Twitter Adopts Poison Pill, but Musk Has Other Options

In line with our expectation that Twitter wouldn’t initially welcome Elon Musk’s $54.20 per share bid, the board adopted a poison pill on April 15 that will make it difficult for the Tesla (TSLA) CEO to increase his stake above 15%. However, this could also provide more time for other potential buyers to come in and bid more than Musk. While the move indicates that the board will not accept Musk’s offer, the board has not yet officially responded. We are maintaining our $58 fair value estimate for Twitter.

While we are not certain what the result of this saga will be, various tweets by Musk have indicated that he will probably pursue the acquisition and may make a tender offer. He could also partner with private equity firms. Another option could be that Musk gathers heads of--or large investors in--a few U.S. media companies to take Twitter private. Possible partners could be companies perceived as having biases toward either side of the political aisle in the United States, such as Fox, Sinclair, Google, Warner Bros. Discovery, The New York Times, Barry Diller (chair and senior executive of IAC), and others. We believe the media companies may want to show their support for free speech with the possibility of a generating return on it in the future. Plus, a stake in Twitter, which has become one of the main distribution platforms for entertainment and news content, may give those companies a say in how their news and commentary content is presented to users and to what extent it will be moderated.