Billionaire tech executive Elon Musk's $44 billion deal for Twitter Inc. ranks as the fifth-largest technology transaction in recent decades, according to 451 Research's M&A KnowledgeBase.
The transaction value far surpasses other recent large social media deals, including Microsoft Corp.'s $26.4 billion purchase of professional networking service LinkedIn Corp. in 2016 and Facebook's $19 billion acquisition of mobile messaging platform WhatsApp Inc. in 2014.
Twitter stockholders will receive $54.20 in cash per share of Twitter common stock that they own upon the proposed transaction's completion.
The amount represents a 38% premium compared to Twitter's closing stock price on April 1, the last trading day before Musk disclosed his 9.2% stake in Twitter. The disclosure touched off a series of events leading to Musk's unsolicited offer and ultimate deal announcement. The valuation is 9.9x Twitter's trailing-12-month revenue, exceeding almost all of the top 10 tech deals struck in the past two decades.
Musk expressed interest in Twitter as early as 2017, asking about its valuation in a tweet, though he did not disclose a serious offer for the company until this year. Back in 2016, analysts were already marking Twitter as an acquisition target, given its falling stock price and market capitalization.
Twitter's market capitalization rose to $34.67 billion at the end of 2013, shortly after its initial public offering launched in November of that year. The stock slid in the following years, and its market capitalization hit a year-end low point of $11.56 billion in 2016. It rebounded during the pandemic, reaching a year-end high of $42.96 billion in 2020.
Musk said he is willing to work with Twitter and its user community to help unlock the platform's "tremendous potential." He has proposed changes including improving authentication methods, using open-source algorithms, and reducing spambots.
To pay for the deal, Musk secured funding commitments, including $25.5 billion of debt and margin loan financing. Musk is also providing an equity commitment of about $21.0 billion.
While Musk has promised changes at Twitter, the heavy debt commitment may push Twitter toward lower growth and higher cash extraction, said Robert Cantwell, founder and portfolio manager of Upholdings and Compound Kings ETF, a private equity fund.
"That potentially means investing in less new products and less new features," Cantwell said. "I think there's very much a world where Twitter doesn't actually grow that much, but it technically can become a lot more cashflow positive."
The deal is expected to close in 2022, subject to the approval of stockholders and regulators.
Twitter's shares fell 22.51% in the year leading up to the deal announcement, which included a recent spike amid a flurry of market speculation about Musk's intentions for Twitter.
451 Research is part of S&P Global Market Intelligence.