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On April 25, 2022, Twitter's board of directors agreed to sell the company below its fair value after Elon Musk exerted public pressure. Many investors who bought shares 30% higher than the offer price during the last year will receive losses, while others take the loss of profit.
- Back on April 13, Elon Musk delivered a letter to Company which contained a non-binding proposal to acquire all the outstanding Common Stock for all cash consideration valuing the Common Stock at $54,20 per share. This represents a 54% premium over the closing price of the Common Stock on January 28, 2022, the trading day before Musk began investing in the Company, and a 38% premium over the closing price of the Common Stock on April 1, 2022. But after all, it’s far below $73,34 one-year highs from July 2021 and different valuation comparisons with peers.
- On April 15, the board of directors approved a hostile takeover defense program called «the poison pill». This suggests that the board of directors considered the proposed price too low. It should be noted that in November 2021, a new CEO Parag Agrawal took office. He presented an ambitious development program with revenue growth to $7,5 bn in 2023. Agrawal's plans can be trusted, as he was directly involved in the company's previous rapid growth of mDAU as CTO, it grew from 115 million in 4Q 2017 to 217 million by the end of 2021.
- On April 25, after a series of public statements against the board of directors of the Company and an indirect threat to sell off the block of shares if the deal was rejected, the board of directors gave up and news came out that an agreement had been reached at the originally announced price, which is contrary to the usual practice of raising the buyout price in the event of an initial refusal.
It is noted there was the direct participation of Morgan Stanley, holder of 8% Twitter shares, in the financing of a potential transaction. The consortium of banks that provided a loan to Elon Musk even before the approval of the deal by the board of directors was headed by Morgan Stanley. This may also indicate a conflict of interest between the bank itself and the owners of Twitter shares through MS.
Taking all facts into account it is obvious that Twitter's BoD made a decision not in the best interests of current shareholders, but having other motives in mind and as a result violated fiduciary duties.
Breach of Fiduciary duty
Shock Event Date
25 April 2022