As the richest person in the world with a fortune of about $270 billion, Elon Musk still intends to borrow money to buy Twitter.
According to the New York Post, tycoon Tesla is preparing for a $43 billion funding round to acquire Twitter in a complicated deal. In it, his company may have to take out more debt or pledge shares in Twitter to get a loan. Moreover, he also faces huge potential from the huge cash flows of other investors.
However, insiders revealed that Musk seems to be facing some obstacles in raising money. In addition to doubts about whether Twitter is worthy of the $54.20/share price Musk announced last Thursday. Before that information, some investors were quite indifferent to Mr. Musk’s unpredictable attitude.
Musk is willing to use his own money to invest between $10 billion and $15 billion to acquire and privatize Twitter, two people familiar with the matter said. According to a filing published on April 4, Musk owns a 9.1% stake in the social media company, worth about $3.4 billion.
In addition, the billionaire is also willing to pledge shares to borrow more if needed, according to which he will have several billion dollars more. The sources said: “Other investors hold a larger total of shares but Musk is the individual shareholder with the highest percentage of holdings in Twitter.”
However, this deal of Musk will mainly be done with outside capital. According to NYP, the billionaire has discussed with Morgan Stanley to borrow another $10 billion to acquire Twitter. This is a traditional leveraged buyout.
On Friday, the NYP reported that most of the money to make the deal — about $20 billion — would come from other investors. They are the ones who will fund the tender offer directly to Twitter’s board of directors, the source revealed.
According to sources familiar with the matter, Musk intends to make a tender offer for Twitter in the next 10 days. However, insiders say that it seems Musk is having more difficulty than expected in finding support.
According to an independent source, the Twitter bid is attracting the interest of investors who have poured money into Musk’s previous projects, such as Tesla and SpaceX. On the other hand, the source noted that most private equity firms don’t want to get involved in political controversies and are concerned that they won’t be able to control Musk’s statements.
Accordingly, very few private equity companies are willing to participate in direct bidding. Morgan Stanley is having a hard time getting other banks to join the cash-raiser. Likewise, many others have expressed doubts about whether Twitter is really worth $43 billion.
Meanwhile, Twitter on Friday adopted a “poison” mechanism that prevents Musk from buying more than 15% of the company’s shares. If he doesn’t make this move, the billionaire could buy Twitter shares at below-market price when he wants to dilute the stock.
So far, the time to make this deal with Musk is quite urgent, when he only announced that he wanted to raise capital a few days before revealing the percentage of shares he was holding. In order for the deal to succeed, he needs to have the support of major shareholders
Meanwhile, the investment fund Thoma Bravo also expressed its intention to buy Twitter with a more attractive deal than Musk’s offer. And Vangard also recently announced that they are holding 82.4 million Twitter shares, or 10.3%. Therefore, Musk is currently the 2nd largest shareholder.
According to Reuters, many investors, analysts and investment bankers expect Twitter’s board to reject Musk’s offer in the next few days.
Refer to NYP, Reuters