Elon Musk has raised $46.5 billion to fund a possible takeover bid for Twitter, with the billionaire putting up about $21 billion of his own money.
Paperwork filed with American regulators indicates that the Tesla chief executive has secured backing from a group of investment banks, led by Morgan Stanley, to explore “whether to commence a tender offer” to Twitter investors to buy their shares.
Musk, 50, has been a strong critic of the social media company, saying it “serves as the de facto public town square” and fails to uphold free speech and democratic principles.
The world’s richest man is Twitter’s largest shareholder, with 9.2 per cent, and had already proposed a $43 billion offer for the social media company last week. Rather than respond directly to the proposal, Twitter’s board adopted a “poison pill” defence to limit Musk’s ability to raise his stake.
In a filing with the US Securities and Exchange Commission, Musk said that “given the lack of response by Twitter”, he may now appeal directly to shareholders. To fund a takeover, he has lined up $25.5 billion in debt, including a loan against some of his Tesla shares, from a group of banks.
He also will provide $21 billion of equity for the deal — finance that the maverick entrepreneur would seem to be able to easily afford as his wealth is about to balloon by another $23 billion. On Wednesday, it was disclosed that Tesla’s record quarterly profit means he is in line for the bonus under a lucrative share compensation package that he has at the electric carmaker.
Twitter, founded in 2006, is based in San Francisco. Its microblogging service is one of the world’s largest social networks and it makes most of its money from advertising.
After Musk began building his stake, the company extended an offer for him to join the board. That move appeared likely to go ahead, only for Musk to reverse course and instead propose a bid to take Twitter private.
Twitter responded to that $54.20-a-share offer with a one-year “poison pill” to fend off a potential hostile takeover by blocking Musk from building a stake of more than 15 per cent. Musk’s response was to warn Twitter about “breaching their fiduciary duty”, tweeting: “The liability they would assume would be titanic in scale.”
No timescale for a formal bid was given yesterday, though there was speculation it could come within days, putting pressure on Parag Agrawal, Twitter’s chief executive, to open direct talks.
In a short statement Twitter confirmed it had received the “new information on potential financing” and that the board was “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”.
Dan Ives, an analyst at Wedbush Securities, the broker, said news of the funding would dispel doubts about whether Musk was serious. “The poison pill gave the board time to try to find a second bidder. Now the soap opera takes next step.”
Musk’s advisers at Morgan Stanley are thought to have lined up about ten banks to back a deal, including Bank of America and Credit Suisse. Twitter, whose other large shareholders include Silver Lake and Elliott Management, has hired JP Morgan Chase and Goldman Sachs as advisers.
Although a prolific tweeter with a following of 81.2 million, Musk is not always a fan of the company. In one recent post, he asked his followers if Twitter’s headquarters should be converted to a homeless shelter “since no one shows up anyway”.
Another tweet asked if Twitter was “dying” because many of its most-followed users, including Taylor Swift, no longer tweeted frequently.
The would-be social media baron, who also runs SpaceX, the space exploration business, has proposed a shake-up of Twitter’s premium subscription service with a possible advertising ban.
Musk’s potential bid comes a day after Tesla eclipsed Wall Street expectations with an 81 per cent rise in revenues and a record first-quarter profit.
Worth an estimated $263 billion, Musk is entitled to more performance-related share awards from Tesla. He can buy tranches of shares at $70.10 each. Shares in Tesla rose by $32.26, or 3.3 per cent, to close at $1,009.46 in New York last night. Twitter shares rose by 34 cents, or 0.7 per cent, to $47.06.
Elon Musk raises $46bn for Twitter bid