Elon Musk has said that he has secured $46.5 billion in funding to buy Twitter, indicating that the Tesla CEO is serious about his bid – and wants to back it up with his personal money.
The offer, which was made public in a filing on Thursday, is made up of a mix of loans and shares, but there are still doubts about how Musk will arrange the acquisition and how Twitter’s board will react. Nonetheless, it seems he is willing to put some of his lucrative Tesla stock, which has made him the world’s richest person, on the line to acquire the platform Musk has dubbed a “modern-day town square.”
“It indicates a higher level of seriousness,” said Donna Hitscherich, a finance professor at Columbia Business School. “You’re increasing your resolve in the hopes that the opposing side will eventually come to the table.”
Musk cited three sources for the offer in his filing with the Securities and Exchange Commission. The first two would be $13 billion and $12.5 billion loans from investment bank Morgan Stanley and other banks, respectively. The third source is Musk’s personal investment of $21 billion in the company.
That element of the funding was less clear, however it implied that parts of Musk’s ownership in Tesla, the electric carmaker he oversees, may be put on the line.
According to Bloomberg, Musk is the world’s richest man, with a net worth of $249 billion as of Wednesday. Much of his fortune is invested in Tesla and SpaceX, the rocket-building company he also runs as CEO.
Meanwhile, some Tesla investors have reacted angrily to Musk’s suggestion, claiming that it diverts his attention away from his duties as CEO and threatens to derail the world’s most valuable automaker.
The offer not only confirms Musk’s proposal — which some had rejected as a ruse or a prank — but it also makes apparent that a sale of Twitter is a real possibility. According to analysts, Twitter’s board of directors has a fiduciary duty to assess the offers on the table and determine whether any of them are in the best interests of shareholders. Names of potential funding partners have surfaced in the last week. According to a source familiar with the subject who spoke on the condition of anonymity owing to the sensitivity of the negotiations, Yahoo owner Apollo Global Management was one of the firms that received requests to explore bids.
Twitter spokesman Brenden Lee said the business has received a “updated, nonbinding proposal” from Musk that includes fresh details on funding as well as additional information on the original plan. “The Board is dedicated to conducting a thorough, thorough, and thoughtful examination in order to decide the best course of action for the Company and all Twitter stakeholders.”
The offer was a significant step forward in Musk’s weeks-long battle for influence on Twitter, where he has more than 82 million followers. He began secretly buying shares this year, amassing a 9.1% ownership interest and temporarily becoming the company’s largest single stakeholder.
Musk was given a board position by the corporation, which would have prohibited him from pursuing a takeover, but he declined.
Last week, Musk announced his aggressive takeover bid, claiming that Twitter is necessary for a functioning democracy. Musk has spent weeks arguing for the importance of “free expression” on Twitter, criticizing permanent bans and demanding for the company’s algorithm to be made public.
During a TED conference last week, he said, “My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is incredibly crucial to the future of civilization.”
“I don’t give a damn about economics,” he said.
Because of Tesla’s relatively solid performance, analysts say Musk has the freedom to pursue a Twitter stake, though the aggressive pursuit may come at a cost.
According to Wedbush Securities analyst Dan Ives, Musk owns 23% of Tesla. The current market value of Tesla is just over $1 trillion, making Musk’s share worth more than $200 billion. Despite the fact that the social media firm has suffered continuous growth issues and has been perceived as falling behind its peers, Musk might be tying up the equivalent of a fifth of his ownership in Tesla in his attempt to buy Twitter.
“In New York City, you’re giving away caviar to buy a hot dog on the street,” Ives added.
Musk’s request has yet to receive a formal response from Twitter. It moved to implement a “poison pill” plan last week, which will be activated if Musk reaches a 15% ownership threshold. If turned on, it would allow Twitter stockholders to acquire more stock at a discount, which would then trade at twice its original price. Musk’s position in the company would be diluted by the influx of new shares, making ownership prohibitively expensive.
Musk has been hinting all week that he might make a tender offer to buy out all outstanding shares of common stock, tweeting “Love Me Tender” over the weekend. He also left the first word blank in a tweet that appeared to be a reference to F. Scott Fitzgerald’s classic “Tender is the Night.”
Musk would offer public shareholders the opportunity to sell their shares at the offer price under such a deal. He could buy the company without the approval of the board of directors if enough individual shareholders agree.
Even as he pursues privatization, Musk has stated that he wants to keep the maximum number of stockholders at Twitter.
Musk is exploring a tender offer, according to the filing, but there are little details on how it may be organized. Last Monday, he submitted a “best and last offer” to Twitter’s board of directors, saying he would pay $54.20 per share. This would put the company’s valuation at around $43 billion, which is less than the entire amount of funding Musk announced on Thursday.
However, the filing also seemed to imply that he would be willing to change his terms. It states that he “is attempting to negotiate a definitive agreement for [Musk] to acquire Twitter and is prepared to initiate such negotiations immediately.”
According to Youssef Squali of Truist Securities in New York, the lack of any public bidder at this point means Musk may be pursuing Twitter alone.
“It’s interesting that no one else has stepped forward,” Squali added, “which means we don’t expect a competitive offer to arise here.” “This is going to be it if there is a deal.”
According to financial records, Musk’s bid to buy Twitter is code-named “Project X.”
Musk will own a historic number of tech companies if he succeeds in his surprise bid to buy Twitter. He has transformed Tesla from a tiny automaker to one of the world’s most valuable automotive companies in the last decade. Last April, SpaceX was awarded a roughly $3 billion NASA contract to put men on the moon. He also owns a number of smaller businesses.