4/29/2022 - Economy and Finance

The Twitter case and the need to control another company through a hostile purchase

By Gustavo Neffa

The Twitter case and the need to control another company through a hostile purchase

If someone (or a company) wants to buy a company, what should they do? If you are not ready in the bag, you must contact or meet with the owner and make an economic offer. But if you are ready or have “public offer”, it is a little more complicated by the atomization of your shareholders (anyone can buy stock in the bag and be “hard” of a partcita).

On April 4, Twitter's action (TWTR) fired 28% in a single day after he became aware that Elon Musk had become the company's majority shareholder (informed the regulator who bought 73 million shares, or about $3,400 million, representing 9.2% of the share in the capital by signing).

Musk has always been critical of this social network and its policies, which “do not respect the principles of freedom of expression”. The first thing I would have thought was that I would set up your own social network, as Trump did creating Truth Social (which the account was closed on Twitter).

The social network that has almost 229 million active users worldwide (over 400 in total registered), but with much competition and less growth of new subscribers of the desired.

The directory offered Musk a seat in the board, but Musk was “for everything”: he declined this offer and decided to redouble the bet by conducting a controversial counteroffer to all shareholders at $54.2 for each action. This is how companies are bought in the bag, through an offer “hostil”, or without consulting with anyone, simply advertise it. A public procurement offer is considered hostile when a company tries to acquire another against the wishes of the management of that company. The minority investors who together are the largest group, will be satisfied with the upside of their actions and will sell themselves, because if no one does the price returns to the same value as before, or less.

A company can also defend itself: in fact, Twitter announced a measure with which it intended to avoid the purchase known as “ Poisoned Stacker”, which is basically a defense mechanism with which it seeks to protect the company against a possible hostile acquisition: it gives current shareholders the right to buy additional shares with a discount.

But finally the Twitter board agreed last Monday to accept the purchase offer. The signing will now ask your shareholders to vote in favour of the agreement. If Musk gives up the deal or if the same goes down, he must pay a fine of no less than a billion dollars. The offer was accepted when the businessman was able to demonstrate that he had the necessary funding: for a devalued offer of $44 billion, you will receive from several banks 13 billion funding for the agreement supported by your Twitter actions and 12,500 million supported by your participation in Tesla (which resulted in a very strong drop of the largest electric car producer in the week).

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gustavo neffa

Gustavo Neffa

I'm Gustavo Neffa. Director of Economics and Finance at FinGurú. Partner and director of Research for Traders, leading a team of market analysts. I spent the last 24 years in the financial sector in both domestic and foreign entities, having occupied the post of Senior Research Analyst in Macrosecurities of the Banco Macro and the BBVA Banco Francés, as well as economic analysts with the economist in chief of the BBVA Banco Francés. I am also a professor in Corporate Finance, Investment Portfolio Management, Financial Asset Valuation, Valuation of International Investment and Finance Projects in various MBAs and postgraduate courses in Buenos Aires and in the interior of the country and professor of the MBA of the UNLP and the UNNE of Financial Asset Assessment and the postgraduate degree in the UBA Capital Market in agreement with ByMA. Co-director of the UNLP Advanced Finance Programme.

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