Guide to buying a Wall Street listed company (like Twitter)

By Gustavo Neffa

Research for tradersang

If someone (or a company) wants to buy a company, what should they do? If it is not listed on the exchange, you will need to contact or meet with the owner and make a financial offer. But if it is listed or has a “public offering”, it is somewhat more complicated due to the atomization of its shareholders. Anyone can buy shares in the stock market and become the “owner” of a small portion.

On April 4, Twitter’s stock (TWTR) rose 28% a day after it was announced that Elon Musk had become the company’s majority shareholder: the Tesla founder informed the regulator that he had bought 73 million shares, or approximately $ 3.4 billion, representing 9.2% of the company’s equity stake.

Musk has always been critical of this social network and its policies for disrespecting the principles of freedom of expression. The first thing he will consider is that he will set up his own social network, as Donald Trump did by creating Truth Social (whose Twitter account is closed).

The social network Twitter has nearly 229 million real and active users worldwidebut there is a lot of competition and less new subscriber growth than desired.

The board of directors offered Musk a seat on the board of directors, but Musk persisted: he rejected that offer and decided to double down by making a controversial counter-offer. to all shareholders at $ 54.2 per share. This is how companies are bought on the stock exchange, by a hostile offeror without consulting anyone, just state it.

A takeover bid is considered hostile when one company attempts to take another against the wishes of that company’s management. Minority investors, who together are the largest group, will be happy to increase their shares and sell them to you, because if there is no one, the price will return to the same amount as before, or less.

A company can also defend itself: In fact, Twitter announced a proposal in which it tried to avoid buying what is known as the “poison pill”, which is basically a defense mechanism by which it aims to protect the company against a possible hostile takeover: it gives the current shareholders have the right to purchase additional shares at a discount.

But finally Twitter’s board of directors agreed last Monday to accept the purchase offer. The company will now ask its shareholders to vote in favor of approving the deal.. If Musk withdraws from the deal or if the deal goes ahead, he will need to pay a fine of at least US $ 1,000 million.

The offer was accepted when the businessman showed that he had the necessary financing: for an offer worth US $ 44 billion, he would take from various banks US $ 13 billion in financing for the deal supported by his Twitter shares and US $ 12.5 billion. supported by his Twitter shares. stake in Tesla, which caused a massive drop in the largest producer of electric vehicles in a week.

The deal is expected to close in 3-6 months. If Musk manages to acquire the necessary shares to be considered the owner of the company, Twitter shares could be “delisted”, that is, take the company out of the stock market, making it private. As Microsoft did with LinkedIn or so many other publicly traded companies, and not now.