The billionaire is not happy with Twitter and decided to go on the attack.
Elon Musk is on a mission to save the planet from pollution by transforming transportation with Tesla (TSLA) – Get Tesla Inc Report and Boring Co. The billionaire is a man in a hurry, and he does not like to see people get in his way.
The management of Twitter (TWTR) – Get Twitter, Inc. Report has just learned this the hard way.
Business circles were greeted on April 14 by a bombshell. Musk announced that he had submitted an offer to acquire the microblogging site, of which he recently became the largest shareholder with a 9.2% stake.
“I made an offer,” the billionaire posted on Twitter, giving a link to the financial document addressed to the Securities and Exchange Commission in which he detailed his proposal.
Does Musk Have the Funding?
According to the SEC filing, the wealthiest man in the world is offering to acquire Twitter for $54.20 a share cash. The price values the company at some $43 billion.
“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe,” he wrote.
“However, since making my investment I now realize the company will neither thrive nor serve this societal imperative in its current form.”
“Twitter needs to be transformed as a private company,” the tech tycoon explained.
“My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder,” he continued. “Twitter has extraordinary potential. I will unlock it.”
Twitter is Musk’s favorite communication channel. It is on the platform that he announces the news concerning his various companies; taunts his critics and interacts with his fans (he has more than 81.6 million followers).
Above all, it is on Twitter that the billionaire has built the Musk brand, a brand synonymous with disruption.
But in November Twitter Founder and CEO Jack Dorsey, who is a friend of Musk, stepped down. And since then, Musk’s criticism of Twitter has been mounting.
Musk’s offer raises a key issue: funding.
How does he plan to finance this operation? In the SEC filing, the billionaire does not include any language on the financial aspect of the operation.
Generally, when a company or a private equity firm makes an offer for a company, it explains how it intends to finance the transaction. (This is particularly so when, as here, the offer is unsolicited.) The potential buyer may be going into debt and wants people to know that it has secured financing, including perhaps obtaining agreements from banks and other lenders.
In theory, Musk, the richest man in the world, can personally finance the transaction. His personal fortune is valued at $259 billion as of April 13, according to the Bloomberg Billionaire Index.
This fortune is based mainly on his nearly 17% stake in Tesla and his stake in SpaceX. If Musk were to finance the deal himself by selling TSLA stock, he’d need to reduce his stake in Tesla by 4 percentage points.
Is Musk Serious?
But is Musk ready to reduce his voting power in Tesla? Last year, the billionaire had exercised options on Tesla shares but ended up increasing his stake. This suggests that he is keen to remain a major shareholder in Tesla. The same argument can be made for SpaceX.
The other option is whether Musk has a financial partner.
In any case, the current situation is reminiscent of the Tesla episode of August 2018 when the billionaire said he wanted to take Tesla private at a price of $420 a share.
He added that he had secured the funding, but the SEC launched an investigation. This resulted in a settlement that included fines of $20 million for Musk and $20 million for Tesla. The billionaire also had to give up the chairman’s post.
Aside from funding, Musk’s proposal relative to Twitter also raises the question of whether he’s really serious.
“The proposal is non-binding,” Musk said. “The reporting person reserves the right to withdraw the proposal or modify the terms at any time.”
Basically, the billionaire can walk away at any point.
“The Twitter board of directors will carefully review the proposal to determine the course of action that it believes is in the best interest of the company and all Twitter stockholders,” the microblogging website responded.
