Elon Musk has secured $46.5bn (£35.6bn) in financing to fund a possible hostile bid for Twitter and is putting up $21bn of his own money as part of the package.
On top of that equity, Musk is raising a further $12.5bn for the offer via a margin loan secured against his shares in Tesla, the electric carmaker that he runs as CEO. Morgan Stanley, the US investment bank, is leading a group of financial institutions providing $13bn in debt financing.
The funding commitments were outlined in a filing on Thursday with the US financial watchdog, the Securities and Exchange Commission. The document confirmed that the world’s richest man was “exploring whether to begin a tender offer” for the shares in Twitter he does not hold. Musk already owns 9.2% of the social media platform and announced a $54.20-per-share bid last week.
A tender offer is viewed as a hostile bid because it bypasses the company’s board, which in a conventional takeover situation would be expected to recommend an offer to shareholders. Instead, Twitter’s board has moved to block Musk from increasing his shareholding without its approval.
Last week Twitter launched a so-called poison pill defense against Musk’s bid, aimed at blocking him from building a stake in the business bigger than 15%. The tactic, commonly used by company boards as a bulwark against unwanted approaches, will allow existing investors in Twitter to buy shares at a heavy discount if anyone attempts to buy more than 15% of the company without the board’s backing.
This would dilute the shareholding of an unwelcome bidder such as Musk and is a significant block to any non-board-approved bid. However, shareholders who support Musk’s approach could force the board to drop the poison pill gambit.
“This will put pressure on the board if a groundswell of shareholders tender their shares and could force removal of poison pill and a sale to Musk,” said Dan Ives, a senior analyst at the US financial firm Wedbush Securities.
Musk, who has more than 82 million followers on Twitter and is a prolific user of the platform, hinted at the weekend that he was considering a tender approach.
Twitter has yet to respond formally to Musk’s bid of $43bn lodged last week, apart from announcing the poison pill move.
In a statement on Thursday, the company said: “We are in receipt of the updated, non-binding proposal from Elon Musk, which provides additional information regarding the original proposal and new information on potential financing.
“As previously announced and communicated to Mr Musk directly, the board is committed to conducting a careful, comprehensive and deliberate review to determine the course of action that it believes is in the best interest of the company and all Twitter stockholders.”
Musk, a self-described “free speech absolutist”, has made clear he believes the microblogging site is not giving free rein to users. Revealing his takeover approach last week, he said in a letter to the board that Twitter was “the platform for free speech around the world” but could not achieve this “societal imperative” in its current form and “needs to be transformed as a private company”.
Before launching his takeover bid, Musk had flagged a series of changes he might bring to the company – some more likely than others – including introducing an edit button for tweets and turning Twitter’s San Francisco headquarters into a homeless shelter. The latter suggestion – subsequently deleted by Musk – was supported in a tweet by the world’s second-richest man, Jeff Bezos.
Shares in Twitter rose 0.5% to $46.95 in response to Musk’s latest filing.
The money Musk has personally set aside to fund the possible Twitter bid is less than the $23bn bonus he is now due to collect from Tesla after the electric car company reported record quarterly profits.
Musk, who is already sitting on an estimated $249bn fortune, is in line for the bonus share payout because Tesla hit share price and financial growth milestones in its earnings on Wednesday night.