Enzo Takeshi Pastana Takahashi

Maria Clara Drzeviechi

Assignment 1

1. Describe the takeover tactics used by Mr. Elon Musk. Why were they
employed, and were they effective?
Mr. Elon Musk used the Open Market Purchase tactic to buy Twitter. This tactic
consists in buying shares of the company in the stock market before announcing that
you intend to do the acquisition. In this case, Mr. Elon Musk made the offer to buy
Twitter only on April 14, but he had already taken 9% stake in the company on March
14, making him the largest shareholder. He also implemented the Bear Hug, making
such an offer with a much higher price (Musk’s offer was $54.2 a share while they were
around $45 in the market at the time) that the acquiring company must accept it. The
first tactic mentioned was employed to feel the market before he makes the offer, while
to second was to force them to accept. Although, these attempts were not successful in
the beginning (because Twitter did a takeover defense), later, combined with a friendly
approach and with the pressure of Twitter’s shareholders to accept the offer, he
managed to buy the company for $44bn.

2. What takeover defenses were employed by Twitter in this case? Why were
they used, and were they effective?
As a takeover defense, Twitter used the poison pill. This tactic was used to fight against
Mr. Elon Musk attempt to buy the company, by adopting a year-long shareholder rights
plan to “enable all shareholders to realize the full value of their investment in Twitter”.
This would block Musk from acquiring more than 15% stake in the open market.
Although in the beginning this tactic looked effective, a few days later, the board was
forced to the negotiation table, accepting Musk’s offer.

3. Using the information provided in the articles, what are the arguments for
and against the takeover of Twitter.
Arguments for:
Twitter would be “better than ever”, according to Mr. Elon Musk, since he would
introduce new features, make the algorithms open source, stamping out bots and
authenticating “all humans”, while enhancing freedom of speech in the platform.
Arguments against:
Mr. Elon Musk has already worried some staffers after he floated the possibility of
shutting the company’s San Francisco headquarters while making a string of other
controversial suggestions, such as paying board members a salary of $0. The remaining
staffers were left with uncertainty about their jobs and the future of the company

4. What are the reasons for Mr. Elon Musk to walk away from the deal? Do
you think the deal was risky for Twitter shareholders? Explain.

Mr. Elon Musk walked away from the deal because he, according to him, Twitter had
given him misleading information about the number of spam and fake accounts, being
way higher than the number that his analysts predicted.
The takeover is risky for the shareholders since it has already caused a lot of turmoil in
the company with the remaining staffers being uncertain about their jobs and the future
of the company. However, there are a few benefits for the shareholders also. Mr. Elon
Musk said that he intended to retain “as many shareholders as is allowed by the law in a
private company”, insisting that he did not want to “monopolize” or “maximize” his
Twitter ownership. Also, as soon as he announced that he had bought Twitter’s shares,
their price in the stock market rose, indicating that the market is seeing this change
positively. This can be further confirmed by the company’s directors receiving calls
from some of its largest shareholders, including active and passive investors, pushing
for them to accept the offer, because they had little confidence that the stock price
would rise significantly higher than Musk’s offer in the near term. Furthermore, the
cash premium that the shareholders would receive from Musk would mitigate this risk.
Lastly, Dorsey, former chief executive, and co-founder, said “I trust his mission to
extend the light of consciousness”.