To Capture Twitter, Elon Musk Showcases New Type Of Takeover Warfare

The billionaire is waging a highly public attack against the company, weaponizing its own platform against it. His campaign defies many of the conventions around buyout battles.

To understand what makes Elon Musk’s highly visible and dramatic attempt to take over Twitter so unconventional, it helps to look at what happened the last time Twitter encountered another unexpected investor in the company.

That wasn’t very long ago, and the situation did play out conventionally. In March 2020, Elliott Management announced it had purchased about 4% of Twitter shares. Elliott is a so-called activist investing firm. It acquires stakes in public companies, then advocates for change, hoping it will boost the investment’s value. Elliott’s investment made an initial splash in the media, prompting a series of swiftly held closed-door meetings between Elliott and Twitter management. A peace deal followed. Twitter handed Elliott a board seat and agreed to raise targets for user and revenue growth. By the following summer, things were good enough between Twitter and Elliott for the two to consider combining for a bid on TikTok. (In the end, of course, no one got to buy TikTok.) With Twitter stock up 175% from Elliott’s initial investment, it gave back its board seat in April 2021.

When Musk arrived last month, Twitter tried the same approach. CEO Parag Agrawal repeatedly spoke with Musk and offered him a board seat. But unlike Elliott, Musk turned it down—doing so visibly on Twitter after a weekend of tweets criticizing the company’s business model. Two tweets directly solicited his 81 million followers for their opinions. Days later, he announced he didn’t want to just own part of Twitter, he wanted to buy it all. Further increasing the public spectacle, he published the text messages he had sent Chairman Bret Taylor. Twitter responded by adopting a poison pill, a common defense against a hostile takeover invented during the Michael Milken-Ivan Boesky 1980s (before corporate raiders became activist investors).

Musk continued on. In less than a week, he has used a TED Talks stage to label the SEC regulators who’d need to approve his acquisition as “bastards,” assailed Twitter’s board on Twitter, recirculated a pro-Musk meme originally published by the venture capitalist Marc Andreessen and cryptically referenced the Elvis Presley song “Love Me Tender.” (A bid for a company is, formally, a “tender offer.”)

“A smart activist can leverage the power of social media and other forms of distribution to connect beyond traditional methods,” says Connor Haley, founder of activist firm Alta Fox Capital. He hasn’t gone full Musk in his latest campaign against Hasbro. But he has recognized how the internet and social media give him an intimate ability to reach the company’s shareholders and customers, bolstering his proposals for the business, which include spinning off its trading-cards unit. “I think you’ll increasingly see activists take this route if they really want to drive long-term value creation.”

Musk, who acquired a 9.2% stake in Twitter in early 2022, proposes to pay $43 billion for the company, a 38% premium from the share-price level when he announced his intentions last Thursday. The poison pill measure is a strong indication Twitter’s board doesn’t like his offer, though it has yet to formally turn it down. Musk has hired Morgan Stanley to advise him; Twitter has responded by hiring both Goldman Sachs and JP Morgan to counsel it. Agrawal, meanwhile, has urged staff to remain resilient but warned them to prepare themselves for a period of distractions. The company receives some substantial protection from the poison pill, which will let Twitter sell discounted stock, reducing Musk’s ownership. Often, activists will depart after a company reaches for a poison pill, unwilling to bear the heavy financial costs of retaining their large shareholding after the pill is enacted.

Nonetheless, Musk’s takeover attempt is, truly, unlike any other in the 40 years or so these things have been going on. Superficially, there is the matter of his wealth. While the buyout game has long attracted moneyed participants, none really hold a candle to Musk (net worth: $264.6 billion). Less superficially, there’s the matter of how he has waged his war: weaponizing the very product he hopes to acquire, turning Twitter into the main staging ground for his offensive against the company. It’s as if Henry Kravis had pressed his bid for RJR Nabisco by standing outside its gates and pelting the boardroom windows with stale Milk-Bone dog biscuits.

“This is totally weird and unusual. Sure you’ve got some other takeovers lately, like Jos. A. Bank trying to merge with Men’s Warehouse,” says Carliss Chatman, a professor of corporate law at Washington and Lee. (She has a popular Twitter account where she has chronicled Musk’s attempted takeover and other C-suite dramas.) “But this is some rich megalomaniac trying to buy something and treating it all like playing with a toy.”

In digitizing the corporate raid, Musk is building on the work of others. In the mid-2000s, investor Eric Jackson effectively used informal YouTube videos to promote his case against Yahoo in the mid-2000s, one of many things that went wrong for Yahoo around then. In 2017, billionaire Bill Ackman bought ads on Facebook and Twitter to publicize his stance against ADP. Around the same time, Elliott expensively mailed out thousands of greeting cards containing a video screen and a pre-loaded video detailing its smokes with Arconic, an aerospace-parts maker. Another blueprint for Musk to follow came last year, when the Chewy.com founder Ryan Cohen marshaled together thousands of Twitter- and Reddit-based retail investors to overturn management at GameStop and buoy the stock price.

Activists have routinely set up websites detailing their investment idea for the better part of two decades, though they tend to be no more innovative than the site set up by your local congressperson. And even then, they still rely on press releases and the traditional media to spread their messages. Case in point: Elliott Management’s Jesse Cohn, who leads his activist investments and sat in Elliott’s seat on the Twitter board, has tweeted just 34 times in six years. He has only 7,424 followers and likes to include links to official PR releases.

Since Thursday, Musk has seemed to intensify his campaign, targeting much of it at Twitter’s directors. (Boards and buyout investors like Musk never get along during a hostile takeover. But they usually snip at each other via SEC document or media release. Doing so over social media gives Musk the ability to more directly build support—potentially at a rate more viral than a PR release could possibly generate.)

In a tweet exchange with crypto billionaire Cameron Winklevoss, Musk suggested the directors could face “titanic” liability if they reject his bid, seeming to advocate for shareholder lawsuits against the board. He highlighted another user’s post that screenshotted director Robert Zoellick’s blank Twitter feed. (Zoellick, the World Bank’s former president, joined both the board and Twitter in 2018 and has never tweeted.) Musk also criticized the board members’ small shareholdings in Twitter stock, implying that if they held more, they’d better understand why they should take his deal.

Activists typically reveal from the start how they plan to finance unsolicited takeovers, something they see as necessary to win support from a company’s investors, who may be skeptical of their advances. This hasn’t been the case for Musk. He hasn’t detailed exactly how he’ll fund his bid, and while he is incredibly wealthy, his fortune is illiquid, tied to Tesla stock. He may need to borrow against those shares to raise money or bring in partners to the transaction, reducing his costs. Private equity firms Apollo and Thoma Bravo are reportedly interested in joining him.

It’s too early to tell whether Musk will win through this strategy. But he is definitely attracting attention and support. The latter has come from the usual corners of Twitter—“If the game is fair, Elon will buy Twitter,” Musk’s former PayPal colleague David Sacks tweeted—and less usual ones. Alexis Ohanian, the Reddit cofounder, said on Twitter that he has been prompted to research poison pills for the first time, deciding “they’re really not a good look,” a statement that can be viewed as pro-Musk, anti-Twitter board.

Musk seems to be gaining a modicum of support from within the company. Twitter’s cofounder and twice-former CEO Jack Dorsey seemed to signal he agreed with Musk this weekend. Dorsey was ousted by an earlier iteration of the board in a 2008 coup that ended his first run as Twitter CEO; he remained a director. He returned in 2015 and stepped down as CEO in November. While he remains a board member until next month, Dorsey on Saturday nonetheless called the board “consistently the dysfunction of the company.”

Twitter investors increasingly seem to think something may in fact happen. After the Dorsey tweets and Musk’s frenzied weekend, the stock rose 7.5% on Monday to $48.45. They aren’t yet fully sold on Musk’s ability to pull it off. If they were, the stock would trade for at least $54.20, the price suggested by Musk.

Twitter HQ has seemed pained to meet Musk on this novel battleground, ironically, one it helped create. (It declined to comment for this story.) While Musk on Monday tweeted about how he intended to cut board members’ pay to $0 if he takes control, Twitter made a lengthy filing with the SEC detailing its poison pill measure.

Musk has offered $54.20 a share for the company, the “420” part of the figure a weed-culture reference and a popular online joke. In the new filing on the poison pill, Twitter said shareholders could acquire new shares for $210, equity worth double that amount: $420. Maybe a coincidence. Or maybe Twitter realizes Musk has unavoidably changed the game’s rules, and to win, it needs to figure out how to play.


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