Elon Musk plans to turn Twitter into a private company.
Elon Musk sought advice from Michael Dell in August 2018. Musk, who was trying to take his electric vehicle company Tesla private, asked Dell about the process and the best lawyers to use for this delicate transaction.
Musk, who did not take Tesla private, is now doing so with Twitter. He is delisting the company's shares and taking them out of the hands of public shareholders as part of his $44 billion acquisition of the social media site, which closed Thursday.
Making Twitter a private company gives Musk some advantages. Private companies, unlike publicly traded companies, are not required to publish quarterly reports on their performance. They are also less regulated and may be more strictly controlled by an owner. This means Musk can take control of Twitter, including changing the platform's content guidelines, economics and goals, without having to worry about investor concerns.
Musk is merging Twitter with X Holdings, a business vehicle he created in Delaware to execute the transaction, as part of his acquisition of Twitter. X will control the service after purchasing all shares of Twitter, while Musk will control the holding company.
According to a securities filing, Twitter will be delisted from the New York Stock Exchange and its shares will no longer trade on public markets effective November 8. Twitter shareholders authorized the sale of the company to Musk in September, agreeing to give him their shares at a price of $54.20 per share. Investors will be entitled to claim the cash value of their shares.
Following the completion of the transaction, Twitter's board of directors will be dissolved and its nine members will no longer preside over the company's operations. Musk will almost certainly form a new board of directors made up of friends and investors who helped finance the acquisition. The new board will be responsible for charting Twitter's course as a private company.
Musk has already started cleaning house, with several top Twitter executives being fired on Thursday.
Among those fired was Twitter CEO Parag Agrawal, who feuded publicly and personally with Musk. When the latter warned earlier this year that Twitter had an unregulated spam problem, Agrawal responded via Twitter. Musk's response was a feces emoji.
According to a court document, Agrawal sent a text message to Musk, alerting the billionaire that his complaints were affecting Twitter.
Twitter will escape some public scrutiny by going private, because it will no longer be required to make quarterly statements about the health of its business. This gives Musk considerable leeway to adjust Twitter.
However, the banks that gave him $12.5 billion for the acquisition will put pressure on him to start paying down his debt. According to financial commentators, the cost of repaying these loans could be as much as $1 billion a year.
Musk also received approximately $7.1 billion from equity investors to complete the transaction. He could also face pressure from these investors, who might expect him to re-list Twitter at some point in order to return their investment.
In some privatization transactions, owners have chosen to sell parts of their business in order to settle their debts. Musk could decide to do the same with Twitter.