The inside track on Elon Musk’s negotiations with Twitter

Twitter is in discussions to sell itself to Elon Musk and could finalise a deal as soon as this week, people familiar with the matter said, a dramatic turn of events just 10 days after the billionaire unveiled his $ 43bn bid for the social-media company ..

The two sides met on 23 April to discuss Musk’s proposal and were making progress, though still had issues to hash out, the people said. There is no guarantee they will reach a deal.

Twitter had been expected to rebuff the offer, which Musk made on 14 April without saying how he would pay for it, and put in place a so-called poison pill to block him from increasing his stake. But after the Tesla chief disclosed that he has $ 46.5bn in financing and the stock market swooned, Twitter changed its posture and opened the door to negotiations, The Wall Street Journal reported earlier on 24 April.

Musk has said from the beginning that his $ 54.20-a-share offer is his “best and final”, and he reiterated to Twitter chair Bret Taylor again in recent days that he won’t budge on price, some of the people said. The conversations between the two sides were expected to focus on issues including what Musk would pay should an agreed deal fall apart before being consummated.

Twitter is slated to report first-quarter earnings on 28 April and had been expected to weigh in on the bid then, if not sooner.

READ Musk says his $ 47bn Twitter bid is’not a way to make money.’ That bothers critics

The potential turnabout on Twitter’s part comes after Musk met privately on 22 April with several shareholders of the company to extol the virtues of his proposal while repeating that the board has a “yes-or-no” decision to make, according to people familiar with He also pledged to solve the free-speech issues he sees as plaguing the platform and the country more broadly, whether his bid succeeds or not, they said.

Musk made his pitch to select shareholders in a series of video calls, with a focus on actively managed funds, the people said, in hopes that they could sway the company’s decision.

Musk said he sees no way Twitter management can get the stock to his offer price on its own, given the issues in the business and a persistent inability to correct them. It couldn’t be learned if he detailed specific steps he would take, though he has tweeted about wanting to reduce the platform’s reliance on advertising, as well as to make simpler changes such as allowing longer tweets.

Lauri Brunner, who manages Thrivent Asset Management’s large-cap growth fund, sees Musk as a skilled operator. “He has an established track record at Tesla,” she said. deliver strong operating performance at Twitter. ”Minneapolis-based Thrivent has a roughly 0.4% stake in Twitter worth $ 160m and is also a Tesla shareholder.

Musk already has said he is considering taking his bid directly to shareholders by launching a tender offer. Even if he was to get significant shareholder support in a tender offer — which is far from guaranteed — he would still need a way around the company’s poison pill , a legal manoeuvre it employed that effectively blocks him from building his stake to 15% or more.

One oft-employed tactic to push a bid, seeking to gain control of the target’s board, is out of reach for now. Twitter’s directors have staggered terms, meaning a dissident shareholder would need multiple years to gain control rather than a single shareholder vote. Twitter tried last year to phase out the staggered board terms given that they are frowned upon by the corporate-governance community, but not enough shareholders voted on the measure. The company is attempting to do so again at this year’s annual meeting set for 25 May .Only two directors are up for re-election, and it is too late for Musk to nominate his own.

Twitter’s shares have been trading below his offer price since he made the bid on 14 April, typically a sign that shareholders are sceptical a deal will happen, though they did close up roughly 4% on 22 April at $ 48.93, the day after he unveiled financing for the deal. Musk has indicated that if the current bid fails, he could sell his stake, which totals more than 9%.

The financing included more than $ 25bn in debt coming from nearly every global blue-chip investment bank aside from the two advising Twitter. The remainder was $ 21bn in equity Musk would provide himself, likely by selling existing stakes in his other businesses such as Tesla The speed at which the financing came together and the market selloff in recent days — which makes the all-cash offer look relatively more attractive — likely contributed to Twitter’s greater willingness to entertain Musk’s proposal.

Twitter’s board should engage with Musk since its stock has “gone nowhere” since the company went public eight years ago, Jeff Gramm, a portfolio manager with Bandera Partners, a New York hedge fund with about $ 385m under management, said earlier. The firm last bought Twitter shares in February and owns about 950,000 overall, which accounts for about 11% of its portfolio.

Gramm said Twitter’s board can’t walk away from Musk’s offer without providing an alternative that gives real value to shareholders. “I’m not sure what that can be at this stage besides finding a higher bid,” he said.

—Sarah E Needleman contributed to this article.

This article was published by The Wall Street Journal, part of Dow Jones