Funding Secured! Now Twitter board is reportedly considering Elon Musk’s $43B offer

Elon Musk might succeed in his efforts to take Twitter private after all. Musk, the world’s richest person, detailed his financing plans for Twitter on Thursday. Soon after he filed his financing options, Twitter’s board began seriously considering his offer to take the company private.

In an unsolicited bid to take Twitter private, Musk valued the micro-blogging platform at $43B and offered to pay $54.20 for each share. Twitter was trading at $48.93 per share at the end of trading on Nasdaq on Friday. In a new securities filing last week, Musk revealed he has received commitments for $46.5B to finance his potential bid for the platform.

Twitter board meets to discuss Musk takeover

According to the New York Times, Twitter board has become receptive to Musk’s offer after he revealed his financing options. The report reveals that Twitter’s board negotiated with Musk into the early hours of Monday. Both Musk and Twitter’s board have reportedly discussed details, including a timeline to close any potential deals.

The turnaround in reception from Twitter‘s board is so drastic that the two sides have even negotiated fees that would be paid if an agreement is reached and then fall apart. When Musk first revealed his “best and final”, there was scepticism around his ability to finance the deal. The SpaceX chief had infamously tweeted his plans to take Tesla private in 2018 but never kept his word or proved his ability to execute the funding.

With Twitter, Musk seems serious and has lined up $46.5B in financing for the offer. This financing, according to the Times, has been a turning point for Twitter board and allowed the 11 members to seriously consider the offer.

Elon Musk first revealed his stake in Twitter early this month as a passive 9.2 per cent stake. After his stake became public, CEO Parag Agrawal offered him a seat on Twitter’s board, which Musk seemed interested in joining. However, he backed out a few days later and revealed his intent to take Twitter private at a valuation of $43B.

“I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy,” Musk wrote to Twitter Chairman Bret Taylor in a letter disclosed with SEC filing.

In order to thwart Musk and his takeover bid, Twitter adopted a “poison pill” that limited Musk from raising his stake to more than 15 per cent. If he raised his stake to more than 15 per cent, then all existing Twitter shareholders would get the option to buy Twitter shares at a discount, which would automatically lower Musk’s holding in the company.

The Wall Street Journal reported over the weekend that Musk met several shareholders privately on Friday. He reportedly made his pitch to select shareholders in a series of video calls and focussed on actively managed funds. His ability to sway people in the real world as well as online is probably one of the reasons that Twitter’s board has decided to entertain his offer.

A tough decision to make for Twitter’s board

For Twitter’s board, the road ahead won’t be easy and will only be further complicated by Musk and his ability to change the narrative with his tweets. In his filing, Musk said his offer is final but it is not yet clear what the board perceives to be the real value for Twitter. A number of analysts believe that Twitter’s board should try to negotiate a deal at $70 a share, a price that Twitter reached last year.

In his securities filing, Musk said he is committing about $21B in equity financing and has secured about $25.5B in debt financing through Morgan Stanley Senior Funding and other firms. The debt financing includes about $12.5B in loans against his stock in Tesla.

His Tesla stocks alone would make it easier for Musk to acquire Twitter but it is unlikely that Elon Musk would want to sell his liquid assets in a company that is defying trends and making EV mainstream. The filing also revealed that Bank of America, Barclays, MUFG, Societe Generale, Mizuho Bank, and BNP Paribas are participating in his offer to take Twitter private.

“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 spokesperson for Twitter said in a statement after Musk revealed his financing options.

With funding secured, Musk was expected to make a tender offer for Twitter but it seems Twitter’s board decided to discuss the offer with him directly. As soon as Musk first detailed his plan to take Twitter private, it was clear that the micro-blogging platform would be purchased by Musk or some other entity.

Buyout firm Thoma Bravo reportedly approached Twitter with an acquisition offer. The openness of Twitter’s board does not mean Musk will succeed in his endeavour and the board might succeed in finding another potential investor with analysts accepting the board to settle at $60 a share. With Twitter set to report first quarter earnings on Thursday, he will know more about the board’s position this week. For now, it seems Twitter is reaching its end to being a public company.