After having proposed to buy Twitter for 43 billion dollars (40 billion euros), Elon Musk is now active in order to ensure the financing he needs to go through with his approach. According to a document filed with the American authorities this Thursday, April 21, consulted by Reutersit’s done !
Elon Musk chooses debt financing
the New York Times, after having spoken with several sources close to the file, had already announced that an offer was going to be deposited in the week. With that in mind, the investment bank working with Musk, Morgan Stanley, has been busy reaching out to banks and other potential investors to shore up funding for the offer.
The billionaire evaluated the different types of debt, including senior debt called privileged debt and a loan against his shares of Tesla (which in passing could displease the automaker’s shareholders). Eventually, the world’s richest man pledged to put $33.5 billion, including $21 billion out of his own pocket and the rest in margin loans. Several banks, including Morgan Stanley, have agreed to provide $13 billion in debt guaranteed by Twitter.
Twitter shareholders are trying to stop Elon Musk from buying the social network
Changing Twitter in depth
Elon Musk has been collecting shares of the social network since January and recently became the majority shareholder of the platform with 9.2% of its shares. In response, Twitter CEO Parag Agrawal invited the billionaire to join the company’s board. Surprisingly, Elon Musk refused and instead offered to buy the platform and make it private, that is, it will no longer be listed on the stock exchange.
Elon Musk wants to change Twitter to further promote freedom of expression. Photography: Joshua Hoehne / Unsplash
The CEO of Tesla and SpaceX has big ambitions for Twitter, a social network he uses very frequently and on which he has 82.7 million subscribers. Musk wants platform users to be able to express themselves more freely; as a reminder, Twitter has taken many measures to try to better regulate the hateful content that abounds on the platform. In this sense, he shares a vision similar to that of the CEO of Twitter: they want to decentralize the social network so that users can have more control over their social media feeds, a tactic that the two men see as a way to promote greater freedom of expression.
The move would also reduce the workload of Twitter, which has faced questions about toxic content and misinformation, deciding which posts can stay online and which should be removed. In addition, the businessman continues provocative tweets, for example by polling his 81.6 million subscribers to find out if they would be in favor of adding a feature to correct a tweet already published. A function that Twitter has so far refused to test.
The last straight line of a path strewn with pitfalls?
If his plans for the social network are not yet very clear, Elon Musk has made it clear that profit is not his ultimate goal, which may have complicated his efforts to attract traditional financiers. For its part, Twitter’s Board of Directors did not reject Musk’s offer, but it still used the so-called ” poison pill “. The latter would prevent the billionaire from holding more than 15% of the shares of Twitter.
A takeover of Twitter, if structured like a traditional leveraged buyout, is potentially the biggest deal of its kind in at least two decades. It is also difficult to finance for any buyer, explains the New York Times. The social network does not have the typical financial profile of debt-financed acquisitions: its revenues are not stable and have even recently fallen, which may have dampened financial potential.
Finally, Elon Musk’s liabilities can also play against him: in 2018, he indeed tried to privatize Tesla and tweeted ” financing assured “. This had propelled Tesla shares higher as funding for such a deal was ultimately not ready. The Securities and Exchange Commission (SEC), the US federal financial market regulator and supervisor, later filed a stock fraud lawsuit against the billionaire, accusing him of misleading investors. He eventually had to pay a $20 million fine and agreed to step down as Tesla chairman for three years.
Did he take the risk of playing the same shot? The billionaire’s stubbornness on the subject in any case suggests that he has the motivation, and now the money, necessary to get his hands on Twitter.