Elon Musk may set aside $15 billion of his own money to finance his $43 billion Twitter bid, according to one report.
A New York Post report said on Tuesday that Musk is possibly willing to put aside as much as $15 billion of his own equity to help finance a claim.
Musk also is using Morgan Stanley to help him raise a further $10 billion in finances, the New York Post says, with an aim to make a buyout offer in under a fortnight. The New York Times also reported on Wednesday that Morgan Stanley will aid Musk in drumming up debt instead of equity powering for his claim to start with. A ledger with the SEC the Wednesday previous confirms the investment-bank is financially advising Elon.
Twitter Poison Pill Explained
So what is a ‘poison pill’?
Poison pills are a type of defence used by a target-firm like Twitter to dissuade or discourage aggressive takeover attempts such as Elon’s.
Poison pills permit shareholders the eligibility to buy additional shares at a cheaper price, in order to make these shares seem less attractive to the potential buyer.
Recently, Twitter’s board of directors said that they approved a stockholder rights scheme, as in a ‘poison pill’, permitting shareholders to buyout discounted shares in the case of an entity or individual acquiring more than a 15% stake in the firm without the board’s permission.
The co-founder and ex-CEO of Twitter Jack Dorsey increased the level of criticism against the firm’s board on Saturday, adding that this has “consistently” been what made the firm “dysfunctional”.
Musk’s plans to slice the salaries of Twitter’s board members if his $43B (£33B) buyout for the firm succeeds explains this motive. Musk will remove the salaries of Twitter’s board members if his bid wins over.
Meanwhile, Twitter showed in a securities report for that month that the SpaceX and Tesla owner offered to purchase the company for more than $43 billion with the aim to convert it into a private firm to increase trust with its users.
He says that free speech is key for a society and for a functional democracy, according to the filing. He adds that the firm will not thrive or be able to serve the society as it currently is. Critics say that free speech must be trimmed in some way, in order to not allow things like child abuse groups to have free reign to make illegal plans. So the network will face many difficulties in developing a culture that tows the legal line.
$15B of Elon’s Own Cash Possibly Injected
The billionaire, who has a worth of over $260 billion according to one Bloomberg estimate, is likely to require substantial financial aid to pull off such a large move.
- Musk could inject up to $15 billion of his own money to purchase Twitter, according to the New York Post.
- In spite of his wealth, Musk requires financial aid from banks and/or other investors to finance this level of deal.
- Musk will also have to compete with Twitter's "poison pill" prevention scheme.
A few big buyout groups have refused to provide aud to Musk, according to the Financial Times on Wednesday, including Vista Equity Partners, Blackstone, as well as Brookfield Asset Management.
High among their stated concerns are Twitter's potential growth and profitability horizons, and Musk's volatile personality. The billionaire has controversially tweeted about his solutions for the network, which includes loosening content moderation and getting rid of board members salaries.
Other companies are considering generating debt or certain equity finances, other sources say.
While other investors, including Apollo Global Management and Thoma Bravo have publicly shown interest in joining a bid for Twitter, according to Reuters and the Wall Street Journal.
Elon has not yet publicly said how he plans to finance his claimed purchase of Twitter. The Tesla giant made an impromptu offer to buyout Twitter outright at $54.20 per share, according to a US SEC dated April 14, tantamount to a possible deal of $43 billion. Elon claimed on April 15 that he has necessary assets to fund the bid without giving further info.
Musk and Tesla were also questioned by Business Insider. Morgan Stanley and Elon both did not instantly respond to questions.
Vista Equity Partners and Blackstone also did not respond instantly to questions. Meanwhile, a Brookfield Asset Management representative declined to make a comment.
Supposing Musk manages to put together a formal bid, there will still be the issue of Twitter's "poison pill", which is a defence mechanism the board installed to block any investor from acquiring over 15% of the firm.
The moment that an investor, like Musk, goes beyond that threshold, the scheme would let all other shareholders from April 25 use their rights to buyout a piece of Twitter at an exercise cost of $210, with the goal to dilute the bigger investor's stake.
To repeat, Musk is currently Twitter's largest individual shareholder, after accumulating a stake in the firm equating to 9.1%.