Twitter began negotiations with Elon Musk on Sunday after he wooed shareholders with financing details on his $43bn acquisition offer, people familiar with the matter said.
The company’s decision to engage with Musk, taken earlier on Sunday, did not mean it would accept his $54.20 a share bid, the sources said. It signified, however, that Twitter was exploring whether a sale to Musk was possible on attractive terms.
Musk, chief executive of Tesla, has been meeting with Twitter shareholders in the last few days seeking support for his bid. He has said Twitter needs to be taken private to grow and become a genuine platform for free speech.
Shareholders pushed Twitter to hold talks after Musk outlined a detailed financing plan for his bid on Thursday and urged it not to let the opportunity for a deal slip away.
Musk’s insistence that he was making his “best and final” bid was a hurdle in negotiations, the sources said, but the board had decided to engage with Musk to gather more information and potentially get better terms.
Twitter wanted to know more about any active investigations by regulators into Musk, including by the US Securities and Exchange Commission (SEC), that would pose a risk to the deal, one of the sources told Reuters.
Securities lawyers say that Musk – who settled charges that he misled investors by suggesting four years ago he had secured funding to take Tesla private – may have breached SEC disclosure rules as he amassed a stake in Twitter earlier this year.
Twitter was also looking into whether regulators in any of its major markets would object to Musk owning the company, the source added. Were Twitter to establish that a sale to Musk would be risky, it could ask for a sizeable breakup fee, according to the sources.
The social media company adopted a poison pill after Musk made his offer, to prevent him raising his more than 9% stake in the company above 15% without negotiating a deal with the board. In response, Musk threatened to launch a tender offer that he could use to register shareholder support for his bid.
A concern that Twitter’s board weighed was that unless it sought to negotiate a deal with Musk, many shareholders could back him in a tender offer, the sources said. While the poison pill would prevent them tendering their shares, the company was worried that its negotiating hand would weaken considerably if it was shown to be going against the will of many of its investors.
Representatives for Twitter and Musk did not immediately respond to requests for comment.