Elon Musk says he has lined up $46.5 billion in funding to buy Twitter, and is trying to broker a deal with the company.
Last week, Musk announced an offer to buy the social media company for $54.20 per share, or about $43 billion. At the time, he did not specify how he would finance the acquisition.
The Tesla CEO said in filings with U.S. securities regulators on Thursday that he was exploring what’s called a tender offer to buy all of the social media platform’s common stock for $54,000. $20 per share in cash. In a takeover bid, Musk, who owns about 9% of Twitter shares, would present his offer directly to other shareholders, bypassing the board of directors.
But Musk has not yet decided to do so.
Documents filed with the Securities and Exchange Commission indicate that San Francisco-based Twitter Inc. did not respond to Musk’s proposal.
Twitter said in a statement Thursday that it had received Musk’s updated proposal and its “new information on potential funding.”
The company said its board of directors is “committed to conducting a careful, complete and deliberate review to determine the course of action that it believes is in the best interests of the company and all Twitter shareholders.”
Last week, Twitter’s board adopted a “poison pill” defense that could make a takeover attempt prohibitively expensive.
Funding would come from Morgan Stanley and other financial institutions. Other banks involved include Barclays, Bank of America, Societe Generale, Mizuho Bank, BNP Paribas and MUFG. Morgan Stanley is one of Twitter’s largest shareholders, behind Vanguard Group and Musk.
Musk said $13 billion in funding would come from Morgan Stanley and the other banks, up to $12.5 billion would be loans secured by his Tesla stock, and committed $21 billion in equity, “directly or indirectly” on his part, although he did not. say what the source of those funds would be. The filing indicates that the equity commitment could be reduced by contributions from others or by additional debt incurred.
Musk is the richest man in the world, according to Forbes, with a fortune of nearly $279 billion. But much of his money is tied up in shares of Tesla — he owns about 17% of the company, according to FactSet, which is valued at more than $1 trillion — and SpaceX, his private space company. It’s unclear how much money Musk has.
Electric car and solar panel maker Tesla allows executives to use shares as collateral for loans, but limits borrowing to 25% of the value of the pledged shares. Musk owns 172.6 million shares worth $176.47 billion. Just over 51% of its stake is already pledged, according to a Tesla proxy statement. That means Musk could use the remaining stake to borrow around $21.5 billion.
Securing funding from major banks brings a lot of credibility to Musk’s offer, said Daniel Ives, an analyst at Wedbush Securities.
“It’s not just Musk antics,” Ives said. “The banks were going to line up for this richest person in the world deal. The fact that they put it together so quickly shows that Musk means business. It’s a real offer. »
Ives said the takeover bid puts more pressure on Twitter’s board to find a second bidder or come to the negotiating table with Musk. “It’s a way to circumvent the poison pill and let the shareholders do the talking,” he said.
A Delaware corporation named X Holdings 1 has been formed at the direction of Musk and certain affiliates which intends “to acquire, directly or indirectly, all outstanding interests of, or merge directly or indirectly with Twitter Inc.”, according to a funding commitment letter submitted by the company.
Shares of Twitter fell slightly to $46.57 in Thursday midday trading after the funding became public. The stock price is $7.63 below Musk’s offer.
Musk “seeks to negotiate a definitive agreement to acquire Twitter…and is prepared to enter into such negotiations immediately,” the documents state.
With a takeover bid, Musk would try to get other shareholders to pledge their shares to him at a certain price on a certain date. If enough shareholders agree, Musk could use that as leverage to get the board to drop the poison pill defense.
Experts say the poison pill would essentially mean the end of Twitter if Musk or another investor acquires 15% or more of the company. Under the poison pill, shareholders would have the right to buy preferred stock at $210. If someone acquires a 15% stake, shareholders would get $420 in Twitter stock or assets, more than Twitter could afford to pay.
Musk flagged the possibility of a takeover bid several times this week in tweets using the word “offer.”