Elon Musk said in a statement with the Securities and Exchange Commission today that Twitter has yet to react to his bid to buy the firm and that he is “considering whether to start a tender offer to acquire all of the existing shares.” In the wake of Musk’s unsolicited proposal, Twitter has undertaken a poison-pill defense of its stock. Musk’s plan to pay for Twitter is also detailed in the document. Remember that his cash offer is $54.20 per share, valuing the firm at $43.4 billion.
Musk’s offer is a premium to Twitter’s current worth, but it is much below the company’s 52-week stock market high of $73.34 per share; shares of Twitter traded even higher in early 2021, providing some space for Musk’s offer to be regarded modest, despite its current premium. So where is all that cash going to come from? It appears out there are three primary buckets: According to the petition, a $6.5 billion “senior secured term loan facility,” a $500 million “senior secured revolving facility,” a $3 billion “senior secured bridge loan facility,” and a $3 billion “senior unsecured bridge loan facility” have “agreed to deliver $13 billion in funding” to Musk.
The second round of funding comes from Morgan Stanley and others, who have “agreed to offer $12.5 billion in margin loans” to Musk, presumably against his Tesla and other company shares. Finally, Musk has signed a “equity commitment letter” promising to “provide equity financing for the Proposed Transaction or the Potential Offer sufficient to cover all payments payable in connection with the Offer and the Merger” after deducting the foregoing funding sources. According to the document, Musk’s entire equity stake is “estimated to be around $21 billion.”
To summarize, Musk plans to borrow $13 billion in various ways, borrow $12.5 billion against his own share holdings, and pay $21 billion from his own assets. It’s a tangled mix of funding sources, but Musk’s offer isn’t modest, so getting all of the required funds in one place is obviously difficult.
Do not take the above “funding secured” notes as a guarantee that the deal will close. According to Musk’s filing, “there can be no assurance that a definitive agreement with respect to the Proposed Transaction will be executed or, if executed, whether the Proposed Transaction will be consummated,” and that Musk has “not commenced, or determined to commence, any tender offer for Shares of Twitter” yet. In other words, there’s more to come, but Musk appears to have a method of getting the money he needs to make his proposal more than just words.
