What happens when the world’s richest man tries to buy one of the internet’s biggest social media sites?
Businessman Elon Musk has a long track record of both buying companies and starting new ones. Now he has his eyes on taking over the popular social media company, Twitter. As the founder and CEO of companies like SpaceX and Tesla Motors, the South African-born entrepreneur is reported to have a fortune of $300 billion. Buying Twitter may not be hard for someone with that much money – but to understand what’s going on, we need to delve into the world of business.
Intro to Stocks and Shares
When a person or group starts a new company, they will normally be the only owners of the company. A lot of businesses are owned by just a few people – or even one individual. When a company gets big enough, though, the owners might decide to sell parts – or shares – to members of the public. This is how the stock market works – anyone can buy and sell “stocks” or “shares” of businesses to become part-owners. In fact, many of these publicly traded companies are owned by hundreds, thousands, or even millions of individual investors.
Twitter has millions of shares available for people to buy and sell – lots are owned by other businesses or investment groups, but members of the public can also get involved. Since the company has so many shares, most investors only own a very small part of the business.
Recently, it was revealed that Musk had bought 9.2% of Twitter – or 73.5 million shares.
While Musk may have less than 10% of the shares in Twitter, this actually made him the largest shareholder in the business. Even Jack Dorsey, a founder of Twitter, owns less than 3% of the company.
The current CEO of Twitter, Parag Agrawal, offered Musk a seat on the board of directors – the group of people who manage the company. If Musk took the job, it would mean that he could help shape the direction of the company in a small way. However, the offer came with a hitch: Musk could not buy more than 14.9% of the company during his time on the board.
It seems Musk thought he would not have as much influence as he wanted, so he soon rejected the offer.
A Hostile Takeover?
Musk had another strategy to take control of Twitter: He made an offer to buy the whole company. In a public letter, he offered to pay $54.20 per share, which is a total of $41 billion.
Twitter’s board of directors didn’t seem too happy about this offer – it appears they do not want to give up control of the company. They are now trying to stop Musk from buying the whole company by offering all shareholders – except Elon Musk – the chance to buy extra shares at a reduced price. When someone tries to buy a company and the directors don’t want to sell, it is called a “hostile takeover.”
When Musk announced he was willing to buy the whole company, he said that $54.20 per share was his “best and final” offer. He later said he had a “plan B” if his offer was refused. With the board of directors hoping they can stop Musk, it may not be too long before we find out what his plan B is.
Try a quiz based on this article
_________ is the owner of SpaceX and Tesla Motors, and is hoping to buy Twitter.
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Elon Musk.
Large, successful companies tend to sell shares of their company to other people.
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True.
A(n) ___________ is money spent on something with hopes of it making more money in the future.
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Investment.
Jack Dorsey, the founder of Twitter, owns less than ____ of the company.
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3%.
The current CEO of Twitter offered Musk a seat on the board of directors.
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True.
If Musk accepted the seat on the board of directors, he would not be permitted to buy more than _____ of the company.
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14.9%.
Which answer best defines ‘influence’?
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The ability to control decisions.
Elon Musk accepted the seat on Twitter’s board of directors.
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False.
Musk offered to pay ____ billion for the company rather than accepting the offer to be on the board.
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41.
When someone tries to buy a company that the directors do not want to sell, it is called a _______.
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Hostile takeover.
