Dispelling doubt, Musk lines up USD46 Billion for Twitter buyout

Funds arranged through equity and debt financing

Dispelling doubt, Musk lines up USD46 Billion for Twitter buyout

Dispelling doubt, Musk lines up USD46 Billion for Twitter buyout

Ending weeks of doubt about whether his takeover bid for Twitter is for real, Elon Musk proved that he is serious about the bid.

The CEO of Tesla and SpaceX managed to arrange USD 25.5 billion in debt financing from Morgan Stanley and other financial institutions, while personally pledging USD 21 billion of his own funds through equity financing.

This recent move came as a shot in the arm for the Tesla CEO, proving to detractors that he was not merely talking about acquiring Twitter. In just seventeen days, which saw him disclose himself as the largest shareholder of Twitter, turning down a board seat, and now launching a hostile takeover bid, Musk has once again proved his detractors wrong.

Musk has promised to turn Twitter into a bastion for free speech, although his actions till now made it difficult to judge whether he was serious about his intentions. In the past, when he had tweeted about taking Tesla private, The US Securities and Exchange Commission had filed a lawsuit. This  had cast a shadow over his bid for Twitter.

While the regulatory filing on Thursday dispelled doubts about the takeover, the Tesla CEO is still left with the task of securing investors for the equity portion of his offer.

Sources claimed that several possible partners have been in touch with Musk to be part of the equity financing, including Apollo Global Management Inc. According to earlier reports, investors such as Blackstone Inc., and Brookfield Asset Management Inc., have ruled out backing the offer.

Although, according to the filing on Thursday, the debt financing includes loans backed by his equity stake in Tesla, it is unclear whether Musk would consider selling part of his stake in his prized company to finance the acquisition of Twitter.

After spending USD 2.6 billion to buy his stake in Twitter, reports say that Musk has approximately USD 3 billion in liquid assets.

Acknowledging receipt of an updated and non-binding proposal from Elon Musk, the Twitter board mentioned that they are committed to conduct a comprehensive review of the appropriate course of action that is in the best interests of the company and its stakeholders.

Last week, Musk had made an offer to buy Twitter at the rate of USD 54.20 to take the company private. At the time, however, it was not clear how he would arrange the financing of the deal.

Investors unconvinced about Musk offer

Since the announcement, Twitter shares have traded below the offer price at USD 47.08, indicating that investors are still doubtful about the deal going through.

In a separate statement, Elon Musk said that he is considering launching a tender offer, since the Twitter board has not communicated their response to his bid. According to the filing, Musk is trying to negotiate a definitive agreement and is also ready to commence negotiations with the Twitter board.

Twitter’s board has said that they are open to discussing a deal. In an earlier response to Musk’s tweets about the takeover, the board had attempted to slow him down with a “poison pill”, which is a shareholder rights plan that makes it expensive to acquire anything beyond a 15 percent ownership stake.

The only option for Twitter at the moment is to line up a “white knight” to save it from Musk’s hostile offer. The company has been discussing takeover interest with other investors too, including private equity firm Thoma Bravo LLC.

In response, Musk has stated that a rejection of his bid would result in him re-evaluating his stake in Twitter. Last weekend, Musk had stated that the interests of Twitter’s board are not aligned with that of the shareholders.

Elon Musk is one of the most prominent and outspoken users on Twitter, with over 82 million followers on the platform.

He has said his main motivation in buying Twitter is to make it a bastion for free speech, which he claimed is essential to a functioning democracy.


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