Now That Elon Musk Has Offered to Buy Twitter, What Happens Next?

Elon Musk has offered to buy Twitter at a valuation of about $43 billion. Here is what will — or could — happen next:

The board reviews the offer. The board will work with its advisers at Goldman Sachs to review Mr. Musk’s offer. They will have to consider, among other things, whether the deal fairly values the company, and whether Mr. Musk has the financing to cobble together a deal.

The board cannot simply decide it does not like Mr. Musk as a suitor, but they can “come up with reasons why they don’t like the bid,” like, for example, his ability to fund it, said Steven Davidoff Solomon, a professor at the School of Law at the University of California, Berkeley.

The board announces its decision. The board will likely take up to a few days to review the offer. If it rejects the offer, it can go in one of several ways: It can put in a defense mechanism known as a poison pill that limits the ability of Mr. Musk, and every other shareholder, to buy up Twitter shares in the open market.

Once it does that, it could still decide to sell itself, but without the pressure of Mr. Musk — or any other suitor — threatening to acquire it by buying a significant number of shares in the open market.

There are reasons Twitter may opt not to do a poison pill. It might be wary of potential criticism that a poison pill is deflecting the concerns of a highly vocal member of its community.

Likewise, Mr. Musk, whose last reported stake in Twitter was a little over 9 percent, has incentive to keep his proportion of Twitter shares below 10 percent. Once he hits that threshold, he is limited in how quickly he can sell out of the company.

Assuming Twitter rejects the offer, Mr. Musk could raise his offer — despite having already said it was best and final. He could also take the bid directly to other shareholders, through what is known as a tender offer, in which he would buy shares from other shareholders.

Still, at least one shareholder has already said the bid undervalues the company.

The board potentially looks for a white knight. “Twitter has essentially been for sale since they went public,” said Howard Berkenblit, who leads the Capital Markets group at law firm Sullivan & Worcester.

Mr. Musk’s latest activity most likely heightened interest in and Twitter’s amenability to a deal. Some private equity firms may be put off by Twitter’s limited cash flow, but a number of technology companies may take a look, given heightened interest in the social media giant’s power and reach.

There could be big suitors. Recall that Microsoft, which owns LinkedIn, and Oracle both vied for a deal with video sharing company TikTok. Still, potential antitrust considerations would likely be a significant deterrent, given the Biden administration’s scrutiny of big technology deals.