Elon Musk Competes to Secure Funding for Twitter Bid

Elon Musk races to raise funds $43 billion bid to buy Twitter.

Investment bank Morgan Stanley, who worked with Mr. Musk on the potential deal, said four people with knowledge of the situation had urged banks and other potential investors to provide financing for the proposal. One of the people said that Mr. Musk is focused on raising debt first and has not yet started seeking equity financing for his proposal.

Mr. Musk is considering various debt packages, including more senior debt, known as concessional debt, and a loan against his shares. tesla, the electric car maker it runs, said two people. Private equity firm Apollo Global Management between the parties I’m considering offering debt financing In a bid for Twitter.

One of the people said that Mr. Musk is aiming to put together a fully funded proposal this week, but that timeline is far from certain. Because the details were confidential and volatile, those with knowledge of the discussions were not authorized to speak publicly.

It’s unclear whether Mr Musk’s efforts will be successful, but they do address an important question regarding the Twitter bid. Last week, Mr. Musk, the richest man in the world, made an unsolicited offer to the social media company, saying he wanted to take it privately and that he wanted people to speak more freely in the service. His proposal, however, was met with skepticism by Wall Street because he did not include details on how he would find the money for the deal.

While the Twitter board didn’t reject Mr Musk’s offer, days later he responded with a defensive tactic known as “”.poison pillA poison pill could effectively prevent Mr. Musk from owning more than 15 percent of Twitter shares. was forming a stake in the 50-year-old company and Owns more than 9 percent of Twittermaking it its single largest individual shareholder.

Mr. Musk, whose net worth has been reported so far, $255 billiondid not respond to a request for comment. On Tuesday, he tweeted his thoughts on social networks and their policies in what appears to be a veiled posting to Twitter.

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

Tesla did not make a request for comment. It’s unclear how Tesla’s shareholders would evaluate Mr. Musk’s move to potentially take loans against the company’s stock; Some of its largest shareholders declined to comment. The automaker will announce quarterly earnings on Wednesday. Mr. Musk speaks frequently during Tesla’s earnings call with investors.

If a deal for Twitter is structured as a traditional leveraged buyout, it will potentially be the largest such deal in at least the last two decades and will be difficult for any buyer to fund. This is because Twitter does not have the typical financial profile of debt-driven acquisitions.

In most leveraged buyout deals, companies have large and stable cash flows. But Twitter’s business has been inconsistent and revenue growth has slowed. Their earnings, excluding costs such as interest, are only about $1 billion a year, and financiers generally don’t want to pile too much debt on companies that make earnings of this size.

There are also hurdles specific to Mr. Musk. In 2018, Mr. Musk tried to take over Tesla privately and tweeted “fund has been secured,“Tesla is pushing its shares higher. He had no ready financing for such a deal. The Securities and Exchange Commission later filed a securities fraud lawsuit against him, accusing them of misleading investors. Mr. Musk $20 million fine paid and agreed to step down from Tesla’s presidency for three years.

Someone familiar with the situation said some investors were wary of funding Mr Musk’s Twitter bid, worried about the risks of teaming up with a volatile billionaire and a company as politically contentious as Twitter. For banks, offering a loan against Tesla stock is also risky, given the stock’s volatility.

While Mr. Musk has talked about reversing Twitter’s moderation policies and providing additional transparency about how its algorithms work, he has not made public his business plan for Twitter. He made it clear that the focus was not on profit, potentially complicating efforts to invest in traditional Wall Street financiers.

“This is not a way to make money,” Mr. Musk said in an interview at a TED conference last week. “My strong intuitive understanding is that having a maximally reliable and broadly inclusive public platform is paramount.”

Mr Musk’s bid for Twitter is $54.20 per share. Several analysts said the company’s board of directors could only accept offers of $60 per share or more. Twitter’s stock jumped to over $70 per share last year when the company announces its goals to double its revenuebut its stock has since dropped to about $45 as investors question its ability to meet those goals.

Musk, who started collecting Twitter shares in January, was invited to Twitter this month. Join the company’s board of directors. Then, Parag AgrawalThe Twitter CEO and other board members said they welcome Mr Musk as a director given his use of the platform. Mr. Musk frequently has more than 82.5 million Twitter followers and tweets.

Mr. Musk and Mr. Agrawal share similar perspectives on how to do it. Decentralizing Twitter So users can have more control over their social media feeds, a tactic both men see as a way to encourage greater freedom of speech. The move will also lessen the burden for Twitter, faced with questions about toxic content and misinformation, to decide which posts should go live and what should be removed.

But then Mr. Musk rejected the board seat and started working to take over the company.

Two people close to the company said Twitter, which brought together advisors from Goldman Sachs and JPMorgan Chase, was also weighing whether to invite offers from other potential buyers. At least one interested party, private equity firm Thoma Bravo, has emerged, but it’s unclear whether it will eventually make an offer.

Kate Conger, Mike Isaac and Jack Ewing contributing reporting.