Musk’s Twitter buyout attempt: Struggling to win investors’ confidence?

Elon Musk may have parked as much as $15 billion of his own to show his commitment to investors and have them stand by his side in a bid to finance the Twitter acquisition deal. Musk has already offered $43 billion to Twitter and has openly disclosed that it has "Plan B" if the board turns down his offer. But he will have to contend with Twitter's "poison pill" defense.

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Even for the world’s richest person getting access to $43 billion could be quite a challenge. According to reports, Elon Musk is reportedly crawling to put together his acquisition bid for Twitter.

According to a New York Post report, to win the confidence of investors and the market Musk may have set aside as much as $15 billion of his own money to finance the Twitter acquisition deal.

The New York Post reported that he has approached Morgan Stanley for help in raising $10 billion more in debt. He hopes to launch a tender offer within 10 days. The report also claims that Morgan Stanley was helping Musk raise debt financing rather than equity financing to fund his bid. Last Wednesday’s filing to the SEC confirms that Musk is taking advice from the bank on his intention of acquiring Twitter.

According to Bloomberg’s estimates on Wednesday, the billionaire has a net worth of $261 billion. To pull off such a huge deal, he will likely need substantial financial support.

Musk, however, has already faced initial setbacks after a few large buyout companies declined to offer equity to Musk, reported the Financial Times on Wednesday.

Their concerns include Twitter’s long-term growth prospects and profitability prospects. They also criticized Musk’s unconventional attitude to dealing with the situation. The billionaire has aggressively tweeted about his plans for acquiring the micro-blogging platform. This includes loosening content moderation, and not paying board Members.

The newspaper said that there are institutions that may be interested in backing Elon Musk, but only on for preferred equity financing or debt.

Thoma Bravo and Apollo Global Management expressed interest in a bid to acquire Twitter.

Musk is yet to disclose how he intends to finance the purchase of Twitter. According to US Securities and Exchange Commission filings on April 14, Musk made an unrestricted offer to purchase Twitter outright for $54.20 per share, setting the valuation of Twitter at nearly $43 billion. On April 15, he claimed that he had enough assets for the buyout.

Musk may be able to make a formal bid but he will still have to deal with Twitter’s poison pill, which is a defense mechanism that the board created to stop an investor from buying more than 15%.

If Musk crosses the threshold limit, the plan will allow other shareholders to exercise their rights to purchase a portion of Twitter’s shares at a $210 price. This would be in an effort to dilute the larger investor’s stake.

Musk, the largest individual shareholder of Twitter, has acquired 9.1% stake in the company already. Just two days back Musk found unusual support from inside the board when Jack Dorsey, Cofounder of Twitter, criticized the current board of Twitter and agreed that the current board is incapable of securing the interest of shareholders. It’s important to note that Dorsey holds a 2.2% stake in Twitter.

The largest stakeholder in Twitter is The VanGuard Group with a 9.2% holding as per SEC filing on April 14, 2022. Interestingly, the investment group has neither rejected nor shown support for Musk’s takeover bid. The group is keeping its cards closed to its chest like many other shareholders who have a sizeable stake in the company.

Hence, it’s difficult to say how the situation will turn out for Elon even if he managed to finance his takeover bid of Twitter. The Twitter saga has just begun and a lot more action will unfold in the days to come. Stay tuned!


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