It seems that Elon Musk is still serious about trying to take Twitter (NYSE: TWTR) private.
In the latest twist, the billionaire has unveiled a $46.5bn financing package to fund his buyout.
It’s not surprising he’s managed to find the money – the billionaire executive of Tesla (Nasdaq: TSLA) is currently the richest person in the world, according to the Bloomberg Billionaires Index, with a fortune of $260bn.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Musk has lined up $25.5bn in debt financing, including a margin loan of $12.5bn against his stake in Tesla, from his major banking partners. He is also looking to provide $21bn of equity for the deal himself.
A bit of financial gymnastics will allow the billionaire to put up this figure without too much pain. The margin loan is secured against 85% of his 17% stake in Tesla, which is worth around $170bn at current prices.
That limits the amount of stock Musk can sell to fund the deal. However, under Tesla’s controversial 2018 bonus scheme, the CEO has three opportunities to buy more than eight million shares (each time) in the electric vehicle manufacturer at a 90% discount. With the next tranche of the bonus scheme set to kick in soon, this could provide the extra funding he needs for the equity slice.
Elon Musk needs to convince Twitter to sell
However, finding the money to finance the bid – which is an interesting challenge – was never really the biggest problem for Musk. Convincing the company to give itself up was always going to be a bigger headache.
And it doesn’t look as if Twitter is going to bend to Musk's wishes any time soon.
Last week it launched a so-called “poison pill” defence against the bid, aimed at blocking him from building a stake of more than 15%. The structure will allow existing investors to buy more shares at a heavy discount if Musk or anyone else attempts to buy more than 15% of the company without the board‘s backing.
Tesla’s CEO already owns 9.2% of Twitter and has said he is exploring a tender offer to buy a bigger stake in the company. Such a move is usually considered a hostile act because it bypasses the board of directors, who are ultimately supposed to represent shareholders. And now it would trigger the poison-pill defence, diluting his stake, and increasing the cost of a potential buyout.
Interestingly, Twitter has yet to issue a formal response to the initial buyout offer, so there could be yet another twist in this tale.
Is there something else going on behind the scenes?
The bigger question is what does Musk really want with Twitter? He has claimed that the company is a platform for free speech around the world and he wants to defend this right. However, the enterprise does not fit well alongside his collection of other businesses, namely Tesla and SpaceX, and the group is struggling for direction.
Twitter is trying to boost revenues by getting advertisers to pay more for their brands to appear on users' timelines, but it is still losing money. It reported a net loss of $221m in 2021 on revenues of more than $5bn.
Some of Musk’s critics have speculated that he could be pursuing Twitter in order to divert attention from as-yet-to-be-seen problems. If this is the case, it’s an expensive way to distract the media, but for a billionaire who has a history of playing fast and loose with the rules – and one whose own Twitter stream is essentially an ongoing publicity stunt – it would not be out of character.
It might be best for investors to sit this one out, rather than trying to guess what’s in store for either side of this increasingly bitter battle.
-
Landlords ordered to make rental properties more energy efficient by 2030The government has said rental properties must have a minimum EPC rating of C by 2030. We explain how much it will cost landlords to upgrade their buy-to-let portfolio
-
Primark owner Associated British Foods is an overlooked gem going cheap — should you buy shares?Associated British Foods, the owner of Primark, is a family-owned business, which means it is passed over by the increasingly popular passive investment funds. That spells opportunity for private investors, says Jamie Ward.
-
Halifax: House price slump continues as prices slide for the sixth consecutive monthUK house prices fell again in September as buyers returned, but the slowdown was not as fast as anticipated, latest Halifax data shows. Where are house prices falling the most?
-
Rents hit a record high - but is the opportunity for buy-to-let investors still strong?UK rent prices have hit a record high with the average hitting over £1,200 a month says Rightmove. Are there still opportunities in buy-to-let?
-
Pension savers turn to gold investmentsInvestors are racing to buy gold to protect their pensions from a stock market correction and high inflation, experts say
-
Where to find the best returns from student accommodationStudent accommodation can be a lucrative investment if you know where to look.
-
Best investing appsLooking for an easy-to-use app to help you start investing, keep track of your portfolio or make trades on the go? We round up the best investing apps
-
The world’s best bargain stocksSearching for bargain stocks with Alec Cutler of the Orbis Global Balanced Fund, who tells Andrew Van Sickle which sectors are being overlooked.
-
Revealed: the cheapest cities to own a home in BritainNew research reveals the cheapest cities to own a home, taking account of mortgage payments, utility bills and council tax
-
UK recession: How to protect your portfolioAs the UK recession is confirmed, we look at ways to protect your wealth.
