WSJ News Exclusive | Twitter is reviewing Elon Musk’s offer and may be more receptive to a deal

Twitter is still working on a very large estimate of its own value, which should come close to Mr. Musk’s offer, and it could also insist on sweeteners such as Mr. Musk has agreed to cover break protections if the The deal was falling apart, some people said.

The two sides are meeting on Sunday to discuss Mr. Musk’s proposal, the people said.

Twitter is expected to weigh in on the supply when it reports first-quarter results on Thursday, if not sooner, the people said. Twitter’s response won’t necessarily be black and white and could leave the door open to invite other bidders or negotiate with Mr. Musk on terms other than price. Mr. Musk reiterated to Twitter Chairman Bret Taylor in recent days that he would not budge from his $54.20 per share offer, the people said.

The potential U-turn from Twitter comes after Mr Musk met privately with several company shareholders on Friday to tout the virtues of his proposal while reiterating that the board has a ‘yes or no’ decision to make. , according to people familiar with the matter. He also pledged to address free speech issues he sees as affecting the platform and the country more broadly, whether or not his candidacy is successful, they said.

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The CEO delivered his pitch for selecting shareholders in a series of video calls, with a focus on actively managed funds, the people said, in hopes they could sway the decision. ‘business.

Mr. Musk said he saw no way Twitter management could take the stock to its offering price on its own, given the company’s problems and a continued inability to fix them. It was unclear whether he detailed specific steps he would take, although he tweeted about wanting to reduce the platform’s reliance on advertising, as well as bringing simpler edits such as allowing longer tweets.

Mr. Musk already has shareholders rallying behind him after the meetings. Lauri Brunner, who manages Thrivent Asset Management LLC’s large-cap growth fund, sees Mr. Musk as a skilled trader. “He has an established track record at Tesla,” she said. “He is the catalyst that drives strong operational performance at Twitter.” Minneapolis-based Thrivent has a roughly 0.4% stake in Twitter worth $160 million and is also a shareholder in Tesla.

Mr Musk has previously said he plans to take his offer directly to shareholders by launching a tender offer. Even if he were to win significant shareholder support in a takeover bid – which is far from guaranteed – he would still need a way around the corporate poison pill, a legal maneuver that she has employed which effectively prevents her from increasing her stake to 15% or more.

A tactic often used to push an offer, seeking to take control of the target board, is out of reach for now. Twitter directors have staggered terms, which means a dissenting shareholder would need several years to gain control rather than a single shareholder vote. Twitter last year tried to phase out staggered board terms given they are frowned upon by the corporate governance community, but not enough shareholders are voting on the measure. The company is trying to do it again at this year’s annual meeting scheduled for May 25. Only two directors are up for re-election, and it is too late for Mr. Musk to name his.

Twitter shares have been trading below its offer price since it made the offer on April 14, usually a sign that shareholders are skeptical of a deal, despite having closed up around 4% on Friday to $48.93, the day after it unveiled the financing for the deal. . He indicated that if the current offer fails, he could sell his stake, which is more than 9%.

The funding included more than $25 billion in debt from nearly every top-tier global investment bank except for Twitter’s two advisers. The rest was $21 billion in equity Mr. Musk would provide, likely by selling existing stakes in his other businesses such as Tesla. The speed at which the funding came together and the market sell-off in recent days — making the all-cash offer relatively more attractive — likely contributed to Twitter’s greater willingness to entertain Mr. Musk’s proposal. .

Twitter’s board should engage with Mr. Musk since his stock has “gone nowhere” since the company went public eight years ago, said Jeff Gramm, portfolio manager at Bandera Partners LLC, a New York-based hedge fund with approximately $385 million under management. The company last bought Twitter shares in February and owns about 950,000 shares in total, representing about 11% of its portfolio.

Mr. Gramm said Twitter’s board could not walk away from Mr. Musk’s offer without providing an alternative that delivers real shareholder value. “I don’t know what it can be at this point besides finding a higher offer,” he said.

—Sarah E. Needleman contributed to this article.

Write to Cara Lombardo at cara.lombardo@wsj.com