The document shows that Musk has received $46.5 billion in commitment to help finance the proposed deal. If he decides to go ahead with a tender offer, he will approach Twitter shareholders and offer to buy their shares within a specific time frame. He’s still considering whether to launch a tender offer for Twitter, according to the filing.
Musk, the richest man in the world, has secured $25.5 billion in debt financing from Morgan Stanley and other financial institutions, including Bank of America, Barclays, and Mizuho. He has also committed to provide $21 billion in equity financing, according to the document.
Musk is seeking to negotiate a “definitive agreement” with the board for the acquisition of Twitter.
“Twitter hasn’t responded to the proposal,” Musk says, according to the filing. “Given the lack of response by Twitter,” he’s “exploring whether to commence a tender offer to acquire all of the outstanding shares” at a price of $54.20 per share.
The billionaire, however, “has not determined whether to do so at this time.”
Some had speculated earlier that Musk lacked sufficient cash for the acquisition. The latest funding information, however, could make it harder for the board to claim he’s not a serious bidder.
The poison pill, also known as a shareholder rights plan, is used as a defense strategy to make Musk’s takeover more expensive and difficult.
If Musk reaches 15 percent ownership, the poison pill will be triggered. That would allow other stockholders to purchase additional shares at a discounted price, thus diluting Musk’s ownership stake.
‘Chess Game’
The ownership contest for Twitter has devolved into a chess game after the company’s board last week adopted the poison pill to thwart Musk’s unwelcome takeover attempt.Many people around the world, including the company’s stockholders, have been eagerly watching to see what the billionaire and the board of directors will do next.
These messages fueled speculation that Musk may be close to announcing a tender offer to acquire the firm.
It’s more likely that Musk will initiate a proxy contest, according to a senior executive of an investment management firm in New York who requested anonymity.
And he will try to convince major shareholders, he said, to get them to his side either by taking his tender offer or by removing the current board.
“What we’re witnessing is a bit of a chess game in public,” says Dale Saran, an attorney who helped fitness company CrossFit avoid a corporate takeover as the company’s general counsel in 2012.
Musk’s public prominence and ability to influence shareholders, Saran said, should be putting a lot of pressure on Twitter and its legal counsel.
“It’s a high price and your shareholders will love it,” Musk said, adding that if the deal falls through, he would reconsider his position as a shareholder.
It’s still uncertain whether Musk will be able to secure enough shareholder support to persuade the board to remove its poison pill and opposition to the offer.
The use of a poison pill doesn’t always mean the company is unwilling to be bought. Twitter’s board might be using it as a tactic to boost the offer price.
Board Under Pressure
Twitter’s board has come under pressure since some analysts say the stock’s upside potential is currently limited. Goldman Sachs, for example, has a “sell” rating on the stock with a price target of $30 per share. Ironically, the investment bank is advising Twitter’s board on Musk’s takeover bid.It’s unlikely that the board will find any buyer willing to pay much higher than Musk’s offer price, according to some business commentators.
Bill Alpert, senior writer at Barron’s, says under its present management and business model, Twitter’s stock is unlikely to revisit last year’s $80 peak.
The company’s stock is currently trading at $46. Shares were up nearly 20 percent since April 4 when Twitter confirmed that Musk had acquired a significant stake in the company.
“Unless you’re like Musk and want to own Twitter for idealistic reasons, you should let him have it. He won’t ruin it, so you can do so with a clear conscience,” Alpert wrote in a recent article.
Steve Forbes, chairman and CEO of Forbes Media, says if Musk withdraws his bid, Twitter’s stock “would collapse.”
“The stock has stuck since it went public eight years ago, and has not been a good performer,” he told Fox Business on April 15.
“So, people are counting on [Musk],” he said. “What gives the stock value is the prospect that he’s going to give it value by making needed changes, starting with free speech.”
On April 19, Florida Gov. Ron DeSantis also weighed in on Musk’s Twitter buyout saga, saying that his state would look into holding Twitter’s board accountable for breaching its fiduciary duty by adopting a poison pill.
DeSantis said, during a press conference, that the state and its pension fund own some Twitter shares and the fund was likely harmed.
According to Bebchuk and his colleagues’ findings, boards that reject premium bids fail to generate optimal long-term returns for their shareholders.
