Twitter used a ‘poison pill’ defence on Friday, limiting Elon Musk‘s ability to increase his ownership in the social media platform as a buyout group emerged to fight his $43 billion bid for the business.
According to persons familiar with the situation, Thoma Bravo, a technology-focused private equity company with more than $103 billion in assets under management as of the end of December, has told Twitter that it is considering putting together a proposal.
It is unclear how much Thoma Bravo would be willing to give, and there is no guarantee that such a competing bid will materialise, according to the individuals, who asked not to be identified since the topic is secret.
A Thoma Bravo official declined to comment, and Twitter employees did not reply promptly to a request for comment. According to the New York Post, Thoma Bravo is exploring a bid for Twitter.
The action raises the prospect of other private equity groups bidding for Twitter. According to data source Preqin, the global private equity business has over $1.8 trillion in dry powder. Unlike huge technological conglomerates, most buyout companies would not be subject to antitrust rules if they acquired Twitter.
It is still feasible that a private equity company will enhance Musk’s offer by collaborating with him rather than competing with him. However, Musk’s criticism of Twitter’s reliance on advertising for the majority of its revenue has made some private equity companies wary of partnering with him, according to industry sources. This is because a robust cash flow makes it much simpler to finance a leveraged buyout.
Twitter has more than $6 billion in cash on its balance sheet and an annual cash flow of close to $700 million, giving banks some reassurance when deciding whether to issue finance for a transaction. Nonetheless, a leveraged buyout for Twitter might be the largest of all time, necessitating the collaboration of numerous buyout companies and other major institutional investors.
Musk is the world’s richest person, according to Forbes, with a net worth of $265 billion. He has set a limit on how much he is willing to spend. On Wednesday, he notified Twitter that his $54.20-per-share all-cash proposal for the firm was his “best and last offer,” and that if it was rejected, he would reevaluate his status as a Twitter shareholder. Musk controls more than 9% of Twitter, making him the second-largest stakeholder after mutual fund behemoth Vanguard.
Musk stated on Thursday that Twitter shareholders should vote on his offer, and he conducted a poll on Twitter in which the majority of users agreed with him. Twitter’s board is currently reviewing Musk’s offer and will only submit it to a vote of the company’s shareholders if it approves it. Twitter shares dipped on Thursday, indicating that most investors believe Musk’s proposal would be rejected by the company’s board as insufficient and lacking in funding specifics.
Twitter said on Friday that it has implemented a poison pill that will dilute anyone with a stake in the firm of more than 15% by selling more shares to other owners. The poison pill, properly known as a shareholder rights plan, will be in effect for 364 days.
The measure does not exclude Musk from making his offer straight to Twitter shareholders via a tender offer. While the poison pill would prohibit the majority of Twitter shareholders from selling their shares, the tender offer would allow them to express their support or opposition to Musk’s bid.