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Elon ‘must’ unpack his Twitter Plan B

Like all good negotiators, Elon Musk said last week that he has a Plan B if his takeover of Twitter is rejected. It now looks like he will need to unpack it if he is serious about acquiring Twitter. Beforehand, he was offered a seat on the board - probably to head off the potential takeover attempt which has since ensued. He allegedly told the Twitter board that he would make them a proposal, which would then be made public (described later as $54.20 per share) and then asked if the board was ‘available for a chat’? Below is a copy of his pre-stated terms (with our comment) as reported by Protocol last week:

1. Best and Final:

a. I am not playing the back-and-forth game.

Assuming we believe this (he might still go back in private), it may be that although Elon himself won’t make further proposals, a consortium of major shareholders might (up to the maximum Twitter rules of a maximum stake of 15% each) - this could be ‘plan B’. It may also mean that he might consider an attractive counter proposal – the board has only said that the Elon Musk offer doesn’t meet their valuation. Elon does however have a reputation (and an ego) to maintain.

b. I have moved straight to the end.

Does it mean the same as ‘Best and Final’? Most ‘first’ proposals made in a negotiation are likely to be rejected, Musk will know this, it may be part of his plan to try and ‘anchor’ a low final price.

c. It's a high price and your shareholders will love it.

For ‘high’ price, he means of course it should be really attractive to Twitter shareholders. The hope will be that his status and authority will influence them to accept it - with the board subsequently under pressure to agree it. Actually, the Twitter share price went down after this statement last week,

d. If the deal doesn't work, given that I don't have confidence in management nor do I believe I can drive the necessary change in the public market, I would need to reconsider my position as a shareholder.

Two options for the shareholders then – (i) either accept a specific price from Elon or (ii) continue with a board where an existing major shareholder has already tried to publicly discredit them – Certainty versus Risk.

i. This is not a threat, it's simply not a good investment without the changes that need to be made.

Actually, intentionally or unintentionally it is (a threat). For this, read: ‘I’ve got a lot of work to do to make the company as good as it ought to be – hence the price I’m offering reflects this’.

ii. And those changes won't happen without taking the company private.

(a repeat of the board capability comments made against point ii.).

2. My advisors and my team are available after you get the letter to answer any questions.

a. There will be more detail in our public filings. After you receive the letter and review the public filings, your team can call my family office with any questions.

So Musk is saying we’re still at the table and can continue to talk.

It’s always interesting when one party remains at the table – even if it’s only to publicly answer questions or queries. It may suggest that there may still some flexibility in their position (a question might even take the form of something like ‘under what circumstances would you accept X and Y’), even if they have previously started with ‘This is our Best and Final…’

It may be that there is still more to play out with Twitter and Elon Musk. Whatever happens, you can be sure that it will be an interesting game for us to sit back and watch.

Sam Macbeth, 19th April 2022

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