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

By Tom Hals and Jessica DiNapoli

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

The San Francisco-based firm obtained a $43 billion “greatest and ultimate” 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 “enviornment without cost speech,” cheering Twitter’s critics who complain about censorship and alarming these fearful 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 aware of the matter have stated. Even when Twitter’s bankers declared the provide was truthful, the corporate’s board administrators have broad 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 may change, nevertheless, if, Twitter’s board determined to discover a sale, both as a result of it obtained extra affords or it determined to solicit acquisition bids, these specialists stated.

Company legislation 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 should not allowed to consider what would occur to the corporate of their deliberations if current shareholders will money out.

“All these tradition and discourse and democracy issues fall by wayside as a result of that’s not going to learn shareholders anymore,” stated Ann Lipton, a professor at Tulane Regulation College.

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

Because it stands, board administrators legally have broad discretion on the right 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 traders, stated Brian Quinn, a professor at Boston Faculty Regulation College.

“In the event that they suppose Musk will flip Twitter right into a free-speech hellscape, that’s enough justification,” Quinn stated.

Whether or not Twitter will resolve to discover a sale will doubtless hinge on whether or not it receives enticing and credible affords within the coming days.

Personal fairness agency Thoma Bravo LP contacted Twitter final week to specific curiosity in placing collectively a suggestion that might 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.

NO FOUNDER AROUND TO PROTECT IT

Not like its friends Snap Inc (NYSE:) and Fb (NASDAQ:) proprietor Meta Platforms Inc, Twitter will not be managed by founders with supervoting shares who can shoot down a deal even when viable and profitable affords are on the desk. Twitter adopted a poison capsule 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 cope with its board.

Including to its vulnerability, Twitter has not arrange a construction governing the moderation of its platform that might survive underneath new possession. It has not, for instance, arrange a proper course of for an impartial arbiter to evaluation its choices, although its customers can enchantment to the corporate if their account is locked or suspended.

Meta, then again, has arrange an exterior Oversight Board, which permits customers to enchantment Fb’s choices to take away or depart 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.

Until Twitter decides to discover a sale, it will probably proceed to look out for the pursuits of stakeholders past shareholders, corresponding to its customers and staff, company governance specialists say.

“You’re explicitly allowed to level to non-shareholder constituencies as your rationale for eager to beat again the takeover,” stated Eric Talley, a professor at Columbia Regulation College.