How Twitter’s Board Went From Fighting Elon Musk to Accepting Him

Twitter’s board had arrived at the stop of the road.

It was April 24. Ten days before, Elon Musk, the world’s richest man, experienced designed an unsolicited bid to purchase Twitter for $54.20 a share. Alarmed by the out-of-the-blue proposal and uncertain if the give was for actual, the social media business had adopted a “poison capsule,” a defensive maneuver to quit Mr. Musk from accumulating a lot more of its shares.

But by that Sunday, Twitter was running out of options. Mr. Musk experienced lined up financing for his offer and was needling the corporation with his tweets. And soon after several hours of conversations and reviewing Twitter’s strategies and funds, the inquiries the 11 board associates have been wrestling with — could the company be really worth more than $54.20 a share? would any other bidder arise? — were all leading to just one dissatisfying reply: No.

Much less than 24 several hours later on, the blockbuster $44 billion deal was announced.

“What I’ll tell you is that centered on the examination and the notion of threat, certainty and worth, the board unanimously determined the offer from Elon represented the very best value for our shareholders,” Bret Taylor, Twitter’s chairman, informed the company’s much more than 7,000 staff on Monday in a phone that The New York Moments listened to.

A central thriller of Mr. Musk’s acquisition of Twitter is how the company’s board went from putting in a poison capsule to agreeing to promote to him in just 11 days. In most megadeals, the adoption of a poison pill qualified prospects to a protracted struggle. The tactic is a distinct signal that a enterprise intends to fight. Negotiations then drag out. Sometimes customers stroll away.

But interviews with a dozen people shut to the transaction, who were not authorized to talk publicly, clearly show just how couple of choices Twitter’s board experienced.

And while there are a lot of forms of customers that offer advisers are ready to fend off — hostile types, intense kinds, those people who lowball and then are eager to negotiate — Twitter confronted an acquirer in Mr. Musk who was not in any offer playbook. In essence, he was an “unknown quantity” acquirer, one who would not budge on selling price and was ready to publicly trash the enterprise and wield his considerable fortune to get an settlement carried out with confined diligence.

“Normal potential buyers may possibly basically say, ‘Well, you know, we essentially want to communicate to the people inside of and see how is the small business likely and get much more info than is readily available to the public,’” mentioned Edward Rock, a professor of corporate governance at the New York University College of Law. “What was appealing,” he stated, is that the Twitter board “reached a offer in a short period of time of time — and these kinds of an unconditional offer.” He known as the deal’s pace “unusual.”

Twitter declined to comment on its board discussions. Mr. Musk did not react to a ask for for comment.

The groundwork for a deal was laid in January, when Mr. Musk started buying Twitter inventory, ultimately developing up a extra than 9 per cent stake in the firm. When he produced his holdings acknowledged in a securities submitting in early April, Twitter provided him a board seat. Mr. Musk briefly agreed to the strategy in advance of transforming his mind.

Alternatively, on the night of April 13, Mr. Musk sent a text information to Mr. Taylor, who has been Twitter’s chairman considering that 2016. (Mr. Taylor is also a co-chief government of the program company Salesforce.)

“I am likely to send you an present letter tonight, it will be community in the morning,” Mr. Musk wrote to Mr. Taylor. The exchange was bundled in a securities filing.

The up coming morning, a bare-bones offer letter arrived from Mr. Musk. It declared his intention to obtain Twitter for $54.20 a share, but it had couple of information about his plans for the company or the funding.

Mr. Musk employed the investment financial institution Morgan Stanley, tapping the products and services of two bankers, Anthony Armstrong and Michael Grimes. Mr. Grimes, who heads Morgan Stanley’s technology banking follow, led the 2012 general public stock supplying of Facebook and other tech companies, even though Mr. Armstrong was a longtime tech banker who had a short while ago been promoted to firm vice chairman.

Twitter’s board did not pretty know how to cope with Mr. Musk’s bid, the persons with awareness of the discussions explained. Mr. Musk did not have a keep track of report of buying organizations and experienced not adopted through on some discounts, together with a single in 2018 when he tweeted that he would consider his carmaker, Tesla, private but then did not do so.

A working day soon after Mr. Musk’s bid turned community, Twitter’s board voted unanimously to slow him down by authorizing the poison capsule. To protect by itself, Twitter turned to Goldman Sachs, its longtime banker, and JPMorgan Chase. For authorized suggestions, it additional the legislation business Simpson Thacher & Bartlett to dietary supplement its longtime legislation firm, Wilson Sonsini.

JPMorgan declined to remark. Morgan Stanley, Goldman Sachs and Simpson Thacher didn’t immediately have opinions.

Mr. Musk was undeterred. His bankers began making an attempt to corral tens of billions of pounds in funding for a Twitter deal. His advisers offered prospective loan providers with a couple of web pages vaguely outlining Mr. Musk’s ambitions. The billionaire also talked immediately with banking companies, a man or woman with information of the phone calls stated.

That aided persuade Citigroup, Lender of The us, BNP Paribas and other financial institutions to set their revenue in. Even with a absence of aspects about Mr. Musk’s ideas, loan providers have been reassured in element by the entrepreneur’s earlier successes and prosperity, the individual explained.

Mr. Musk also campaigned on Twitter for a offer. He hinted that he would get his proposal instantly to shareholders in a so-called tender present if the company’s board did not settle for his bid. On April 16, he tweeted, “Love me tender.” A few days afterwards, he tweeted “____ is the Night time,” a reference to the F. Scott Fitzgerald novel, “Tender Is the Evening.”

Twitter’s board fractured. On April 16, Jack Dorsey, a Twitter founder who stepped down as chief executive in November and is a board member, tweeted that the board had been the “consistent dysfunction of the enterprise.” When questioned by a Twitter user irrespective of whether he was permitted to say that, Mr. Dorsey responded, “no.”

Mr. Dorsey’s criticism rankled other board customers and Twitter executives, said two people who worked on the deal. Mr. Taylor questioned Mr. Dorsey to prevent tweeting negatively, one individual mentioned. Mr. Dorsey continued submitting references to Twitter’s board.

A spokesman for Mr. Dorsey declined to comment. A spokeswoman for Mr. Taylor declined to comment.

On April 21, Mr. Musk lined up $46.5 billion in financing. He experienced acquired commitments from Morgan Stanley and other loan companies for $13 billion in debt funding, even though an additional team of banks promised $12.5 billion in loans against his stock in Tesla. Mr. Musk included that he would use a different $21 billion in dollars to acquire the relaxation of Twitter’s equity.

The financing forced Twitter’s board to just take Mr. Musk significantly. No other delivers for the business experienced emerged, two folks common with the deliberations said.

At Twitter, Mr. Taylor weighed employee uncertainty and the societal implications of a offer vs . the board’s fiduciary obligation, persons with information of the problem stated. That intended making a decision based on irrespective of whether Twitter could fairly obtain a value much better than what Mr. Musk had place forward.

Mr. Taylor and other board associates debated whether or not Twitter’s person and revenue progress potential customers were being realistic. The San Francisco organization, which experienced not turned a income for 8 of the last 10 a long time, experienced established intense business targets.

Twitter experienced also originally benefited from the pandemic, attracting a surge of new customers and sending its stock to additional than $77 in February 2021. But its advertising and marketing enterprise lagged all those of opponents, and as the pandemic enhance wore off, its shares fell under $40.

However, some board members were wary about having a saviorlike determine these kinds of as Mr. Musk swoop in, specifically considering the fact that Twitter experienced now relied upon these figures — including Mr. Dorsey — to ideal the ship, two folks reported.

Mr. Musk began planning to start out a tender give for Twitter, mentioned a single individual close to the discussions. He had a possible ally on Twitter’s board in Egon Durban, a co-main executive of the non-public fairness business Silver Lake, who had worked with Mr. Musk on his failed 2018 effort and hard work to acquire Tesla non-public. But Mr. Durban manufactured distinct to the board that Silver Lake was not teaming up with Mr. Musk to deliver financing for a takeover, two folks reported.

By means of a spokesman, Mr. Durban declined to comment.

Past Saturday, Mr. Musk spoke with Mr. Taylor and threatened to get his provide instantly to Twitter’s shareholders, devoid of explicitly expressing he would get started a hostile bid, a human being with information of the get in touch with mentioned.

On Sunday, Twitter’s board concluded that it had to make a deal with Mr. Musk. The business could not hit $54.20 a share on its very own, board associates agreed, and no white knight was coming.

Mr. Taylor told Mr. Musk that Twitter would carry on with a sale, a particular person with know-how of the call mentioned. Even so, Mr. Musk despatched a letter to Mr. Taylor threatening a hostile bid.

Twitter’s advisers homed in on protections for the offer, like a break up charge if Mr. Musk walked away and a six-month timeline to closing the offer, which could be specially essential if technologies stocks keep on to drop. Mr. Musk’s advisers shored up funding information, with the billionaire individually signing off on just about every stage, a particular person common with the negotiations stated.

Just after the arrangement was declared on Monday afternoon, Mr. Musk took a victory lap.

“Yesss!!!” he tweeted, submitting emojis of rockets, stars and hearts.

Anupreeta Das, Maureen Farrell and Kate Conger contributed reporting.