Elon Musk initially proposed a $43 billion purchase price for Twitter (roughly Rs. Rs. 3,27,880 crore)
Elon Musk said in a filing with US regulators on Thursday that he has lined up $46.5 billion (roughly Rs. 3,54,562 crore) in debt and equity financing to buy Twitter Inc and is considering taking his offer directly to shareholders.
Musk has committed to putting up $33.5 billion (approximately Rs. 2,55,560 crore) to finance the transaction, which will include $21 billion (approximately Rs. 1,60,200 crore) in equity and $12.5 billion (approximately Rs. 95,360 crore) in margin loans against some of his Tesla shares. He is the CEO of the electric vehicle manufacturer Tesla.
Musk, the world’s richest person according to Forbes, presented Twitter’s board of directors with a “best and final” cash offer of $43 billion (roughly Rs. Rs. 3,27,880 crore) on April 14, saying the social media company needs to be taken private in order to grow and become a platform for free speech.
However, Twitter did not respond to his offer and instead used a “poison pill” to thwart him. According to the filing on Thursday, Musk is also considering making a tender offer to buy all of the company’s stock from shareholders but has not decided whether to do so.
Musk, Twitter’s second-largest shareholder with a 9.1 percent stake, has stated that he could make significant changes at the microblogging company, where he has a fan base of more than 80 million users.
Twitter shares rose less than 1% on news of the funding, indicating that the market remains sceptical of the deal.
Following a strong quarterly report, Tesla shares rose more than 3%, and the value of Musk’s 172.6 million Tesla shares increased by more than $5 billion (roughly Rs. 38,145 crore). He qualified for compensation in the form of stock options worth approximately $24 billion (roughly Rs. 1,83,080 crore) on Wednesday after Tesla met profit and revenue targets.
It is unknown whether Musk will sell Tesla stock to cover the $21 billion (approximately Rs. 160,200 crores) equity financing. According to a margin loan commitment letter, Musk “may sell, dispose of, or transfer” unpledged Tesla stock at any time.
According to the filing, banks, including Morgan Stanley, have agreed to provide another $13 billion (roughly Rs. 99,170 crore) in debt secured against Twitter.
Musk’s proposal was acknowledged by a Twitter spokesperson.
“As previously announced and directly communicated to Mr. Musk, the board is committed to conducting a careful, comprehensive, and deliberate review to determine the course of action that it believes is in the best interests of the company and all Twitter stockholders,” said a Twitter representative in a statement.
According to Ryan Jacob, chief investment officer at Jacob Asset Management, which owns Twitter stock, Musk’s latest filing will force Twitter’s board to respond.
“They needed to think about the seriousness of the offer, and this filing may do that,” he said. “It’ll be difficult for them to ignore it.”
The funding would likely “put pressure on Twitter’s board to either find a White Knight, which is unlikely or negotiate with Musk to obtain a higher value and remove the poison pill,” according to Josh White, assistant professor of finance at Vanderbilt University and a former financial economist for the Securities and Exchange Commission.
According to people familiar with the situation, Musk’s offer has piqued the interest of private equity firms in participating in a deal for Twitter.
Apollo Global Management Inc is looking into ways to provide financing for any deal and is willing to collaborate with Musk or any other bidder, while Thoma Bravo has informed Twitter that it is considering putting together a bid.
According to the New York Post, Thoma Bravo is in talks with Musk about a joint venture. Thoma Bravo did not respond to a comment request.
Musk has made a number of announcements on the platform, some of which have gotten him into trouble with US regulators.
Musk tweeted in 2018 that he had “funding secured” to take Tesla private for $420 (roughly Rs. 32,040) per share, a move that resulted in millions of dollars in fines and his forced resignation as chairman of the car company to settle claims from the US Securities and Exchange Commission that he defrauded investors.