After weeks of back and forth between Elon Musk and Twitter (NYSE: TWTR), the latter has officially accepted the Tesla CEO’s $44 billion offer to take it private.
Under the terms of the deal, shareholders would receive $54.20 in cash for each share of Twitter stock they own, matching Musk’s original offer and marking a 38% premium on the stock price the day before Musk revealed his 9% stake in the company last month. Twitter will also be taken private as part of the deal.
Twitter released a statement:
“The Twitter Board conducted a thoughtful and comprehensive process to assess Elon’s proposal with a deliberate focus on value, certainty, and financing. The proposed transaction will deliver a substantial cash premium, and we believe it is the best path forward for Twitter’s stockholders.”
But what now?
What happens to my shares when a company goes private?
In most cases of companies being taken private, it is a matter of weeks and not days. Then, once private, a company’s shares can no longer be traded publicly because the company is delisted from the public exchange on which its shares once traded. Until then, investors can continue to invest in a business that is going private.
So, for example, once the Twitter deal is officially closed, Twitter shares will cease to trade on the NYSE and holders will receive $54.20 per share owned.
Pros and Cons of Going Private
- Fewer regulatory requirements as a business.
- No longer answerable to public shareholders, thus freeing up decision-making time.
- More time to focus on growing the business instead of simply pleasing the market.
- No more quarterly reports.
- It can be more difficult to raise capital, thus limiting funds for research and growth, etc.
- Private shareholders hold more power, thus making it more difficult to manage disgruntled investors.
- Selling shares in the company is much more difficult if private shareholders are looking for an exit.
The Bottom Line
When a company goes private, shares are often purchased at a premium and the company is delisted from public stock exchanges. Shareholders give up ownership in the company in exchange for that premium price for each share that they own, but can no longer buy shares in the company through a broker.
In short, while it can be disappointing to see investments go private, retail investors like us really have little to no control over buyouts like this. With that in mind, all we can do is take it on the chin and either cash out or reinvest funds elsewhere.
Content Manager at MyWallSt
Jamie is the Content Editor here at MyWallSt. His favorite stock is Apple, which is also the first stock he ever bought. Jamie is not only a big fan of its products, but he believes that the tech giant has a whole lot more to give the world, and hasn't even scraped the surface of its potential.