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

Twitter’s board had reached the tip of the highway.

It was April 24. Ten days earlier, Elon Musk, the world’s richest man, made an unsolicited bid to purchase Twitter for $54.20 a share. Alarmed by the out-of-the-blue proposal and unsure if the provide was for actual, the social media firm had adopted a “poison tablet,” a defensive maneuver to cease Mr. Musk from accumulating extra of its shares.

However by that Sunday, Twitter was working out of selections. Mr. Musk had lined up financing for his provide and was needling the corporate along with his tweets. And after hours of discussions and reviewing Twitter’s plans and funds, the questions the 11 board members had been wrestling with — might the corporate be price greater than $54.20 a share? would every other bidder emerge? — had been all main to 1 dissatisfying reply: No.

Lower than 24 hours later, the blockbuster $44 billion deal was introduced.

“What I’ll inform you is that primarily based on the evaluation and the notion of danger, certainty and worth, the board unanimously determined the provide from Elon represented one of the best worth for our shareholders,” Bret Taylor, Twitter’s chairman, informed the corporate’s greater than 7,000 workers on Monday in a name that The New York Instances listened to.

A central thriller of Mr. Musk’s acquisition of Twitter is how the corporate’s board went from putting in a poison tablet to agreeing to promote to him in simply 11 days. In most megadeals, the adoption of a poison tablet results in a protracted battle. The tactic is a transparent sign that an organization intends to battle. Negotiations then drag out. Generally consumers stroll away.

However interviews with a dozen folks near the transaction, who weren’t approved to talk publicly, present simply how few choices Twitter’s board had.

And whereas there are lots of forms of consumers that deal advisers are ready to fend off — hostile ones, aggressive ones, those that lowball after which are keen to barter — Twitter confronted an acquirer in Mr. Musk who was not in any deal playbook. In essence, he was an “unknown amount” acquirer, one who wouldn’t budge on value and was ready to publicly trash the corporate and wield his appreciable fortune to get an settlement achieved with restricted diligence.

“Regular consumers may truly say, ‘Nicely, you realize, we truly need to discuss to the parents inside and see how is the enterprise going and get extra knowledge than is out there to the general public,’” mentioned Edward Rock, a professor of company governance on the New York College Faculty of Regulation. “What was fascinating,” he mentioned, is that the Twitter board “reached a deal in a brief time frame — and such an unconditional deal.” He known as the deal’s velocity “uncommon.”

Twitter declined to touch upon its board discussions. Mr. Musk didn’t reply to a request for remark.

The groundwork for a deal was laid in January, when Mr. Musk started shopping for Twitter inventory, finally increase a greater than 9 p.c stake within the firm. When he made his holdings identified in a securities submitting in early April, Twitter supplied him a board seat. Mr. Musk briefly agreed to the thought earlier than altering his thoughts.

As an alternative, on the night of April 13, Mr. Musk despatched a textual content message to Mr. Taylor, who has been Twitter’s chairman since 2016. (Mr. Taylor can be a co-chief govt of the software program firm Salesforce.)

“I’m going to ship you a proposal letter tonight, it will likely be public within the morning,” Mr. Musk wrote to Mr. Taylor. The alternate was included in a securities submitting.

The subsequent morning, a bare-bones provide letter arrived from Mr. Musk. It declared his intention to purchase Twitter for $54.20 a share, but it surely had few particulars about his plans for the corporate or the financing.

Mr. Musk employed the funding financial institution Morgan Stanley, tapping the companies of two bankers, Anthony Armstrong and Michael Grimes. Mr. Grimes, who heads Morgan Stanley’s expertise banking apply, led the 2012 public inventory providing of Fb and different tech firms, whereas Mr. Armstrong was a longtime tech banker who had not too long ago been promoted to firm vice chairman.

Twitter’s board didn’t fairly know how you can deal with Mr. Musk’s bid, the folks with information of the discussions mentioned. Mr. Musk didn’t have a monitor document of shopping for firms and had not adopted by means of on some offers, together with one in 2018 when he tweeted that he would take his carmaker, Tesla, non-public however then didn’t achieve this.

A day after Mr. Musk’s bid grew to become public, Twitter’s board voted unanimously to gradual him down by authorizing the poison tablet. To defend itself, Twitter turned to Goldman Sachs, its longtime banker, and JPMorgan Chase. For authorized recommendation, it added the legislation agency Simpson Thacher & Bartlett to complement its longtime legislation agency, Wilson Sonsini.

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

Mr. Musk was undeterred. His bankers started attempting to corral tens of billions of {dollars} in financing for a Twitter deal. His advisers introduced potential lenders with a couple of pages vaguely outlining Mr. Musk’s objectives. The billionaire additionally talked immediately with banks, an individual with information of the calls mentioned.

That helped persuade Citigroup, Financial institution of America, BNP Paribas and different banks to place their cash in. Regardless of a scarcity of particulars about Mr. Musk’s plans, lenders had been reassured partially by the entrepreneur’s previous successes and wealth, the particular person mentioned.

Mr. Musk additionally campaigned on Twitter for a deal. He hinted that he would take his proposal on to shareholders in a so-called tender provide if the corporate’s board didn’t settle for his bid. On April 16, he tweeted, “Love me tender.” Three days later, he tweeted “____ is the Night time,” a reference to the F. Scott Fitzgerald novel, “Tender Is the Night time.”

Twitter’s board fractured. On April 16, Jack Dorsey, a Twitter founder who stepped down as chief govt in November and is a board member, tweeted that the board had been the “constant dysfunction of the corporate.” When requested by a Twitter consumer whether or not he was allowed to say that, Mr. Dorsey responded, “no.”

Mr. Dorsey’s criticism rankled different board members and Twitter executives, mentioned two individuals who labored on the deal. Mr. Taylor requested Mr. Dorsey to cease tweeting negatively, one particular person mentioned. Mr. Dorsey continued posting references to Twitter’s board.

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

On April 21, Mr. Musk lined up $46.5 billion in financing. He had obtained commitments from Morgan Stanley and different lenders for $13 billion in debt financing, whereas one other group of banks promised $12.5 billion in loans in opposition to his inventory in Tesla. Mr. Musk added that he would use one other $21 billion in money to purchase the remainder of Twitter’s fairness.

The financing pressured Twitter’s board to take Mr. Musk significantly. No different gives for the corporate had emerged, two folks accustomed to the deliberations mentioned.

At Twitter, Mr. Taylor weighed worker uncertainty and the societal implications of a deal versus the board’s fiduciary obligation, folks with information of the state of affairs mentioned. That meant making a call primarily based on whether or not Twitter might fairly obtain a worth higher than what Mr. Musk had put ahead.

Mr. Taylor and different board members debated whether or not Twitter’s consumer and income development prospects had been reasonable. The San Francisco firm, which had not turned a revenue for eight of the final 10 years, had set aggressive enterprise targets.

Twitter had additionally initially benefited from the pandemic, attracting a surge of latest customers and sending its inventory to greater than $77 in February 2021. However its promoting enterprise lagged these of opponents, and because the pandemic enhance wore off, its shares fell under $40.

Nonetheless, some board members had been cautious about having a saviorlike determine similar to Mr. Musk swoop in, particularly since Twitter had already relied upon such figures — together with Mr. Dorsey — to proper the ship, two folks mentioned.

Mr. Musk started making ready to start out a young provide for Twitter, mentioned one particular person near the discussions. He had a possible ally on Twitter’s board in Egon Durban, a co-chief govt of the non-public fairness agency Silver Lake, who had labored with Mr. Musk on his failed 2018 effort to take Tesla non-public. However Mr. Durban made clear to the board that Silver Lake was not teaming up with Mr. Musk to offer financing for a takeover, two folks mentioned.

By a spokesman, Mr. Durban declined to remark.

Final Saturday, Mr. Musk spoke with Mr. Taylor and threatened to take his provide on to Twitter’s shareholders, with out explicitly saying he would begin a hostile bid, an individual with information of the decision mentioned.

On Sunday, Twitter’s board concluded that it needed to make a take care of Mr. Musk. The corporate couldn’t hit $54.20 a share by itself, board members agreed, and no white knight was coming.

Mr. Taylor informed Mr. Musk that Twitter would proceed with a sale, an individual with information of the decision mentioned. Even so, Mr. Musk despatched a letter to Mr. Taylor threatening a hostile bid.

Twitter’s advisers homed in on protections for the deal, like a breakup charge if Mr. Musk walked away and a six-month timeline to closing the deal, which may very well be notably essential if expertise shares proceed to fall. Mr. Musk’s advisers shored up financing particulars, with the billionaire personally signing off on every level, an individual accustomed to the negotiations mentioned.

After the settlement was introduced on Monday afternoon, Mr. Musk took a victory lap.

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

Anupreeta Das, Maureen Farrell and Kate Conger contributed reporting.