Twitter (NYSE:TWTR) stock shot up as much as 10% today on news that Elon Musk is offering to buy the social media company for $54.20 per share.
Musk’s offer values Twitter at more than $40 billion and comes less than two weeks after Musk disclosed that he had taken a 9.2% stake in the social media giant.
In a letter that Musk sent to Twitter Chairman Bret Taylor, which has been disclosed in a regulatory filing, Musk said that “Twitter needs to be transformed as a private company.”
What Happened With TWTR Stock
With his 9.2% stake, Musk became Twitter’s largest shareholder. Management at Twitter subsequently invited Musk, who also runs both Tesla (NASDAQ:
TSLA) and SpaceX, to join its board of directors, a move that would have prevented Musk from owning more than 15% of Twitter.
However, Musk declined to join Twitter’s board and is now offering to buy all of Twitter and take the company private. The letter sent to Bret Taylor also states: “My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder.”
Why It Matters
Musk’s move to gain control of Twitter highlights his determination to transform a social media platform that he has long criticized.
In the letter, Musk said “Since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form… Twitter has extraordinary potential. I will unlock it.”
Musk, who is estimated to be the world’s richest person with a net worth in excess of $250 billion, is offering to pay cash to buy Twitter. In a note to clients, Wedbush technology analyst Dan Ives said “We believe this soap opera will end with Musk owning Twitter after this aggressive hostile takeover of the company.”
Ives added that Musk has left Twitter’s board with little choice but to accept his offer.
What’s Next for Twitter
Twitter shareholders continue to benefit from the drama created by Elon Musk. TWTR stock has risen nearly 20% in April on news of Musk’s interest. The share price, which finished trading yesterday at $45.85, is going even higher today.
And given the premium Musk is offering, shareholders are expected to tender their stock.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
