Amid Twitter, Inc.TWTR board's reluctance to accept Tesla, Inc. TSLA CEO Elon Musk's offer to take the social media platform private, the world's richest person may be plotting his next move. Wedbush analyst and prominent Tesla bull Daniel Ives said in a recent note it has now become a "game of high-stakes poker" between the two parties.
What Happened: As the stakeholders look ahead to how the Musk-Twitter saga will evolve, the Tesla CEO sent everyone into a guessing game with a pithy cryptic tweet. On Saturday, Musk tweeted "Love Me Tender," enclosing the tweet between musical notes emojis. At face value, it seems to be a reference to Elvis Presley's 1956 hit song with the same title.
Twitter investors, particularly, took it as a hint that Musk is preparing to directly approach shareholders with a tender offer in the eventuality of the social media platform's board outrightly rejecting the offer.
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Why It's Important: After Musk disclosed his intention to buy out Twitter for $54.20 per share Thursday, Twitter's board adopted a shareholder rights plan. Also known as the "poison pill," such a plan is usually adopted to ward off potential acquirers by making a potential acquisition unappealing.
Musk said at a TED Talk on Thursday that he has a Plan B, if Twitter rejects his proposal. Over the weekend, reports suggested that private-equity firm Thoma Bravo is interested in tabling a competing bid.
Subsequently, it was also reported that Musk might join hands with like-minded investors and offer a sweetened bid. If Musk decides to go ahead with a tender offer, he might have to make an offer that is attractive enough for existing shareholders to surrender their shares. A tender offer is usually conditional on the acquirer amassing enough shares to obtain controlling interest in the company.
Wedbush's Ives said he sees three paths ahead.
Musk can directly make his case to Twitter shareholders and possibly to the board, which is along the lines of how a tender offer works. Alternatively, he can increase the bid by finding a strategic partner(s), or sell his passive stake and stop chasing Twitter, the analyst noted.
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Photo: Courtesy of Steve Jurvetson via Wikimedia
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