Twitter board members can draw on concerns about the fate of the social media platform under Elon Musk to stave it off, but if they decide to explore a sale, price will override all other considerations, corporate say governance experts.
The San Francisco-based company received a $43 billion (€40 billion) “best and final” offer from Mr Musk last week, which is still under review. Mr Musk, the world’s richest person and CEO of Tesla, has said he wants to make Twitter an “arena for free speech”. ‘ cheer Twitter’s critics who complain about censorship, alarming those concerned about hate speech and bullying.
Twitter’s board of directors is expected to reject Mr Musk’s offer as too low by April 28 when it is scheduled to report first-quarter results, people familiar with the matter said. Even if Twitter’s bankers declared the offer fair, the company’s board members have ample leeway to turn it down if they feel the platform is better off with its current content strategy, corporate governance lawyers and professors said.
But that would change if Twitter’s board decides to explore a sale, either because it has received more offers or it has decided to solicit takeover bids, these experts said.
Corporate law in Delaware, where Twitter is incorporated, dictates that once a company initiates a sales process, securing the most lucrative deal for shareholders becomes the overriding consideration. Board members must not consider in their deliberations what would happen to the company if existing shareholders cashed out.
“All of these considerations of culture, discourse, and democracy are falling by the wayside because shareholders aren’t going to benefit anymore,” said Ann Lipton, a professor at Tulane Law School.
Representatives for Twitter and Musk did not immediately respond to requests for comment.
As it stands, the board members have a great deal of legal discretion as to how to deal with Mr Musk’s offer given that it was unsolicited. Directors may refuse to work with Mr. Musk if they believe the company’s content policies and culture better serve the long-term interests of its investors, said Brian Quinn, a professor at Boston College Law School.
“If you think Musk is going to turn Twitter into a free speech hellscape, that’s sufficient justification,” Quinn said.
Whether Twitter decides to consider a sale will likely depend on receiving attractive and credible offers in the coming days.
Private equity firm Thoma Bravo contacted Twitter last week to express interest in putting together an offer that would challenge Mr Musk, but there is no certainty such an offer will go through, sources told Reuters. Sources have also said that other buyout firms have since contacted Twitter to announce their takeover interest.
Unlike its rivals Snap and Facebook owner Meta, Twitter isn’t controlled by founders with supervoting stocks who can nail a deal even when viable and lucrative offers are on the table.
Twitter last week introduced a “poison pill” to prevent Mr Musk, who has amassed a stake of more than 9 percent in the company, from increasing his stake to more than 15 percent without brokering a deal with the board.
Adding to its vulnerability, Twitter has not established a structure governing the moderation of its platform, which would survive under new ownership. For example, it hasn’t established a formal process for an independent arbitrator to review its decisions, although its users can appeal to the company if their account is suspended or suspended.
Meta, on the other hand, has set up an external oversight board that allows users to appeal Facebook’s decisions to remove or leave certain content. The decisions of the Board of Directors are binding.
Twitter could face backlash from some of its shareholders if it doesn’t consider a sale, including Mr Musk, who tweeted that he would like the company’s shareholders to have a say, regardless of the board’s opinion.
Mr Musk could challenge the board at the company’s 2023 annual meeting by proposing his own slate of candidates, and if successful, force the company to consider a sale.
Unless Twitter decides to consider a sale, it may continue to look out for the interests of non-shareholder stakeholders, such as: B. its users and employees, say corporate governance experts.
https://www.independent.ie/business/world/free-speech-concerns-wont-matter-once-twitter-entertains-bidders-beyond-musk-41567999.html Concerns about freedom of expression will no longer matter once Twitter entertains bidders beyond Musk