EU, are among the regulatory agencies that may review the proposed Twitter buyout.

The agencies generally focus on how the sale of a company could affect competition in an industry or whether it violates antitrust laws.

These reviews can take months or longer but generally represent more of a potential hurdle when two companies in the same industry are combining, or in the case of a single buyer, whether ownership already has a significant stake in companies within the same industry.

Neither Tesla nor Musk’s other company, Space Exploration Technologies or SpaceX, are social media platforms, so antitrust concerns are not expected to arise when regulators review the deal.

“We do not expect any major regulatory hurdles to the deal as this soap opera now ends with Musk owning Twitter,” Wedbush analyst Daniel Ives wrote in a research note Monday.

When do shareholders get to vote?

The deal is expected to close in 2022, subject to the approval of Twitter shareholders. Twitter hasn’t announced the timing of a shareholder vote, though the company’s annual meeting is set for 25 May, which could offer a convenient time to poll shareholders.

A company can elect to hold a shareholder vote even before regulators review a proposed takeover.

What about Twitter leadership?

At this early stage, it’s unclear what will happen to Twitter’s current board or management team if the deal is completed, but Musk has made it abundantly clear that he believes the company has been poorly run. That assessment strongly indicates that Musk’s makeover will also include a purge of Twitter’s top ranks.

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