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Market Update

Musk Looks to Buy Twitter With a Bid At a 54% Premium

The Tesla and SpaceX chief launched a broadside at the lack of free speech on social media in regulatory filings, explaining he wanted to "unlock" the platform's value.

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Elon Musk has made an offer to buy Twitter (TWTR) at a 54% premium to its closing price on Wednesday in a move that he says will "unlock" the social media platform's value by privatizing the company, according to regulatory filings and a public statement.

"I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy," says Musk, the chief executive of electric vehicle maker Tesla (TSLA)

"However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.

"As a result, I am offering to buy 100% of Twitter for $54.20 per share in cash, a 54% premium over the day before I began investing in Twitter and a 38% premium over the day before my investment was publicly announced.

"My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder. Twitter has extraordinary potential. I will unlock it."

Twitter shares are currently trading at around $45, so Musk's premium bid of $54.20 values the whole company at around $43.4 billion, based on the 800 million shares outstanding in the firm. In pre-market trading, Twitter shares are up 10% to nearly $51 per share.

All Becomes Clear

Musk's dealings with the company have drawn public attention after he initially announced his intention to take a controlling stake in Twitter and join the company's board. The latter plan was subsequently retracted, though it was at first unclear precisely why.

"When Elon Musk took a 9.2% stake in Twitter and then declined to take a position on the board there was much speculation as to his motives for not accepting the role," says Michael Hewson, chief market analyst at CMC Markets.

"Today we found out why he was so reticent. [...] As a member of the board, he would have been precluded from making such a bid. The big question for the Twitter board now is whether to accept a very generous offer for a business that has been a serial underperformer and tends to treat its users with indifference.

"Whatever your feelings on Musk he would certainly shake things up, with the only question as to whether he would make things worse or improve them."

Ollie Smith does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.