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Elon Musk has money to buy Twitter — now what?
A fart button?
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Elizabeth Lopatto says that she is ". . .little annoyed that Elon Musk actually raised his money for Twitter because I was so excited to say “Where’s the money, Lebowski?” a lot of times. But fine, he found the money, according to the documents he filed with the SEC.
So Musk is planning to pay $21 billion himself. The rest of the money, according to the letters of commitment, is coming from Morgan Stanley and assorted other banks. In one letter, the banks are offering $13 billion in loans to Twitter; the second offers a $12.5 billion personal loan against Musk’s Tesla stock, which I’m sure will just thrill Tesla shareholders. The dates on these letters are, you guessed it, April 20th or 4/20, blaze it, etc.
These letters give his bid more gravitas than before (when it was “idk I’ll find the money somewhere I guess but lol 420 is funny”) but the market still isn’t taking Musk’s offer of $54.20 a share seriously. Shares were $47.08 as of the close of trading on April 21st; that’s up from before the whole Musk saga started, but if investors thought this was real, we’d see trading closer to the offer price.
I do think it’s interesting that there’s no one else majorly involved in this financing deal — you’d think some private equity firms would belly up to the bar here. Reportedly, Apollo Global, a huge buyout firm, was looking at doing so. Private equity firm Thoma Bravo was also considering its options.
So, what gives?
There are a few potential things going on.
Thing one is that Musk said publicly that his Twitter bid was “not a way to make money.” Firms like Apollo Global and Thoma Bravo are very much about ways to make money. I imagine that may have scared off some funding for Musk. Whoopsie.
Thing two is that Twitter’s board seems to oppose Musk’s bid. The board, which includes Jack Dorsey, did deploy their poison pill after all. The poison pill, otherwise known as a “shareholder rights plan,” basically dilutes Musk’s shares by giving everyone else more shares. More Twitter shares make it harder to buy Twitter. The board hasn’t yet said anything about rejecting Musk’s offer but that poison pill seems like a hint. . .
Thing three: firms like Apollo Global and Thoma Bravo look at their options all the time. That’s their job! They think about deals, and then they make some of them! So maybe they looked and were like, “ha Bob Iger is right, the nastiness is extraordinary” and then went to go look at some other deals.
Now, if Musk buys Twitter, I feel like we all have a vague idea of how this goes. First, a lot of Twitter employees quit because Musk’s companies are notoriously miserable places to work. Second, Musk tweets about a bunch of shit and then does some of it — which may or may not include reinstating Donald Trump on Twitter, getting rid of all the spam bots, and adding a fart button. Third: uh, maybe profit?
[ ] Of course, one possible outcome is that no one buys Twitter, and this seems to be the outcome shareholders are betting on. The private equity firms sniff at Twitter, as others have before, and decide against buying it, as others have before. The board rejects Musk’s offer and he launches a tender offer and Twitter’s management poison-pills the thing. This all ends with Twitter still a public company, where it will have to deal with all the same problems it had before, except Agrawal maybe needs some therapy because, wow, this was a lot. What can I say? We love to have fun on Twitter dot com!"
Reference: https://www.theverge.com/2022/4/22/23036479/elon-musk-twitter-bid-private-equity
RELATED
Musk Swayed Wall Street by Pitching His Vision for Twitter
- Lenders were given some details of how business could be run
- Financing package came together in days, over holiday weekend
"Publicly, Elon Musk has said he doesn’t care about the economics of owning Twitter Inc.
But during a hectic, multi-day scramble to line up $46.5 billion of funds to buy the social media platform, the world’s richest person shared enough of a vision with a dozen banks to persuade them to pull out their checkbooks.
If our twitter bid succeeds, we will defeat the spam bots or die trying!
— Elon Musk (@elonmusk) April 21, 2022
But, maybe not! The deal as constructed includes $1 billion in debt servicing costs every year, Bloomberg’s Matt Levine points out. That’s an awful lot of money for a company that, ummm, lost money last year.
There are other potential corporate gymnastics at work. Musk has formed three holding companies for his Twitter bid, all named for an old idea of his: X.com, the original name for what became PayPal. This could offer Musk an opportunity to combine all his companies — Tesla, the Boring Company, Neuralink, and SpaceX — into one big company that, idk, shoots lasers out of its eyes.
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