Musk Ups His Offer To Twitter, Let’s Them Know He Now Has Financing.
After Musk offered last week to buy out Twitter, its board of directors adopted a poison-pill strategy to dilute the values of its shares and hopefully drive Musk off his quest to take over the company. They sure failed to realize his determination in this.
Musk responded by notifying the board of his intent. According to MSN:
Elon Musk says he has secured $46.5 billion in financing to acquire Twitter ― much of it backed by his Tesla shares ― but questions remain about how he will structure the deal and how the company’s board will respond.
In a Securities and Exchange Commission filing on Thursday, the Tesla CEO listed three sources for the cash. The first two would be loans from investment bank Morgan Stanley, worth $13 billion and $12.5 billion respectively. The third source is described as an equity commitment of $21 billion from Musk himself.
Last week, he made a surprise proposal to purchase the social media platform for $54.20 per share. Twitter quickly responded by adopting a so-called “poison pill” strategy to make the company’s stock less desirable and more difficult for Musk to acquire.
Musk is looking to increase the bid to buy out the open shares and is turning this back on the board, a board I may add that holds very little Twitter stock, to answer its shareholders. This offer is a smart move by Musk; he is appealing directly to the stockholders, where he is offering them premium cash for their stocks, versus what the board is offering, for their stocks to be devalued and the company put at risk.
One may question why lenders would find such a leveraged buyout of Twitter appealing when such a move would undermine their interest in the short term. Still, many fail to realize what most investors are looking at is the long term, which will bring back the best investment over time. With a net worth of over $200 billion, one can look at the risks in the long term and see that there is a much larger upside to this. This could quickly turn into a rush for investors as they see the long-term benefits outweigh the short-term risks.
Looking at the deal, The Financial Times noted that this would tie up around 85% of Musk’s current stake in Tesla, but this does not put his control of the company at much risk, for it is likely that Musk will leverage his investments to buy out even more shares:
The margin loan to fund a Twitter bid requires a pledge of nearly 59m Tesla shares, or about 85 per cent of Musk’s total stake. His remaining unpledged stock is worth about $25bn at current prices so if sold, and allowing for an overhang discount, there would be just enough to cover the cash component of the offer. It’s a big ask.
But such calculations ignore a big event looming in the Muskonomy: the final payout from Tesla’s 2018 bonus scheme. Musk’s last awards will unlock shortly, assuming board approval, and will carry a five-year selling lockup.
Each of the three tranches due Musk give him the right to buy 8.4m Tesla shares at $70, a more than 99 per cent discount to the prevailing market level. So, based on a $1,061 share price at pixel time, Musk could buy Tesla stock worth $25.4bn for about $588m. Factor in those shares and the margin loan financing looks a bit less onerous.
While it looks like the Twitter Board is trying to ignore Musk, they now run the risk of legal challenges for not carrying out their duty regarding holding their investor’s interest at heart. Financial Times goes on to say:
The documents filed with the Securities and Exchange Commission say San Francisco-based Twitter Inc. has not responded to Musk’s proposal.
Twitter said in a statement Thursday that it has received Musk’s updated proposal and its “new information on potential financing.”
The company said its 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.”
In other words, the Board is in a panic because Musk not only called their bluff, he raised his offer, they are quickly running out of options.
Musk has said his first order of business would be to rid Twitter of all spambots, thus inciting the left even further. These are programs used to try to steer people to buy stock and vote in a way that Twitter wants them to, thus controlling the flow of information; this has sent the whole liberal establishment into a full panic.
Musk, in the past, has attacked Twitter over its censorship. Many conservatives, who have had their accounts suspended, their voices silenced, are not hoping Musk will bring back open speech to Twitter. Many openly stated they would love to see Trump placed back on the platform, thus shattering the leftist control over information.
Before you get all excited, Trump has said that even if Musk buys out Twitter, which he does think is a great idea, he most likely would not go back to the platform, he is dedicated at this time to putting his social network site on good grounds.
I think Twitter thought if they threw up roadblocks Elon Musk would walk away, it seems they failed to realize, that one doesn’t become the richest man in the world without having the fortitude and outright orneriness to not let such roadblocks become anything other than speedbumps.
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