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What are the means of privatizations?

  Elon Musk is bought Twitter for approximately $44 billion, but what does that actually mean? To start, public companies are those that can be traded on public stock exchanges, like the NASDAQ. In Twitter's case, companies go public, usually to raise capital, among a plethora of other reasons. But in the case of Twitter, they went public back in 2013 via an initial public offering or IPO. Now, nine years later, Elon Musk has swooped in and bought the company. But Why would you want to do this? And what happens when a company goes private in the first place?


 The process is known as privatization. The most notable change to Twitter will be that the company shares will no longer be listed on a Stock Exchange, meaning that the public will not be freely able to purchase any shares of ownership in the company. The company will still have shares, but they will be held privately, and sale or purchase of them would have to happen in a private transaction. The other major component of the privatization of Twitter is that the company will no longer be answerable to public shareholders or regulated as closely by the SEC or other government entities. Essentially, the private shareholders, in Twitter's case, mostly Elon Musk can do whatever they want with the company, and no one can really say anything. When Elon Musk offered to buy Twitter, the board of directors was legally obligated to consider the offer. Elon offered to buy the company at a premium over the share price on the day of his offer, a value of about $44 billion. Now that the board has accepted the offer. Every single shareholder will eventually have the option to be paid 5420 for each of their shares the per share buyout price, which was premium to the existing stock price at the time of the offer. 


But why? Why spend so much money buying the company? Well, in Twitter's case, likely because Elon wants to radically transform it. If the company was still public and Musk, for example, just had a seat on the board, he'd still have to deal with all of the other stakeholders in the company and would simply get an opinion. In the matter, not the ability to lead or decide on it. Since Elon has such significant plans to change Twitter for what he sees as the better, taking the company private was the most efficient and effective way to do it. 


So what happens next? Now that the board has accepted Elon's offer, the deal has to be closed over the course of a few weeks to months, and this involves legal and regulatory review, delisting from the NASDAQ, as well as the actual purchase or exchanging of money of the shares from Elon Musk's pocket to the thousands of shareholders of Twitter while company privatization is a fairly straightforward and standardized process, one thing is for sure, we're in for a wild ride with Elon at the helm of Twitter.



 

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