According to the US watchdog filing, Tesla’s CEO is putting $21bn of his own money into the package
Elon Musk has secured $46.5bn (£35.6bn) in financing and as part of the package he is putting up $21bn of his money to help in funding a possible hostile bid for Twitter.
An additional $12.5bn, on top of that equity, is being raised by Musk for the offer via a margin loan secured against his shares in Tesla, the electric carmaker that he runs as CEO. The US investment bank Morgan Stanley is leading a group of financial institutions providing $13bn in debt financing.
In a filing on April 21 with the Securities and Exchange Commission, the US financial watchdog, the funding commitments were outlined. The world’s richest man was “exploring whether to commence a tender offer” for the shares in Twitter he does not own, the document confirmed. Already in possession of 9.2% of the social media platform, Musk announced a $54.20-per-share bid last week.
Since the tender offer bypasses the company’s board, which would be expected to recommend an offer to shareholders in a convectional takeover situation, it is viewed as a hostile bid. Unauthorized, Twitter’s board has moved to hinder Musk from increasing his shareholding.
The so-called poison pill defense that Twitter launched against Musk’s bid last week was aimed at preventing him from building a stake in the business bigger than 15%. If anyone tries to buy more than 15% of the company without the board’s support, the tactic — commonly used as a bulwark against unwanted approaches by company boards — will enable existing investors in Twitter to buy shares at a huge discount.
This is a significant block to any non-board-approved bid and would weaken the shareholding of an unwelcome bidder such as Musk. But the board could be forced to drop the poison pill gambit by shareholders who support Musk’s approach.
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Dan Ives, a senior analyst at the US financial firm Wedbush Securities, said:
“This will put pressure on the board if a groundswell of shareholders tender their shares and could force removal of the poison pill and a sale to Musk.”
Musk, who is a prolific user of the platform and has over 82 million followers on Twitter, indicated at the weekend that he was thinking about a tender approach. Aside from announcing the poison pill move, Twitter has yet to react formally to Musk’s bid of $43bn registered last week.
The company said in a statement on April 21:
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“We are in receipt of the updated, non-binding proposal from Elon Musk, which provides additional information regarding the original proposal and new information on potential financing.”
“As previously announced and communicated to Mr. Musk directly, 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 interest of the company and all Twitter stockholders.”
Musk, a self-styled “free speech absolutist”, emphasized that he believes the microblogging site is not giving free rein to users.
In a letter to the board, he said Twitter was “the platform for free speech around the world” but could not attain this “societal imperative” in its present form and “needs to be transformed as a private company”, revealing his takeover approach last week.
Musk, before launching his takeover bid, had pointed out a series of changes he might bring to the company – some more likely than others – including turning Twitter’s San Francisco headquarters into a homeless shelter and introducing an edit button for tweets.
The former suggestion — subsequently deleted by Musk – was backed in a tweet by Jeff Bezos, the world’s second-richest man. In response to Musk’s latest filing, shares in Twitter rose 0.5% to $46.95.
After the electric car company reported record quarterly profits, Musk is due to collect a $23bn bonus from Tesla which is more than the money he has personally set aside to fund the possible Twitter bid.
Since Tesla hit financial growth milestones and share price in its earnings on Wednesday night, Musk, who is already sitting on an estimated $249bn fortune, is in line for the bonus share payout.