It is a seminal moment for the 16-year-old company that emerged as one of the world’s most influential public squares and now faces a string of challenges.
Discussions over the deal, which last week appeared uncertain, accelerated over the weekend after Musk wooed Twitter shareholders with financing details of his offer.
Under pressure, Twitter started negotiating with Musk to buy the company at the proposed $54.20 per share price.
“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” Musk said in a statement.
Shares rose 6% following the news to $51.90. The deal represents a near 40% premium to the closing price the day before Musk disclosed he had bought a more than 9% stake. Even so, the offer is below the $70 range where Twitter was trading last year.
On Monday, Musk told his more than 80 million followers that the company has tremendous potential and he wanted to make it better by adding new features, making the algorithms open source to increase trust and defeat spam bots.
“I think if the company were given enough time to transform, we would have made substantially more than what Musk is currently offering,” said Jonathan Boyar, managing director at Boyar Value Group, which holds a stake in Twitter.
However, he added, “this transaction reinforces our belief that if the public markets do not properly value a company, an acquirer eventually will.”
Musk’s move continues a tradition of billionaires buying control of influential media platforms that include Rupert Murdoch’s takeover of the New York Post in 1976 and the Wall Street Journal in 2007 and Jeff Bezos’ 2013 acquisition of the Washington Post.
The transaction was approved by the board and is now subject to a shareholder vote. No regulatory hurdles are expected, analysts said.
Daniel Ives, an analyst at Wedbush, said the company’s board of directors had its back “against the wall” once Musk detailed his financing package and no other bidders or white knights emerged.
In a prepared statement the company said Musk secured $25.5 billion of debt and margin loan financing and is providing a $21 billion equity commitment.
It was not immediately clear what the breakup fee would be or who would run the new company.
Twitter’s outsized importance as a mouthpiece for politicians, political dissidents and activists belies its relatively small size.
Although it is only about a tenth of the size of far larger social media platforms like Meta Platforms Inc’s (FB.O) Facebook, it has been credited with helping spawn the Arab Spring uprising and accused of playing a role in the Jan. 6, 2021, storming of the U.S. Capitol.
After Twitter banned former President Donald Trump over concerns around incitement of violence following last year’s U.S. Capitol attack by his supporters, Musk tweeted: “A lot of people are going to be super unhappy with West Coast high tech as the de facto arbiter of free speech.”
Republicans on Monday cheered the news of a possible Musk buyout of Twitter, betting on Trump’s reinstatement on the service.
Trump, whose company is building a rival to Twitter called Truth Social, said he will not return to Twitter, according to a Fox News interview.
The White House declined on Monday to comment on Musk’s deal, but said that President Joe Biden has long been concerned about the power of social media platforms.
“Our concerns are not new,” said White House spokesperson Jen Psaki, adding that the platforms need to be held accountable. “The president has long talked about his concerns about the power of social media platforms, including Twitter and others, to spread misinformation.”