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Billionaire Elon Musk Tries to Buy Twitter – Lesson

Elon Musk Acquires Twitter

(Photo illustration by Jakub Porzycki/NurPhoto via Getty Images)

A business battle is taking place over control of the social media platform.

Update: Twitter accepted Elon Musk’s offer to buy the company. Musk will soon take over as owner of the social media platform.

What happens when the world’s richest man tries to buy one of the internet’s biggest social media sites?

Businessman Elon Musk has a long track record of both buying companies and starting new ones. Now he has his eyes on taking over the popular social media company, Twitter. As the founder and CEO of companies like SpaceX and Tesla Motors, the South African-born entrepreneur is reported to have a fortune of $300 billion. Buying Twitter may not be hard for someone with that much money – but to understand what’s going on, we need to delve into the world of business.

Intro to Stocks and Shares

When a person or group starts a new company, they will normally be the only owners of the company. A lot of businesses are owned by just a few people – or even one individual. When a company gets big enough, though, the owners might decide to sell parts – or shares – to members of the public. This is how the stock market works – anyone can buy and sell “stocks” or “shares” of businesses to become part-owners. In fact, many of these publicly traded companies are owned by hundreds, thousands, or even millions of individual investors.

Recently, it was revealed that Musk had bought 9.2% of Twitter – or 73.5 million shares. Twitter has millions of shares available for people to buy and sell – lots are owned by other businesses or investment groups, but members of the public can also get involved. Since the company has so many shares, most investors only own a very small part of the business.

While Musk may have less than 10% of the shares in Twitter, this actually made him the largest shareholder in the business. Even Jack Dorsey, a founder of Twitter, owns less than 3% of the company.

The current CEO of Twitter, Parag Agrawal, offered Musk a seat on the board of directors – the group of people who manage the company. If Musk took the job, it would mean that he could help shape the direction of the company in a small way. However, the offer came with a hitch: Musk could not buy more than 14.9% of the company during his time on the board.

It seems Musk thought he would not have as much influence as he wanted, so he soon rejected the offer.

A Hostile Takeover?

Musk had another strategy to take control of Twitter: He made an offer to buy the whole company. In a public letter, he offered to pay $54.20 per share, which is a total of $41 billion.

Elon Musk To Buy Twitter

(Photo by Justin Sullivan/Getty Images)

Twitter’s board of directors didn’t seem too happy about this offer – it appears they do not want to give up control of the company. They are now trying to stop Musk from buying the whole company by offering all shareholders – except Elon Musk – the chance to buy extra shares at a reduced price. When someone tries to buy a company and the directors don’t want to sell, it is called a “hostile takeover.”

A hostile takeover is always a risk when you put a company on the stock market and sell most of the shares. If no one controls a majority of the shares, then anyone with enough money has the chance to buy enough to take over.

When Musk announced he was willing to buy the whole company, he said that $54.20 per share was his “best and final” offer. He later said he had a “plan B” if his offer was refused. With the board of directors hoping they can stop Musk, it may not be too long before we find out what his plan B is.