Elon Musk’s move to buy Twitter faces roadblocks
Even for the world’s richest people, buying Twitter will always be a challenge — the most complex financial transaction has now become even more tricky with the defensive “poison pill” action from the platform board.
Muskin’s $ 43 billion offer presents a myriad of potential risks: potential government approvals, legal and regulatory obligation diligence, final contract negotiations and, of course, how to pay for it all.
Then Twitter’s group showed on Friday that it was not going to go quiet, with the incorrect acquisition of more than 15 per cent of the company’s shares prompting a plan to fill the market with shares, thus making buying more difficult.
“Your move is @elonmusk,” Silicon Valley journalist Cara Swisser tweeted.
Musk’s offer, which he said was final, valued Twitter at $ 54.20 a share — above the final price before his auction, but below $ 77.06 in February last year.
This is a difficult moment that will result in lawsuits from all concerned, even with a moderate and inflexible proposal to help the Board argue for rejection.
Kevin Kaiser, a professor of finance at the Warden School, said the Twitter team must keep the argument that the company is overvalued in order to succeed in thwarting Musk’s offer.
Stakeholders who consider the board rejecting a lucrative deal can file a lawsuit against Twitter.
Lean the board?
Musk is trying to get off the board and buy shares directly from shareholders in the market, but that could lead to tough negotiations with some stockholders for more money.
“Under the Delaware Act, the Twitter Board has a limited ability to block tenders offered directly to shareholders, which Elon Musk did not do, but he can do so if he chooses,” Kaiser said.
“If he does this, he can win without the support or approval of the board if the shareholders choose to tender their shares.”
While Forbes estimates the serial entrepreneur’s net worth is $ 265 billion, his wealth is not waiting to be spent in a bank account.
Musk told a TED conference he had “enough funds” to execute the deal, but financial analysts described the situation as “very complicated”.
Much of Musk’s wealth comes from the shares of Tesla, the electric car maker he runs.
Musk must convert part of his Tesla into cash by selling shares in his Tesla or by mortgaging the shares and taking out loans.
“Details on how Musk will fund the deal will determine Twitter’s changes,” Moody’s told investors in a statement.
Moody’s estimates that Musk will spend $ 39 billion to buy all outstanding Twitter shares, and that he will have a “strong chance” to repay or refinance the San Francisco-based company’s billions of dollars in debt.
That was before Twitter’s poison pill move to raise the price of musk.
Musk tweeted a poll that he may have been thinking about taking his bid directly to shareholders.
He asked that it be not the board but the shareholders who should take the company privately at the price offered.
By the end of Friday’s poll, more than 2.7 million votes had been cast, with nearly 84 percent of those in favor of the idea.
Selling a large stake in Tesla to buy Twitter will come with a big tax law based on capital gains, and the shares of the electric car company will sink as the market is full of stocks for sale.
Musk can hold his shares and borrow and absorb interest payments. Or he could team up with a deep pocket, but it could also come with an administrator with a strong desire for someone to respond to the decisions he makes on Twitter.
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