In a filing with the SEC today, Elon Musk indicated that Twitter has yet to respond to his offer to purchase the company and that he is “assessing whether to file a tender offer to acquire all of the outstanding shares.” Keep in mind that given Musk’s unsolicited offer, Twitter himself took a poison pill defense of his equity.
The filing also describes how Musk intends to pay for Twitter. Keep in mind that his offer has a cash value of $54.20 per share, valuing the company at around $43.4 billion. The serial entrepreneur’s bid represents a premium to Twitter’s value today, but lands well below the company’s 52-week stock high of $73.34 per share; Twitter’s shares were trading even higher in early 2021, leaving some room for Musk’s offer to be seen as modest despite his premium today.
Where will all the money come from? Three big buckets, it turns out:
- The first tranche, according to the filing, comes from Morgan Stanley and “certain other financial institutions,” which “have committed to provide $13 billion in financing” to loan Musk in the form of a 6, $5 billion, or $500 million, of “senior secured revolving facility,” a $3 billion “senior secured bridge loan facility” and a $3 billion “senior unsecured bridge loan facility.” U.S. dollar.
- The second purse comes again from Morgan Stanley and others, who “have pledged to provide $12.5 billion in margin loans” against what we suspect is its stakes in Tesla and other companies.
- And third, an “equity commitment letter” from Musk to “provide equity financing for the proposed transaction or potential offering sufficient to pay all amounts payable in connection with the offering and the merger,” less the funding sources noted above. The total value of Musk’s equity commitment is “expected to be approximately $21 billion,” the filing reads.
In summary: Musk intends to borrow around $13 billion in various ways; Borrow $12.5 billion against its own holdings; and pays around $21 billion from its own holdings. It’s a somewhat complicated collection of funding sources, but Musk’s offering isn’t exactly small, so the path to raising the cash needed in one pile is understandably convoluted.
Don’t take the “funding secured” comments above as an indication that the deal is a hit. Twitter has backed the offer, and Musk’s filing clearly states that “there can be no assurance that a definitive agreement with respect to the Proposed Transaction will be executed or, if executed, that the Proposed Transaction will be consummated” and Musk has “not yet begun or intends to begin a takeover bid for Twitter stock.”
In other words, there’s more to come, but Musk appears to have a path to the money he needs to make his offer more than words.