The latest development in the Elon Musk Twitter takeover saga is that he has secured the funding to “tender” an offer to purchase the social media company. Musk has offered to buy Twitter outright by purchasing the company’s stocks directly from shareholders, according to a filing with the Security Exchange Commission (SEC).
Musk has been hinting that he is poised to make a move by referring to the Elvis Presley song “Love me Tender” and the novel “Tender is the Night” by F. Scott Fitzgerald in tweets.
His bid for the takeover is backed by Morgan Stanley, an investment bank, and other lenders, who have offered close to $26 billion in loans. Per the filing, Musk, the chief executive officer of Tesla, will personally add approximately $21 billion in equity financing.
Last week, Elon Musk offered to buy Twitter for $54.20 a share, giving Twitter a valuation of $43 billion. At the time of his offer, the 50-year-old Musk had already become Twitter’s largest shareholder, owning over 9% of the social media company’s shares.
Musk stated that he wanted to take Twitter private and turn it into a platform for free speech. Initially, Twitter welcomed Musk and offered him a spot on the board of directors. However, the company never directly responded to Musk’s offer to buy the entire company and instead implemented a “poison pill.”
A “poison pill” is a defensive strategy used by a firm to prevent a potentially hostile takeover. It is meant to make the firm less attractive to the entity trying to purchase it. In the case of Twitter, the strategy would dilute the company’s stock value if Musk bought more than 15% of the shares. Musk declined the offer to become a board member of Twitter.
Since a tender offer bypasses the board of directors and is directed only to shareholders, a bidder can use it when the company’s board refuses to negotiate.
The filing, known as a 13D, was submitted on April 13. Musk made a non-binding proposal to buy all outstanding shares of common stock in Twitter at $54.20 per share. The filing states that since Twitter’s board has not responded to Musk’s proposal to buy the company outright, he is exploring the option of commencing a tender offer.
Musk’s offer must stay in place for 20 days after filing the regulatory paperwork. Twitter has 10 days from the filing date to communicate with shareholders about the proposal.
Since Musk currently owns a little over 9% of Twitter, he must tender around 41% of shares to have a bare majority. If Musk owns even the most minimal of majorities, it puts him in a position where he can replace people on Twitter’s board with members who would be more favorably inclined towards him.
Should not enough shares be tendered, Musk has two options – cancel the offer and walk away, or amend the terms to sweeten the deal for the shareholders.
A spokesman for Twitter confirmed they had received the latest updated offer.
“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,” the spokesman said.