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Inside Musk's $44 billion Twitter purchase: From cannabis joke to finalized contract

At first, Twitter and its advisers were unsure whether or not to take Elon Musk seriously. On April 14, his $54.20-per-share bid price for the social media company included the digits 420, a reference to a smoking marijuana cliche.

At first, Twitter Inc. and its advisers were unsure how seriously to take him.

The figures 420, a reference to a metaphor for smoking marijuana, appeared in Elon Musk's $54.20-per-share offer price for the social media firm on April 14. On April 20, abbreviated as 4/20, he signed financing documents in favor of his candidacy, which he presented last week.

These alludes to his 2018 "funding secured" tweet, in which he stated that he was considering taking Tesla Inc private for $420 per share. Tesla and Musk later agreed to pay a total of $20 million to settle claims that he defrauded investors.

According to a U.S. Securities and Exchange Commission complaint filed at the time, Musk said he rounded up the price to $420 because he had recently learned about the number's significance in marijuana culture and thought his girlfriend would find it amusing, "which admittedly is not a great reason to pick a price."

However, discussions with Twitter became more serious when the company's advisers, which included Goldman Sachs Group Inc, JPMorgan Chase & Co, and Allen & Co bankers, began going over Musk's financing documentation in favor of his $44 billion proposal on April 21.

Morgan Stanley, Bank of America Corp., and Barclays Plc, among others, have agreed to financing $25.5 billion in debt, part of which is secured against Twitter and some of which is related to Musk's Tesla stock. Musk has pledged a further $21 billion in cash.

The board of directors of Twitter, which was still studying Musk's bid a week after he had presented it with minimal explanation, went into overdrive. It hastened to finish an analysis in order to assign a value to its standalone plan, which Parag Agrawal, Twitter's CEO for five months, was delivering on. It also urged its bankers to double-check if there was another bidder who could match Musk's offer.

This version of Musk's Twitter contract is based on conversations with four people familiar with the talks who asked to remain anonymous in order to discuss them.

Musk, Twitter, and the banks' representatives either declined or did not reply to requests for comment.

Twitter's board chairman, Bret Taylor, who is also the co-chief executive of Salesforce, was in charge of deal discussions. Twitter's board of directors realized there was no white knight, as technology and media companies worried about potential antitrust violations, and private equity firms couldn't saddle the company with enough debt to boost profits due to its minimal cash flow.

Musk had previously stated that he was unconcerned about the deal's finances and was pursuing Twitter to further free expression, despite being dissatisfied with many of the platform's moderation decisions.

By historical standards, his offer was not particularly substantial. While it came at a 38 percent premium to where Twitter shares were trading before April 4, when he became a Twitter shareholder, the stock had been trading higher for the majority of last year.

However, Twitter's bankers predicted that even if the firm performed as well as last year, investors would value it lower because the social media advertising market had grown more price competitive. The board did not feel Agrawal could quickly return the stock to $54.20.

Many Twitter shareholders, including large active mutual funds, agreed with this assessment once Musk demonstrated that his bid was financially viable. These shareholders requested that the corporation not miss out on a potential deal.

Some investors vowed to side with Musk in a tender bid that he had hinted he was considering if Twitter disregarded Musk. Twitter's poison pill would shield the firm from a takeover, but it would not protect it from losing the support of its shareholders openly.

Musk's stars aligned in a variety of ways. Concerns about inflation and an economic slowdown dragged down technology equities throughout the whole of April, creating a grim background for Twitter.

Musk also had some supporters on Twitter's board of directors. Egon Durban, the co-founder of private equity company Silver Lake and a partner in Musk's failed bid for Tesla, sits on Twitter's board of directors. Another board director and the company's former CEO, Jack Dorsey, shares Musk's enthusiasm for cryptocurrencies and has frequently complimented him online.

"Elon is the only person in whom I have faith. On Monday, Dorsey wrote, "I believe his purpose to extend the light of consciousness," adding that taking Twitter "back from Wall Street is the correct first step.""

On Sunday, Twitter's advisers met with Musk to try to persuade him to increase his offer, but he refused, insisting that the $54.20-per-share offer was his "best and final."

Musk agreed to pay Twitter a hefty break-up fee if he changed his mind and walked away as a little compromise. On Tuesday, the actual fee will be revealed in regulatory filings.

The two parties reached an agreement in the early hours of Monday, and Twitter's board of directors convened later that day to accept it. Twitter shares finished at $51.70, a tiny discount to the offer price, after closing at $45.08 the day Musk announced his bid.

The world's richest individual now has a big transaction to brag about four years after walking away from a $72 billion Tesla takeover he once considered.

Musk tweeted on Monday, "I hope that even my harshest critics remain on Twitter, because that is what free expression entails."


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