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216 lines
21 KiB
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<div><p>
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The social media company went public in 2013. But Elon
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Musk is taking it private as part of his acquisition of
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the firm. Here’s what that means.
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</p><figure><picture><source media="(max-width: 599px) and (min-device-pixel-ratio: 3),(max-width: 599px) and (-webkit-min-device-pixel-ratio: 3),(max-width: 599px) and (min-resolution: 3dppx),(max-width: 599px) and (min-resolution: 288dpi)" srcset="
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"/>
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<img alt="Elon Musk plans to change Twitter from a public to a privately held company." src="https://static01.nyt.com/images/2022/10/29/business/00jpTWITTER-PRIVATE2-print/merlin_214496130_63f02e73-7e2f-47ef-9597-f0b9fc9d20c3-articleLarge.jpg?quality=75&auto=webp&disable=upscale" srcset="
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https://static01.nyt.com/images/2022/10/29/business/00jpTWITTER-PRIVATE2-print/merlin_214496130_63f02e73-7e2f-47ef-9597-f0b9fc9d20c3-articleLarge.jpg?quality=75&auto=webp 600w,
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https://static01.nyt.com/images/2022/10/29/business/00jpTWITTER-PRIVATE2-print/merlin_214496130_63f02e73-7e2f-47ef-9597-f0b9fc9d20c3-jumbo.jpg?quality=75&auto=webp 1024w,
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https://static01.nyt.com/images/2022/10/29/business/00jpTWITTER-PRIVATE2-print/merlin_214496130_63f02e73-7e2f-47ef-9597-f0b9fc9d20c3-superJumbo.jpg?quality=75&auto=webp 2048w
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" sizes="((min-width: 600px) and (max-width: 1004px)) 84vw, (min-width: 1005px) 60vw, 100vw" decoding="async"/></picture><figcaption>Credit... Jason Henry for The New York Times</figcaption></figure><div>
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<time datetime="2022-10-28T05:00:25-04:00"><span>Oct. 28, 2022</span></time>
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</div><p>
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<em>Elon Musk closes his purchase of Twitter and fires
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several top executives. </em><a href="https://www.nytimes.com/live/2022/10/28/business/elon-musk-twitter" title=""><em>Follow for the latest news updates</em></a><em>.</em>
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</p><p>
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SAN FRANCISCO — In August 2018, Elon Musk called
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<a href="https://www.nytimes.com/topic/person/michael-s-dell" title="">Michael Dell</a>
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for advice.
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</p><p>
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Mr. Musk, who was
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<a href="https://www.nytimes.com/2018/08/07/business/tesla-stock-elon-musk-private.html" title="">trying to take Tesla, his electric car company,
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private</a>, quizzed Mr. Dell, who had done that very thing with
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<a href="https://archive.nytimes.com/dealbook.nytimes.com/2013/02/05/dell-sets-23-8-billion-deal-to-go-private/" title="">his eponymous computer company in 2013</a>, about the process and the best lawyers to use for
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the complicated transaction.
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</p><p>
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“I was really asking him about — did he find being
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private was good?” Mr. Musk recalled in a
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<a href="https://storage.courtlistener.com/recap/gov.uscourts.cand.330489/gov.uscourts.cand.330489.403.0.pdf" title="" rel="noopener noreferrer" target="_blank">deposition</a>
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about the Tesla effort. “Did he regret going private?”
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</p><p>
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Mr. Dell warned Mr. Musk that it was “a very difficult
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process” but that he was glad to have done it,
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according to court filings.
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</p><p>
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Now, Mr. Musk, who did not end up taking Tesla
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private, is doing so with Twitter. As part of his $44
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billion acquisition of the social media service, which
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closed on Thursday, he is delisting the company’s
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stock and taking it out of the hands of public
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shareholders.
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</p><p>
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Making Twitter a private company gives Mr. Musk some
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advantages. Unlike publicly traded companies,
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privately held firms do not have to make quarterly
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public disclosures about their performance. They are
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also subject to less regulatory scrutiny and can be
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more tightly controlled by an owner. That means Mr.
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Musk can make over Twitter — including tweaking the
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platform’s content rules, its finances and its
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priorities — without having to consider the worries of
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the investing public.
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</p><p>
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“It’s hard to run a public company if you think you
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should be the one running it and you’re not open to
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other views from people, like stockholders,” said
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Brian J.M. Quinn, a professor at Boston College Law
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School. “By taking it private, you feel like you have
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a lot more flexibility.”
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</p><p>
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Here’s how Twitter is set to change as a private
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company under Mr. Musk.
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</p><h2>
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How is Mr. Musk taking Twitter private?
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</h2><p>
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As part of buying Twitter, Mr. Musk is merging the
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social media company with
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<a href="https://www.nytimes.com/2022/10/06/technology/elon-musk-x.html" title="">X Holdings</a>, a corporate entity that he established in Delaware
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to handle the deal. X is buying out all of Twitter’s
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stock and will control the service, and Mr. Musk will
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control the holding company.
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</p><div>
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<span>Image</span>
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</div><figcaption>
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<span><span>Credit...</span><span><span>Lucas Jackson/Reuters</span></span></span>
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</figcaption><h2>
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What happens to Twitter’s stock?
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</h2><p>
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Twitter will be delisted from the New York Stock
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Exchange and its shares will no longer trade on public
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markets as of Nov. 8, according to
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<a href="https://www.sec.gov/Archives/edgar/data/876661/000087666122000890/xslF25X02/primary_doc.xml" title="" rel="noopener noreferrer" target="_blank">a securities filing</a>. In September, Twitter’s shareholders approved the
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company’s sale to Mr. Musk and agreed to sell their
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stock to him for $54.20 a share. Investors will be
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able to claim the cash value of their shares.
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</p><h2>
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What happens to Twitter’s board of directors?
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</h2><p>
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With the deal’s completion,
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<a href="https://www.nytimes.com/2022/10/04/technology/twitter-board-elon-musk.html" title="">Twitter’s board of directors</a>
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will dissolve and its nine members will no longer
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preside over the company’s operations. Mr. Musk will
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most likely appoint a new board made up of friends and
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investors who helped fund the acquisition. The new
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board will be responsible for plotting Twitter’s
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trajectory as a private company.
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</p><p>
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“It will still be required by law to have a board of
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directors, and that would probably include Elon Musk
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and some of the other big equity investors in the
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company,” said Eric Talley, a professor at Columbia
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Law School. “I expect Mr. Musk will run it as a
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somewhat friendly dictatorship.”
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</p><h2>
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What happens to Twitter’s top executives?
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</h2><p>
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Mr. Musk has already started cleaning house, with
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several of Twitter’s top executives
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<a href="https://www.nytimes.com/2022/10/27/technology/elon-musk-twitter-deal-complete.html" title="">getting fired on Thursday</a>.
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</p><p>
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The executives who were fired include
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<a href="https://www.nytimes.com/2021/11/29/technology/parag-agrawal-twitter.html" title="">Parag Agrawal</a>, Twitter’s chief executive, who has clashed publicly
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and privately with Mr. Musk. When Mr. Musk complained
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this year that Twitter had an unchecked spam problem,
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Mr. Agrawal tweeted to rebut his claims. Mr. Musk
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responded with a poop emoji.
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</p><p>
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At another point, Mr. Agrawal texted Mr. Musk, telling
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the billionaire that his criticisms were harming
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Twitter, according to a
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<a href="https://www.documentcloud.org/documents/23112929-elon-musk-text-exhibits-twitter-v-musk" title="" rel="noopener noreferrer" target="_blank">court filing</a>.
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</p><p>
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“This is a waste of time,” Mr. Musk retorted.
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</p><p>
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Other executives who were fired include Ned Segal,
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Twitter’s chief financial officer; Vijaya Gadde, the
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top legal and policy executive; and Sean Edgett, the
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general counsel.
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</p><p>
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Under the merger agreement, Mr. Agrawal was
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potentially set to receive a golden parachute worth
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about $60 million, with Mr. Segal to receive $46
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million, while Ms. Gadde would receive about $20
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million. It was not immediately clear whether Mr. Musk
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intended to make the payments.
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</p><div>
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<span>Image</span>
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</div><figcaption>
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<span><span>Credit...</span><span><span>Kevin Dietsch/Getty Images</span></span></span>
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</figcaption><h2>
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What about Twitter’s employees?
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</h2><p>
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Twitter has about 7,500 employees. Some of them
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<a href="https://www.nytimes.com/2022/10/21/technology/twitter-employees-elon-musk.html" title="">have been jittery</a>
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for months about the company’s sale to Mr. Musk. Many
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could face layoffs or job changes as their new owner
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takes over.
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</p><p>
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Their compensation is also set to change. Employees
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typically receive stock options in the company. But,
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with the delisting of Twitter’s stock, employees are
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set to be cashed out for shares they already have and
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to be paid with cash bonuses going forward, instead of
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the stock options they were scheduled to receive,
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according to the merger agreement. Some
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<a href="https://www.nytimes.com/2022/10/21/technology/twitter-employees-elon-musk.html" title="">employees have worried</a>
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that Mr. Musk may not honor the agreement.
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</p><p>
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“Most of these employees have been in a public company
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and are used to public option grants, which are
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liquid,” Mr. Quinn said. “They will have to come up
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with some other Silicon Valley-friendly method of
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keeping people around.”
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</p><h2>
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What financial pressures will Twitter face as a
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private company?
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</h2><p>
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By going private, Twitter will avoid some public
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scrutiny since it will no longer be required to make
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quarterly disclosures about the health of its
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business. This will give Mr. Musk some flexibility as
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he changes Twitter.
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</p><p>
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But he will face pressure from the banks that lent him
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$12.5 billion for the deal to begin repaying his debt.
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The cost of repaying those loans could run as high as
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$1 billion a year, financial analysts said.
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</p><p>
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“He has less public pressure, but he has a lot of
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private pressure from the banks to make the payments,”
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Mr. Quinn said of Mr. Musk. “Like almost every other
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private-equity take-private, he’s going to need a
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manager who is very focused on operations, being lean
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and being able to pay the bills on a day-to-day
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basis.”
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</p><p>
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Mr. Musk also took about $7.1 billion from equity
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investors to push the deal through. He may also face
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pressure from those investors, who might expect him to
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take Twitter public again at some point so that they
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can recoup their investment.
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</p><p>
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In some take-private deals, owners have opted to sell
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branches of their companies to pay their debts. Mr.
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Musk could choose to do the same at Twitter.
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</p><p>
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“It’s conceivable that some aspects of Twitter could
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potentially be carved off, sold off or spun off to
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raise money that could go toward paying the debt,” Mr.
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Talley said. “Twitter kind of is pared down to its
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core mission right now. They would have to get a
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little creative.”
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</p><p>Advertisement</p></div>
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