Analysis-Twitter exploring a sale would make free speech an afterthought By Reuters

© Reuters. FILE PHOTO: People holding cell phones are silhouetted in opposition to a backdrop projected with the Twitter brand on this illustration image taken September 27, 2013. REUTERS/Kacper Pempel/Illustration/File Photo

By Tom Hals and Jessica DiNapoli

(Reuters) – Twitter Inc (NYSE:)’s board administrators can lean on issues concerning the destiny of the social media platform below Elon Musk to rebuff him, but when they determine to discover a sale, worth will override all different issues, company governance specialists stated.

The San Francisco-based firm acquired a $43 billion “best and final” provide from Musk final week, which it’s nonetheless reviewing. Musk, the world’s richest particular person and CEO of Tesla (NASDAQ:) Inc, has stated he desires to make Twitter an “arena for free speech,” cheering Twitter’s critics who complain about censorship and alarming these nervous about hate speech and bullying.

Twitter’s board is anticipated to reject Musk’s bid as too low by April 28, when it’s scheduled to report first-quarter earnings, individuals accustomed to the matter have stated. Even if Twitter’s bankers declared the provide was honest, the corporate’s board administrators have extensive latitude to reject it in the event that they thought the platform was higher off with its present content material technique, company governance legal professionals and professors stated.

This would change, nevertheless, if, Twitter’s board determined to discover a sale, both as a result of it acquired extra presents or it determined to solicit acquisition bids, these specialists stated.

Corporate regulation in Delaware, the place Twitter is integrated, dictates that after an organization launches a sale course of, securing probably the most profitable deal for shareholders turns into the overarching consideration. Board administrators usually are not allowed to consider what would occur to the corporate of their deliberations if current shareholders will money out.

“All these culture and discourse and democracy considerations fall by wayside because that’s not going to benefit shareholders anymore,” stated Ann Lipton, a professor at Tulane Law School.

Twitter and Musk spokespeople didn’t instantly reply to requests for remark.

As it stands, board administrators legally have extensive discretion on the best way to deal with Musk’s bid as a result of it was unsolicited. The administrators can refuse to have interaction with Musk in the event that they consider the corporate’s content material insurance policies and tradition higher serve the long-term pursuits of its buyers, stated Brian Quinn, a professor at Boston College Law School.

“If they think Musk will turn Twitter into a free-speech hellscape, that is sufficient justification,” Quinn stated.

Whether Twitter will determine to discover a sale will doubtless hinge on whether or not it receives engaging and credible presents within the coming days.

Private fairness agency Thoma Bravo LP contacted Twitter final week to precise curiosity in placing collectively a suggestion that may problem Musk, however there is no such thing as a certainty that such a bid will materialize, sources informed Reuters. Sources have additionally stated that different buyout corporations have since contacted Twitter to register their acquisition curiosity.


Unlike its friends Snap Inc (NYSE:) and Facebook (NASDAQ:) proprietor Meta Platforms Inc, Twitter is just not managed by founders with supervoting shares who can shoot down a deal even when viable and profitable presents are on the desk. Twitter adopted a poison tablet final week to stop Musk, who has amassed a stake within the firm of greater than 9%, from elevating his stake to greater than 15% with out negotiating a take care of its board.

Adding to its vulnerability, Twitter has not arrange a construction governing the moderation of its platform that may survive below new possession. It has not, for instance, arrange a proper course of for an unbiased arbiter to assessment its choices, although its customers can attraction to the corporate if their account is locked or suspended.

Meta, then again, has arrange an exterior Oversight Board, which permits customers to attraction Facebook’s choices to take away or go away up sure content material. The Oversight Board’s choices are binding.

Twitter may face backlash from a few of its shareholders if it doesn’t discover a sale, together with from Musk, who has tweeted that he desires the corporate’s shareholders to have a say regardless of what its board thinks. Musk may problem the board within the firm’s 2023 annual assembly of shareholders by placing ahead his personal slate of nominees, and, if profitable, drive the corporate to discover a sale.

Unless Twitter decides to discover a sale, it could actually proceed to look out for the pursuits of stakeholders past shareholders, reminiscent of its customers and staff, company governance specialists say.

“You are explicitly allowed to point to non-shareholder constituencies as your rationale for wanting to beat back the takeover,” stated Eric Talley, a professor at Columbia Law School.

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