Twitter Inc is nearing a deal to sell itself to Elon Musk for $54.20 (€50.26) per share in cash, the price that he originally offered to the social media company and called his "best and final," people familiar with the matter said.
Twitter may announce the $43 billion (€40 billion) deal later on Monday once its board has met to recommend the transaction to Twitter shareholders, the sources said.
It is always possible that the deal collapses at the last minute, the sources added.
It comes amid reports that the company was coming under increasing pressure from its shareholders to negotiate with Musk, the world's richest person.
The views of Twitter shareholders were at odds over the weekend on what a fair price for a deal would be, but many reached out to the company after Musk outlined his acquisition financing plan on Thursday and urged it not to let the opportunity for a deal slip away, the sources told Reuters on Sunday speaking on condition of anonymity.
One option available to Twitter's board is to open its books to Musk to try to coax him to sweeten his bid. Another would be to try to solicit offers from other potential bidders.
Twitter has not yet been able to secure so far a "go-shop" provision under its agreement with Musk that would allow it to attract other bids from potential acquirers once the deal is signed, the sources said.
Still, Twitter would be allowed to accept an offer from another party by paying Musk a break-up fee, the sources added.
Twitter and Musk did not immediately respond to requests for comment.
While it is not yet clear which path Twitter will take, it is thought increasingly likely that its board will attempt to solicit a better offer from Musk if it doesn't accept the current one on the table, the sources said.
'Anything is possible'
"I wouldn't be surprised to wake up next week and see Musk raise what he called his best and final offer to possibly $64.20 [€59.56] per share," one of the fund managers who is invested in Twitter said on condition of anonymity to discuss private conversations with the company.
"He could also drop the whole thing entirely. Anything is possible," the fund manager said about Musk's offer.
Twitter shares closed at $48.93 (€45.39) on Friday, a significant discount from Musk's offer that reflects the uncertainty over his bid's fate.
Twitter adopted a poison pill after Musk made his offer to prevent him from raising his more than 9 per cent stake in the company above 15 per cent without negotiating a deal with its board. In response, Musk has threatened to launch a tender offer that he could use to register Twitter shareholder support for his bid.
A concern that Twitter's board is weighing is that unless it seeks to negotiate a deal with Musk, many shareholders could back him in a tender offer, the sources said.
While the poison pill would prevent Twitter shareholders from tendering their shares, the company is worried that its negotiating hand would weaken considerably if it was shown to be going against the will of many of its investors, the sources added.
Musk, the chief executive of electric car maker Tesla Inc, has been meeting with Twitter shareholders since he unveiled his offer on April 14, seeking support for his bid. Musk has said Twitter needs to be taken private to grow and become a genuine platform for free speech.
The Wall Street Journal reported earlier on Sunday on some of Musk's meetings with Twitter shareholders. The newspaper also reported that Musk and Twitter would hold a meeting on Sunday to discuss the acquisition offer.
Elon Musk's offer doesn't come close
The price expectations among Twitter shareholders for the deal diverge largely based on their investment strategy, sources said on Sunday. Active long-term shareholders, who together with index funds hold the biggest chunk of Twitter shares, have higher price expectations, some in the $60s-per-share, the sources said.
They are also more inclined to give Parag Agrawal, who became Twitter's chief executive in November, more time to boost the value of the company's stock, the sources added.
"I don't believe that the proposed offer by Elon Musk ($54.20 [(€50.26] per share) comes close to the intrinsic value of Twitter given its growth prospects," Saudi Arabia's Prince Alwaleed bin Talal, a Twitter shareholder, tweeted on April 14.
Short-term-minded investors such as hedge funds want Twitter to accept Musk's offer or ask for only a small increase, the sources said. Some of these are fretting that a recent plunge in the value of technology stocks amid concerns over inflation and an economic slowdown makes it unlikely Twitter will be able to deliver more value for itself anytime soon, the sources added.
"I would say, take the $54.20 [(€50.26] a share and be done with it," said Sahm Adrangi, portfolio manager at Kerrisdale Capital Management, a hedge fund that owns 1.13 million shares in Twitter, or 0.15 per cent of the company, and has been an investor since early 2020.
One silver lining for Twitter's board is that Musk's offer did not appear to convert his army of Twitter followers into new shareholders in the San Francisco-based company who could back his bid, the sources said.
Twitter's retail investor base has increased from about 20 per cent before Musk unveiled his stake on April 4 to some 22 per cent, according to the sources.