August 13, 2022

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Elon Musk races to secure funding for Twitter bid

Elon Musk races to secure funding for Twitter bid

Elon Musk races to secure funding for him Offered $43 billion to buy Twitter.

Morgan Stanley, the investment bank working with Mr. Musk on the potential deal, has been calling on banks and other potential investors to support financing the offer, four people familiar with the situation said. One person said Mr. Musk was focusing first on increasing debt and had not yet begun seeking equity financing for his bid.

Mr. Musk is evaluating various packages of debt, including large debt known as preferred debt and a loan against his shares in Tesla, the electric car maker he runs, two people said. Apollo Global Management, a private equity firm, is among the parties Consider offering debt financing Try to Twitter. The stocks he needs are likely to be large.

Mr. Musk aims to collect a fully funded bid as soon as this week, one person said, although that timeline is uncertain. People familiar with the discussions were not authorized to speak publicly because the details are confidential and in flux.

It’s unclear whether Mr. Musk’s efforts will be successful, but it is moving toward addressing a key question about his Twitter presentation. Last week, Mr. Musk, the world’s richest man, made an unsolicited offer to the social media company, saying he wanted to make it private and that he wanted people to be able to speak more freely on the service. But Wall Street viewed his offer skeptically because it did not include details of how he got the money needed for the deal.

While the Twitter board did not reject Mr. Musk’s offer, it responded days later with a defensive tactic known as “poison pill. The toxic pill would effectively prevent Mr. Musk from owning more than 15 percent of Twitter shares. The 50-year-old was building a stake in the company and Owns more than 9 percent of Twitterwhich at one point made him its largest single shareholder.

Mr. Musk, whose net worth has been reported at 255 billion dollars, did not respond to a request for comment. On Tuesday, in what appeared to be a veiled reference to Twitter, he tweeted his thoughts about the social network and its policies.

Morgan Stanley declined to comment. Twitter, which also declined to comment, is expected to provide an update on its deal-making prospects when it reports quarterly earnings on April 28.

Tesla did not respond to a request for comment. It’s unclear how Tesla shareholders will take into account Mr. Musk’s move to take out a loan against company stock; Some of its largest shareholders declined to comment. The automaker is to report quarterly earnings on Wednesday. Mr. Musk often speaks during a Tesla earnings call with investors.

The Twitter deal, if structured as a traditional leveraged buyout, would likely be the largest such deal in at least the last two decades and would be difficult to fund for any buyer. That’s because Twitter doesn’t have the financial profile that is typical of debt-fueled acquisitions.

In most leveraged buyouts, companies have large and steady cash flows. But Twitter’s business has been inconsistent, with revenue growth slowing. Its earnings excluding costs such as total interest are only about a billion dollars a year, and financiers generally hate piling up so much debt with profitable companies of this size.

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There are also obstacles for Mr. Musk. In 2018, Mr. Musk tried to take over Tesla and tweeted “financing insurance,He pushed Tesla stock soaring. He had no financing prepared for such a transaction. The Securities and Exchange Commission later sued for securities fraud, accusing it of misleading investors. Mr. Musk Pay a fine of $20 million He agreed to step down as Tesla’s president for three years.

Some investors are wary of getting involved in financing Mr Musk’s Twitter bid, worried about the risks of collaborating with the mercurial billionaire and a politically controversial company like Twitter, a person familiar with the situation said. For banks, making a loan against Tesla stock is also very risky, given the stock’s volatility.

Mr. Musk has not publicly stated his business plan to Twitter, though he has talked about reversing Twitter’s moderation policies and providing additional transparency about how its algorithms work. He has made it clear that profit is not his focus, which could complicate investment efforts with traditional Wall Street financiers.

“This is kind of not a way to make money,” Musk said in an interview at TED last week. “My strong intuitive feeling is that having a public platform that is both maximally trusted and broadly inclusive is critical.”

Mr. Musk’s bid to Twitter is $54.20 per share. Several analysts said the company’s board would likely only accept an offer of $60 per share or more. Twitter stock soared above $70 a share last year When the company announced goals to double its revenuealthough its stock has since fallen to around $45 as investors questioned its ability to achieve these goals.

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Mr. Musk, who started compiling Twitter posts in January, was invited this month to Join the company’s board of directors. on time, Parag AgrawalThe Twitter CEO and other board members said they welcomed Mr. Musk as a manager due to his use of the platform. Mr. Musk has over 82.5 million followers on Twitter and tweets frequently.

Mr. Musk and Mr. Agrawal also share similar views on how to do this Twitter decentralization So users can gain more control over their social media feeds, a tactic both men see as a way to promote more freedom of expression. The move would also reduce the burden on Twitter, which has faced questions about toxic content and misinformation, to decide which posts could remain up and what should be removed.

But then Mr. Musk Refused a board seat Effort began to take over the company.

Two people close to the company said Twitter, which has brought in advisors from Goldman Sachs and JPMorgan Chase, is also considering whether to invite other potential buyers to bid. At least one interested party has emerged, private equity firm Thoma Bravo, although it is unclear whether it will eventually bid.

Kate CongerAnd Mike Isaac And Jack Ewing Contribute to the preparation of reports.