Billionaire Elon Musk plans to make Twitter a company following his $44 billion deal to buy the social media platform.
Twitter has been a publicly traded company since 2013, but has benefited twice, in 2018 and 2019.
The social media platform’s base of more than 200 million users is much smaller than competitions like TikTok and Facebook, and it has noticed a poor expansion of profits from Google and Facebook, the two dominant forces in virtual advertising.
However, Twitter has been a popular social media platform for politicians, such as former President Donald Trump before his ban in January 2021, celebrities and others to stream their posts for free to their followers.
Musk argued that for Twitter to succeed and meet the “social imperative” of loose speech, it will have to “become a personal enterprise. “
If Musk’s planned deal to buy Twitter comes to fruition and privatizes the company, Twitter, according to shareholders, will get $54. 20 based on the cash percentage. That’s a 38% premium over Twitter’s final value on April 1, the last day of trading before Musk publicly announced he had acquired a 9% stake in the company.
That will put more in the wallet of maximum shareholders, said Matthew Faulkner, an assistant professor of finance at San Jose State University.
There have been a few occasions in history when Twitter’s inventory topped $54. 20, once in 2013 after its initial public offering and in February 2021 in what Faulkner called a “COVID market surge. “
To move to private, Twitter’s board of trustees will negotiate a buyout deal with Musk and then make a special choice for its investors to accept or reject the purchase.
Any investor who has voting percentages in the company could vote, institutional shareholders who have a tendency to have higher amounts of percentages, therefore, would represent a higher percentage of the votes.
According to financial experts, the most important and apparent advantages of making the company personal is to allow greater flexibility to make big changes when a company is not under the control of thousands of shareholders and the public deposits required by the Securities and Exchange Commission.
However, Musk would still be responsible through his financiers, but privatization could allow him to raise the price on the company, Faulkner said.
“Acting in the best interests of shareholders is the purpose of the board and management,” Faulkner said. “And that’s a very important thing to think about with the resolution they’ve made here. “
When Musk announced plans to privatize Tesla in 2018, he said he would allow the electric car company to run “without as much distraction and short-term thinking as possible. “
Sharp changes in the inventory market and the quarterly earnings cycle have distracted staff and put pressure on the company to make the right decisions for now, but in the long run, Musk wrote.
Musk, the world’s richest user with an estimated fortune of $219 billion according to Forbes magazine, added an edit button to tweets, ending Twitter’s reliance on classified ads and expanding free speech.
“There are fewer hurdles to overcome to make adjustments large or small within the company when you don’t have to answer to thousands of shareholders,” Faulkner said.
Musk said he will “strive to keep as many shareholders in Twitter privatized as the law allows. “
With Twitter’s privatization, the company would no longer want to report its financial documents or “material” advances to the SEC, the federal regulatory firm with which Musk has had legal trouble in the past.
These submitted reports, which can bring risks to the company and any plans that may have effects on its financial performance, are public data that shareholders and everyone can see.
After Musk tweeted that he had “obtained funds” to privatize Tesla, the SEC in 2018 accused him of securities fraud in a civil lawsuit that accused him of mendacity or reckless deception in his tweets.
Tesla’s stock fell massively as a result of the SEC’s claim, and Musk had to pay a fine and step down as Tesla’s chairman.
Other large and well-known publicly traded corporations were also privatized and then returned to the market.
Dell said privatization in 2013 would allow the company to be “even more flexible and entrepreneurial. “Its founder, Michael Dell, said his company’s privatization allowed it to triumph over the slowdown in the computer industry and expand into other developing IT sectors. .
“One of the advantages of being the majority shareholder of a company is that you can do whatever you want,” Dell said.
After going public in 2013, its ending inventory was $13. 73, Dell went public in 2018 at $46 per share. The company said going public would simplify its capital and ownership structure.
Hilton acquired through a personal investor organization in 2007 and went public in 2013. During his time as a private company, the hotel industry was rebuilt: its number of open rooms increased up to 36% and the number of rooms in project – to evolve but not yet built – exceeded 60%.
In Phoenix, Swift Transportation, one of the largest motor carriers in the United States, first went public in 1990. The company’s founder, Jerry Moyes, privatized the company in 2007, after being forced to step down as CEO two years earlier following an SEC settlement. insider trading research. Moyes admitted to acting badly and paid a $1. 26 million settlement.
The company went public in 2010 and merged in 2017 with Knight-Swift Transportation Holdings.
Contribute: The Associated Press