Twitter to be acquired by Elon Musk, go private, in one of the largest leveraged takeovers ever

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This article was published 24/04/2022 (879 days ago), so information in it may no longer be current.

Elon Musk, the world’s richest person, has signed a deal to buy social media platform Twitter, taking the company private in one of the largest ever leveraged takeovers of a publicly listed company.

Twitter announced Monday afternoon that it entered into a definitive agreement to be acquired for around $44 billion (U.S.) by an entity owned by Musk at $54.20 a share. The deal, which was unanimously approved by Twitter’s board of directors, is expected to close within the year. Once the deal is closed, Twitter will become a privately held company.

Twitter shares were up 5.66 per cent on Monday afternoon after market close.

In a press release, Twitter’s independent board chair Bret Taylor said the board conducted “a thoughtful and comprehensive process to assess Elon’s proposal.”

“We believe it is the best path forward for Twitter’s stockholders,” said Taylor.

In the press release, Musk called Twitter a “digital town square where matters vital to the future of humanity are debated,” and said he looks forward to unlocking the platform’s potential.

“I also want to make Twitter better than ever by enhancing the product with new features, making the algorithms open source to increase trust, defeating the spam bots, and authenticating all humans,” he said.

Musk said last week he had lined up $46.5 billion in financing to buy the social media company. Twitter had put in place an anti-takeover measure, but decided to negotiate once it was clear Musk had secured financing.

According to documents filed with U.S. securities regulators, the financing will come from Morgan Stanley and other banks to the tune of more than $25 billion. On Monday the Globe and Mail reported that RBC and CIBC are also backing the deal.

Daniel Tsai, a lecturer at the University of Toronto on law, technology and culture, said it’s likely that Twitter hoped another buyer would beat Musk’s offer.

Regardless, Musk is paying a good premium for the company, he said, and is walking out a winner.

There are concerns about Musk’s motives for taking over Twitter. Musk has said he wants to buy the platform because he doesn’t believe it’s living up to its role in enabling free speech, and has proposed relaxing content restrictions, potentially including the rules that forced former president Donald Trump off the social media platform.

Twitter doesn’t have as many users as Facebook or TikTok but is popular in certain industries, such as with world leaders, celebrities, journalists and intellectuals.

In early April, Musk revealed he was Twitter’s largest individual shareholder, after beginning to quietly buy shares at the end of January. With almost 10 per cent of the company, users and experts speculated about how he might exercise that power. In quick succession, Musk accepted an offer to join the company’s board, before rejecting the same offer.

Because Musk failed to disclose his stake in Twitter after surpassing five per cent, a shareholder lawsuit alleged he did so in order to buy more shares before the share price rose in reaction to his involvement.

In late March, Musk began tweeting criticisms of Twitter, especially with regards to free speech.

On Monday, he said he hopes even his “worst critics” will stay on Twitter if the deal goes through, because “that is what free speech means.”

Musk was born in South Africa but moved to Canada at age 17 and attended Queen’s University in Kingston for two years before moving to the U.S. He’s a controversial figure on Twitter, with multiple contentious tweets under his belt — including a tweet about taking Tesla private that triggered a federal lawsuit.

Dogecoin, a meme cryptocurrency touted by Musk, jumped in value amid news of the potential deal.

Karen Eltis, a professor of law at the University of Ottawa, said free speech plays out in an inequitable way on social media platforms, whose algorithms tend to give more weight to the most extreme content, bringing harm to the most vulnerable groups.

In the early age of the internet, this new frontier was hailed as a bastion of free speech, but over time a reversal happened, said Eltis, where social media companies began regulating speech to address the hateful content being posted — but again using algorithms, with no recourse, and often missing the mark.

Musk’s big concern is that these companies are becoming the arbiter of speech, said Eltis, and to an extent it’s a valid concern — she believes the necessary balance between regulating online speech and providing a platform for free speech has yet to be struck.

One of the main issues is that each social media company adheres to its own rules when it comes to regulating speech on their platforms, rather than following one set of principles, said Eltis.

“There’s a valid concern that social media giants are taking down content in an arbitrary fashion that cannot be appealed, that isn’t transparent, and not according to legal standards,” she said.

It’s not yet clear just how far Musk will go in implementing his self-described “free speech absolutist” views on Twitter, said Tsai.

Taking the company private will likely mean less oversight and transparency for Twitter and its users, he said. To have the world’s richest man in charge and not beholden to shareholders could result in “a huge concentration of power that could result in almost a tyrannical negative impact on society,” said Tsai.

Governments are making strides on this issue, said Tsai, including Canada. But given the borderless nature of the internet, Tsai suggested a multilateral, global approach may be key to implementing legal standards with real power over companies like Twitter.

“Giving Elon Musk unfettered control over a company that influences culture so heavily and making it unaccountable as a privately held business … regulators need to think about, should we be implementing standards on platforms?” said Tsai.

“I think we’re heading there.”

If there is a silver lining to this deal, Eltis thinks it’s this: Musk’s takeover of Twitter could propel discussions and reflections about the responsibilities and powers of social media companies over speech.

Richard Moon, a law professor at the University of Windsor, said governments are increasingly taking action to require platforms to remove hateful material. He thinks Musk’s Twitter deal could actually accelerate and reinforce these processes, perhaps resulting in more oversight of companies like Twitter down the line.

“If he really adopts this … full blown free speech libertarian idea to this platform, we’re just going to see greater pressure on the state to take meaningful action,” said Moon.

With files from Bloomberg and Associated Press