Twitter and Musk Are in Discussions to Strike a Deal

Twitter had been anticipated to rebuff the provide, which Mr. Musk made April 14 with out saying how he would pay for it, and put in place a so-called poison capsule to dam him from growing his stake. However after the Tesla Inc. TSLA -0.37% chief disclosed that he has $46.5 billion in financing and the inventory market swooned, Twitter modified its posture and opened the door to negotiations, The Wall Road Journal reported earlier Sunday.

Mr. Musk has mentioned from the start that his $54.20-a-share provide is his “greatest and last,” and he reiterated to Twitter Chairman Bret Taylor once more in latest days that he gained’t budge on worth, a number of the individuals mentioned. The conversations between the 2 sides had been anticipated to concentrate on points together with what Mr. Musk would pay ought to an agreed deal disintegrate earlier than being consummated.

Twitter is slated to report first-quarter earnings Thursday and had been anticipated to weigh in on the bid then, if not sooner.

The potential turnabout on Twitter’s half comes after Mr. Musk met privately Friday with a number of shareholders of the corporate to extol the virtues of his proposal whereas repeating that the board has a “yes-or-no” choice to make, in accordance with individuals acquainted with the matter. He additionally pledged to resolve the free-speech points he sees as plaguing the platform and the nation extra broadly, whether or not his bid succeeds or not, they mentioned.

Mr. Musk made his pitch to pick shareholders in a sequence of video calls, with a concentrate on actively managed funds, the individuals mentioned, in hopes that they may sway the corporate’s choice.

Mr. Musk mentioned he sees no approach Twitter administration can get the inventory to his provide worth by itself, given the problems within the enterprise and a persistent incapability to right them. It couldn’t be discovered if he detailed particular steps he would take, although he has tweeted about wanting to scale back the platform’s reliance on promoting, in addition to to make less complicated adjustments akin to permitting longer tweets.

Some shareholders rallied behind him following the conferences. Lauri Brunner, who manages Thrivent Asset Administration LLC’s large-cap development fund, sees Mr. Musk as a talented operator. “He has a longtime observe document at Tesla,” she mentioned. “He’s the catalyst to ship sturdy working efficiency at Twitter.” Minneapolis-based Thrivent has a roughly 0.4% stake in Twitter value $160 million and can be a Tesla shareholder.

Mr. Musk already has mentioned he’s contemplating taking his bid on to shareholders by launching a young provide. Even when he was to get important shareholder assist in a young provide—which is much from assured—he would nonetheless want a approach across the firm’s poison capsule, a authorized maneuver it employed that successfully blocks him from constructing his stake to 15% or extra.

One oft-employed tactic to push a bid, looking for to achieve management of the goal’s board, is out of attain for now. Twitter’s administrators have staggered phrases, which means a dissident shareholder would wish a number of years to achieve management fairly than a single shareholder vote. Twitter tried final 12 months to part out the staggered board phrases on condition that they’re frowned upon by the corporate-governance neighborhood, however not sufficient shareholders voted on the measure. The corporate is making an attempt to take action once more at this 12 months’s annual assembly set for Might 25. Solely two administrators are up for re-election, and it’s too late for Mr. Musk to appoint his personal.

Twitter’s shares have been buying and selling beneath his provide worth since he made the bid April 14, usually an indication that shareholders are skeptical a deal will occur, although they did shut up roughly 4% Friday at $48.93, the day after he unveiled financing for the deal. Mr. Musk has indicated that if the present bid fails, he may promote his stake, which totals greater than 9%.

The financing included greater than $25 billion in debt coming from almost each world blue-chip funding financial institution except for the 2 advising Twitter. The rest was $21 billion in fairness Mr. Musk would offer himself, seemingly by promoting current stakes in his different companies akin to Tesla. The pace at which the financing got here collectively and the market selloff in latest days—which makes the all-cash provide look comparatively extra engaging—seemingly contributed to Twitter’s better willingness to entertain Mr. Musk’s proposal.

Twitter’s board ought to interact with Mr. Musk since its inventory has “gone nowhere” for the reason that firm went public eight years in the past, Jeff Gramm, a portfolio supervisor with Bandera Companions LLC, a New York hedge fund with about $385 million underneath administration, mentioned earlier. The agency final purchased Twitter shares in February and owns about 950,000 total, which accounts for about 11% of its portfolio.

Mr. Gramm mentioned Twitter’s board can’t stroll away from Mr. Musk’s provide with out offering another that provides actual worth to shareholders. “I’m unsure what that may be at this stage in addition to discovering a better bid,” he mentioned.

—Sarah E. Needleman contributed to this text.

Write to Cara Lombardo at cara.lombardo@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com