Twitter said in a statement Thursday that it had received Musk’s updated proposal and his “new information about potential funding.”
Twitter said in a statement Thursday that it had received Musk’s updated proposal and his “new information about potential funding.”
Elon Musk says he has provided $46.5 billion in financing to buy Twitter and is trying to negotiate 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 say how he intends to finance the acquisition.
The Tesla CEO said Thursday in documents filed with U.S. securities regulators that he was reviewing a so-called tender offer to buy all of the social media platform’s common stock for $54.20 a share in cash. As part of a takeover bid, Musk, who owns around 9% of Twitter stock, would make his offer directly to other shareholders, bypassing the board.
But Musk hasn’t decided yet whether to do so.
The documents filed with the Securities and Exchange Commission say that San Francisco-based Twitter Inc. has not responded to Musk’s proposal.
Twitter said in a statement Thursday that it had received Musk’s updated proposal and his “new information about potential funding.”
The company said its board is “obligated to conduct a careful, comprehensive, and considered review to determine what course of action it believes is in the best interests of the company and all Twitter shareholders.”
Last week, Twitter’s board of directors passed 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 are Barclays, Bank of America, Societie Generale, Mizuho Bank, BNP Paribas and MUFG. Morgan Stanley is one of Twitter’s largest shareholders, behind the Vanguard Group and Musk.
Musk said $13 billion of funding would come from Morgan Stanley and the other banks, up to $12.5 billion would be loans secured by his Tesla stock, and $21 billion in equity “directly or indirectly” committed by him, although he did not say what the source of these funds would be. The filing states that the equity requirement could be reduced by contributions from others or additional debt taken on.
According to Forbes, Musk is the richest man in the world with a fortune of almost $279 billion. But much of his money is tied up in Tesla stock — he owns about 17% of the company, which is valued at more than $1 trillion, according to FactSet — and SpaceX, his private space company. It’s unclear how much cash Musk has.
Electric car and solar panel maker Tesla allows senior executives to use stock as collateral for loans, but limits borrowing to 25% of the value of the stock pledged. Musk owns 172.6 million shares worth $176.47 billion. According to a proxy statement from Tesla, just over 51% of its stake is already pledged as collateral. That means Musk could borrow about $21.5 billion with the remaining stake.
Big bank funding gives Musk’s offer a lot of credibility, said Daniel Ives, an analyst at Wedbush Securities.
“It’s not just Musk antics,” Ives said. “The banks wanted to line up for this deal with the richest person in the world. The fact that they got it together so quickly shows Musk isn’t kidding. This is a real offer.”
Ives said the bid puts more pressure on Twitter’s board to find a second bidder or go to the negotiating table with Musk. “It’s a way of bypassing the poison pill and giving shareholders a say,” he said.
A Delaware corporation called X Holdings 1 was formed under the direction of Musk and certain affiliates who intend to “directly or indirectly acquire all outstanding equity interest in Twitter Inc. or merge directly or indirectly with Twitter Inc.,” according to a financing Submitted the company’s declaration of commitment.
Shares in Twitter fell slightly to $46.57 in Thursday afternoon trading after the funding was announced. The stock price is $7.63 below Musk’s offer.
Musk “seeks to negotiate a definitive agreement to acquire Twitter … and stands ready to begin such negotiations immediately,” the documents said.
With a takeover bid, Musk would try to get other shareholders to pledge their shares to him at a certain price at a certain point in time. If enough shareholders agree, Musk could use this as leverage to get the board to drop the poison pill defense.
Experts say the poison pill would essentially spell the end of Twitter if Musk or another investor acquired 15% or more of the company. Under the poison pill, stockholders would have the right to buy preferred stock for $210. If someone bought a 15% stake, shareholders would receive $420 in Twitter stock or assets, more than Twitter could pay.
Musk has signaled the possibility of a takeover bid several times this week in tweets with the word “tender.”
