Krystal Hu, Anirban S

(Reuters) – Twitter Inc (NYSE:) The company and its advisors weren’t sure how to handle him at first.

Elon Musk offered $54.20-per-share for the company’s social media platform on April 14. It contained the numbers 420. These are a reference the online smoking of marijuana. He submitted financing documents last week to support his bid. They were signed April 20.

These references are reminiscent of his tweet in 2018 “funding secured”, which stated that he had considered taking Tesla Inc (NASDAQ:) Inc private at $420 per share. Musk and Tesla agreed to each pay $20 million to resolve charges that Musk misled investors.

Musk said he rounded the price up to $420 because he had recently learned about the number’s significance in marijuana culture and thought his girlfriend would find it funny, “which admittedly is not a great reason to pick a price,” according to a U.S. Securities and Exchange Commission complaint https://www.sec.gov/litigation/complaints/2018/comp-pr2018-219.pdf filed at the time.

However, discussions with Twitter became serious when Twitter’s advisors in San Francisco, which includes bankers, at Goldman Sachs Group Inc (NYSE:), JPMorgan Chase & Co (NYSE:) and Allen & Co, started poring through Musk’s financing documents in support of his $44 billion bid on April 21.

Many of the largest Wall Street banks are led by Morgan Stanley (NYSE :), Bank of America Corp. Barclays (LON.) Plc committed to paying $25.5 billion of debt. Some of this was secured against Twitter, and others tied to Musk’s Tesla stock. Musk committed an additional $21 billion of cash.

The board at Twitter was reviewing Musk’s proposal, even though he presented it in very limited detail just a week before. It then went into overload. The board raced to do an analysis on the standalone plan to determine its value. Parag Agrawal had just five months to deliver on his duties as chief executive at Twitter. It also asked its bankers for a triple-check to see if any other bidder could offer more than Musk.

The following account of Musk’s Twitter deal is based upon interviews with four people who were familiar with it, but requested anonymity.

Musk and Twitter representatives declined to comment on the request or didn’t respond.

Bret Taylor is the board chairman of Twitter and also serves as co-chief executives at Salesforce (NYSE:). The board directors of Twitter realized that there wasn’t a white knight. Technology and media companies worried about antitrust risks, but private equity firms couldn’t saddle the company enough debt to boost returns due to its small cash flow.

Musk said that he was not concerned about the economics of this deal and that he wanted to use Twitter to encourage free speech.

He was not able to pay a lot of money by historical standards. It was 38% more than what Twitter shares traded before April 4th, when Twitter shareholders were created. However, it had traded higher for much of the year than his original offer.

However, Twitter’s bankers predicted that investors wouldn’t value the stock even if it did well last year. This was because of the price competition in the online advertising marketplace. Agrawal did not think Agrawal would bring stock to $54.20 any time soon.

Many Twitter shareholders agreed with this view, even large active mutual funds. They reached out to Twitter when Musk revealed that he has financing. The shareholders asked Twitter to not let this opportunity slip by.

Some investors threatened to support Musk if he didn’t follow through on a tender offer he said was being considered. Twitter adopted a poison pill to protect it against a takeover. However, it wouldn’t spare the company publically losing support from its shareholders.

BLEAK BACKDROP

Musk was blessed in many other ways. Concerns over inflation and a slowdown in the economy led to technology stocks plummeting for much of April. This was a terrible backdrop for Twitter.

Musk had several friends on Twitter’s board. Egon Durban (co-head of Silver Lake private equity, who was a partner with Musk in his failed bid for Tesla) is a part of Twitter’s Board. Jack Dorsey (another board member and former CEO), shares Musk’s passion for crypto currencies and has exchanged many compliments with him on-line.

“Elon, the only solution that I can trust,” Dorsey tweeted on Monday. Dorsey said Monday that he trusts his mission to spread the light of consciousness and suggested that Twitter should be “returned from Wall Street”.

On Sunday, Musk met with Twitter advisers and attempted to persuade him to increase his offer. However, he remained firm in his belief that his $54.20-per share offer was the best and last.

Musk made a concession by offering Twitter a large breakup fee in exchange for a modest apology. It is likely that the fee will be revealed in regulatory filings by Tuesday.

The two parties reached an agreement in the early hours of Monday. Twitter’s board approved it late that day. The Twitter shares closed at $51.70 on Monday, a slight discount from the price of the deal. They had traded at $45.08 at the time Musk announced his offer.

The world’s wealthiest person has an amazing deal, four years after he walked away from the $72 billion purchase of Tesla.

Musk posted Monday that he hoped that all my critics would remain on Twitter because that’s what freedom of speech looks like.