Elon Musk says he has secured $46.5 billion in financing to acquire Twitter, signaling the Tesla CEO is serious about his bid to acquire the social media firm—and intends to back it up with his personal fortune.
The offer, made public in a filing Thursday, draws on a combination of loans and equity financing, but questions remain about how Musk will structure the deal and how Twitter’s board will respond. Still, it suggests he is willing to risk some of the lucrative Tesla shares that have made him the world’s richest person to acquire the platform Musk has described as a modern-day town square.
“It signals an increasing level of seriousness,” said Donna Hitscherich, a member of the finance faculty at Columbia Business School. “You’re ratcheting up the resolve with the hopes that at one point the other side will come to the table.”
In the Securities and Exchange Commission filing, Musk listed three sources for the offer. The first two would be loans from investment bank Morgan Stanley and other banks, worth $13 billion and $12.5 billion, respectively. The third source is described as an equity commitment of $21 billion from Musk himself.
That portion of the funding was less clearly spelled out, though it carried the strong implication that parts of Musk’s own stake in Tesla, the electric carmaker he runs, could be put on the line.
Musk is ranked by Bloomberg as the richest man in the world ― with a net worth of $249 billion as of Wednesday. Much of his wealth is tied up in Tesla and the rocket-building company SpaceX, which he also helms as CEO.
Meanwhile, some Tesla investors have bristled at Musk’s proposal because it distracts from his responsibilities as chief executive and potentially takes momentum away from the world’s most valuable automaker.
In addition to solidifying Musk’s proposal—which some had dismissed as a decoy or an act of trolling—the offer makes clear that a sale of Twitter is a serious possibility. Analysts noted that Twitter’s board has a fiduciary duty to review the offers on the table, and consider if any are in the best interests of shareholders. Over the past week the names of potential financing partners have emerged. One firm that received requests to discuss bids, for example, was Yahoo owner Apollo Global Management, according to a person familiar with the matter who spoke on the condition of anonymity due to he sensitivity of negotiations.
Twitter spokesman Brenden Lee said the company has received an “updated, nonbinding proposal” from Musk, which contains additional information about the original proposal and new information on financing. “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.”
The offer marked a major escalation in a weeks-long battle by Musk to gain influence at Twitter, where he has more than 82 million followers. He quietly started buying shares this year to amass a more than 9 percent ownership stake, which briefly made him the company’s largest single shareholder.
The company offered him a board seat, something that would have prevented him from pursuing a takeover, but Musk turned that offer down.
Musk launched his hostile takeover bid last week, saying he thinks Twitter is essential to a functioning democracy. Musk has spent weeks opining on the necessity of “free speech” on the platform, taking issue with permanent bans and calling for Twitter to make its algorithm public.
“My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important to the future of civilization,” he said during a TED conference last week.
“I don’t care about the economics at all,” he said.
Musk has the flexibility to pursue a Twitter stake because of Tesla’s relatively strong performance, analysts said, though the aggressive pursuit might come at a cost.
Musk owns 23% of Tesla, according to Wedbush Securities analyst Dan Ives. Tesla’s current market valuation is just over $1 trillion, putting the value of Musk’s stake at more than $200 billion. Musk would potentially be tying up the equivalent of a fifth of his stake in Tesla in his pursuit to buy Twitter, despite the fact the social media company has faced persistent growth concerns and has been regarded as lagging behind its peers.
“You’re giving away caviar to buy a hot dog on the street in New York City,” Ives said.
Twitter has yet to formally respond to Musk’s bid. Last week it moved to adopt a “poison pill” strategy, triggered if Musk crosses a 15% ownership threshold. If activated, it would allow Twitter shareholders to buy additional stock at a discount, that would then trade at a value of twice their sale price. The flood of new shares would dilute Musk’s stake in the company and make owning it prohibitively expensive.
Musk has hinted all week that he might pursue what’s known as a tender offer to acquire all outstanding shares of common stock, tweeting “Love Me Tender” over the weekend. He also tweeted an apparent reference to the F. Scott Fitzgerald novel “Tender is the Night,” leaving the first word blank.
Under such an arrangement, Musk would give public shareholders the chance to sell their shares at the offer price. If enough individual shareholders do so, he could acquire the company without the consent of the company’s board of directors.
Musk has said he wants to let the maximum number of allowable shareholders stay on at Twitter, even as he pursues privatization.
Thursday’s filing confirmed that Musk is considering a tender offer, though it included few details on how it might be structured. The offer he made to Twitter’s board last week said he would pay $54.20 per share, which he called his “best and final offer.” That would value the company at roughly $43 billion, lower than the total amount of funding Musk outlined Thursday.
But the filing also seemed to suggest he would be open to modifying his terms. He “is seeking to negotiate a definitive agreement for the acquisition of Twitter by [Musk] and is prepared to begin such negotiations immediately,” it says.
Youssef Squali, an analyst at Truist Securities in New York, said the absence of another public bidder at this stage suggests Musk may be alone in pursuing Twitter.
“It’s interesting that nobody else has stepped up, meaning we don’t really anticipate a competitive bid to emerge here,” Squali said. “If there is a deal, then this is going to be it.”
Musk’s push to acquire Twitter is code-named “Project X,” according to the financial filings.
If Musk succeeds in his surprise bid to buy Twitter, he will have an unprecedented array of tech companies under his helm. In the past decade, he has taken Tesla from niche automaker to one of the most valuable car brands in the world. SpaceX gained a nearly $3 billion NASA contract last spring to land its astronauts on the moon. He also owns several smaller companies.
Beyond pushing for changes in Twitter’s philosophy on moderation, Musk has weighed in frequently in recent weeks on user interface changes—such as an edit button, which some Twitter users have long requested. Another pet issue of his is the proliferation of spam bots, which often peddle scams and impersonate prominent users such as Musk.
“If our twitter bid succeeds, we will defeat the spam bots or die trying!” he wrote in a tweet Thursday.