Elon Musk said Thursday he had pledges worth $46.5 billion to fund his proposed Twitter offer and was investigating whether he would launch a hostile takeover of the social media company.
In documents filed with the Securities and Exchange Commission on Wednesday, the world’s richest man said he intended to fund the offer with a mix of debt and cash. Investment bank Morgan Stanley and a group of other lenders are offering $13 billion in debt financing and another $12.5 billion in loans against Mr. Musk’s stock in Tesla, the electric car maker he runs. He is expected to add about $21 billion in equity financing.
The financial pledges, collected a week after Mr. Musk made an unsolicited offer on Twitter, put pressure on the social media company’s board to take his advances seriously. Mr. Musk’s original offer contained few financing details and was met with skepticism by Wall Street. Twitter then carried out a “poison pill,” a defensive maneuver that would prevent Mr. Musk from accumulating an unlimited number of company shares.
But Mr Musk, who has said he wants to keep Twitter private and allow people to speak more freely about the service, was quick to secure funding for his offer. That shows how determined he is in his mission to buy Twitter — at least for now.
“It’s serious,” Steven Davidoff Solomon, a professor at the School of Law at the University of California, Berkeley, said of the new application. “He’s getting more professional and this is starting to look more like a normal hostile offer. You don’t do that unless you’re going to make an offer.”
In a takeover bid, also known as a hostile offer, Mr. Musk would take his offer directly to Twitter shareholders without the approval of the company’s board of directors. While Mr. Musk has not publicly outlined a business plan for Twitter under his ownership, he offered a glimpse of what he might do on Thursday.
“If our twitter bid succeeds, we’ll beat the spambots or die trying!” Mr Musk tweeted† He has more than 82.5 million followers on Twitter and is a heavy user of the service.
Mr. Musk responded to an emailed request for comment by writing “X”.
A Twitter spokesperson confirmed that the company had received Mr. Musk’s updated proposal and reiterated that its board of directors was “committed to conducting a careful, comprehensive and considered assessment to determine the course of action” that would be best. for the company and its shareholders.
Twitter is likely to go into more detail about Mr. Musk’s offer when the San Francisco-based company reports its quarterly results next Thursday. Those results could also provide investors with important clues as to whether Mr. Musk’s bid of $54.20 per share is sufficient for the company.
Several analysts have said they expected Twitter’s board to only accept an offer it valued at a minimum of $60 a share. Shares of Twitter soared above $70 a share last year when the company announced targets to double its earnings, but have since fallen to around $45 as investors questioned its ability to meet those targets.
Any hostile bid would face major challenges. If Mr. Musk buys more than 15 percent of the company, Twitter could enter the poison pill and flood the market with new shares that all shareholders except Mr. Musk could buy at a discount. Mr. Musk has built a more than 9 percent stake in Twitter, which at one point made him the largest shareholder in the company.
The poison pill Twitter announced also has a “last look” provision. That would give the company ten days to negotiate with a buyer, like Mr. Musk, before deciding to activate the poison pill. It’s very rare for a potential buyer to activate a poison pill, but Mr. Musk is famously unpredictable.
He said in Thursday’s filing that he would continue to review his investment in Twitter, which could mean buying or selling more shares.
Even with the commitments from banks, the financing for the offer is far from being finalized. Mr Musk said on the file that banks had promised to lend him money, although the final form of their lending may change. The filing noted that the $12.5 billion loan against its Tesla stock could decrease in size, but not increase. Analysts have said the banks that offer loans on Tesla stock are at risk given the stock’s volatility.
The key to Mr. Musk’s offer will be the $21 billion in equity financing, the details of which he has yet to outline. Analysts have questioned whether Mr. Musk would be willing to withdraw the money himself. And private equity firms are wary of getting involved in the fray, The New York Times previously reported, potentially excluding a number of partners.
“Really quite simply, who is willing to scrap 10- and 11-digit checks to participate in Elon’s Big Adventure if that adventure turns into a brawl,” Don Bilson, an analyst at research firm Gordon Haskett, wrote this week. “The setup doesn’t look very promising for Musk at this point, as long as he isn’t personally willing to add more to the pot and is determined to go down the hostile path.”
What will happen to Elon Musk’s bid on Twitter?
The offer. Elon Musk, the world’s richest man, made an unsolicited offer of more than $43 billion for the social media company. Mr. Musk said he wanted to turn Twitter into a private business and that he wanted people to be able to speak more freely about the service.
The 50-year-old billionaire had hinted for days that he planned to increase his Twitter share by making an offer. In recent days, he has been tweeting mentions of the Elvis Presley ballad “love me tenderly” and the novel by F. Scott Fitzgerald”Tender is the night†
Mr. Musk’s habit of tweeting obscure but market-moving information has kept Twitter’s advisers on their toes. They have been keeping a close eye on his Twitter account as they prepared for the possibility of a hostile bid, two people familiar with the matter said.
The new submission seemingly offered its own kind of Easter eggs. The documents contain the names of the shell companies allegedly involved in the transaction: X Holdings I, X Holdings II and X Holdings III. While shell companies are a staple of takeover offers, these entities share a name with X.com, an online banking startup Mr. Musk founded in 1999 that later became part of PayPal. It is also the nickname of one of his children.
In December, Mr. Musk replied with: a thinking face emoji to a popular Twitter thread suggesting that he is creating “a holding company called X” to become the parent company of Tesla, SpaceX and its other ventures.
For Mr. Musk, even offering details about acquisition financing is a change. In 2018, he attempted to take Tesla private, tweeting that he had “secured funding,” driving Tesla shares higher. He had not prepared funding for such a deal.
The SEC later filed a lawsuit against him for securities fraud, accusing him of misleading investors. Mr. Musk paid a $20 million fine and agreed to serve as Tesla chairman for three years.
Drew Pascarella, a senior lecturer in finance at Cornell University, said Morgan Stanley’s involvement in the funding changed this situation. Other banks lending to Mr. Musk include Bank of America, BofA Securities, Barclays, MUFG, BNPP and Mizuho.
“There are a lot of highly placed people at Morgan Stanley who are responsible for that brand, who in my opinion would not allow this to happen unless there was some degree of seriousness behind it,” said Mr Pascarella.
Morgan Stanley declined to comment.
Kate Conger and Ryan Mac reporting contributed.
