Mainly if you own common stock are you forced to sell? or can you hold onto your shares. Say if someone invested early and built-up sizeable investment, they may not want to sell because of cap gains or other tax implications, do they have any say?
Can someone explain the logistics of the Musk Twitter deal for me
- Thread starter kurt cloverdales
- Start date
https://www.cnn.com/2022/04/25/tech/elon-musk-twitter-sale-agreement/index.html
Details are skimpy… generally stockholders are required to sell, based on the board’s acceptance.
Stockholders of record will receive 54.20 when the deal closes (without surrendering shares).
Musk could have minority partners, but has the financing to buy 100% of the outstanding shares.
https://www.cnbc.com/2015/08/20/twitter-stock-falls-below-ipo-price.html
The 54.20 price is just over double the $26 IPO price. Over seven years the (simple) average return is over 15% (per year). That may seem skimpy for a ‘high flying growth stock’, but is at the historical market average return.
Twitter didn’t monetize their business model and has struggled to see the kind of revenue growth expected of a tech giant. The price offered could be considered generous for a company that struggles to make money, relative to its Silicon Valley peers.
Details are skimpy… generally stockholders are required to sell, based on the board’s acceptance.
Stockholders of record will receive 54.20 when the deal closes (without surrendering shares).
Musk could have minority partners, but has the financing to buy 100% of the outstanding shares.
https://www.cnbc.com/2015/08/20/twitter-stock-falls-below-ipo-price.html
The 54.20 price is just over double the $26 IPO price. Over seven years the (simple) average return is over 15% (per year). That may seem skimpy for a ‘high flying growth stock’, but is at the historical market average return.
Twitter didn’t monetize their business model and has struggled to see the kind of revenue growth expected of a tech giant. The price offered could be considered generous for a company that struggles to make money, relative to its Silicon Valley peers.
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Yes, your shares will be replaced with some combination of cash or stock, depending on how it is financed/structured. You have no choice.
I think it’s similar to if the board had accepted an offer for it to be bought out by another company. As I understand it, if Twitter had been acquired by, Google for example, they’d agree to the compensation of cash and/or Google stock for each shareholder. Shareholders don’t have a say in it. With possibly an exception for shareholders to bring suit for the board not acting in their best interest to maximize share value. But i think those kind of suits can happen whether they choose to sell or not because someone will always be unhappy.
it’s disgusting how many law firms issue press releases immediately after announcement and closing soliciting shareholders with a grudge. I have no idea how successful those suits are, but I’m guessing the success rate is relatively low, so it’s a numbers game
Agreed, and it seems like there’s rarely a “wrong” decision to make. Like, the board could reasonably say that they said no to the offer because they see share price growth over X dollars over the long run and not selling is maximizing value. Or they say yes because sale price represents Y% growth and it’s good for investors.
any of the board’s attorneys can address this, but another thing is that when you buy stock, you are entering into an agreement to acquire a specific class with specific rights. Those are all outlined in public filings.
so, even if you are buying it in a secondary transaction (from an existing shareholder vs directly from the company via say an IPO), the shares are still legally governed by their original issuance terms.
good point, those lawsuits would by flying regardless of which direction the board decides. When news broke, each of these serial litigators had a set of lawsuits ready to file in either direction.
In regarded to thinking about Stakeholders,, Matt Levine has this to say:
Incidentally, the legal standard here is a bit odd. Roughly speaking, the way Delaware law works is that a board can reject a cash acquisition for stakeholder-y reasons, but it can’t really accept one for those reasons. “We will not sell to Elon Musk because it would be bad for the world for him to own Twitter, even though the price is right,” is a controversial but possible thing for the board to say. “We will sell to Elon Musk because it would be good for the world for him to own Twitter, even though the price is wrong,” would not be okay. 5 Similarly, if the board did sell to Musk but demanded protections for the product, for the good of its users and society, shareholders might reasonably complain that it did not maximize price. But this is all hypothetical, because Twitter’s board seems to have an old-school focus on maximizing shareholder value.
thanks for the info, so pretty much the board decides what happens to your investment, wonder if there have been cases where people have been forced into deals like this when the stock was tanking.
the board is elected by shareholders. It’s definitely not a perfect system, but anyone buying stock is supposed to know this.
there have certainly been instances in various directions, a good example of what you were referring to would be Bear Stearns which sold for cents on the dollar.
interesting stuff, seems like in everything else the small guy is shit out of luck, if the powers that be make a decision that may not be in his best interest.
That's a valid way to look at it. Unfortunately, when you own a very small piece of something, you don't usually get a say though.
A broader problem is, shareholders, like many groups, are made up of individuals or entities with differing interests. A hedge fund's objectives and goals are not the same as Management's, which are not the same as Vanguard's.
