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Elon Musk says he has $63.6 billion in financing to purchase Twitter

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Elon Musk says he has 63.6 billion in financing to purchase Twitter

Elon Musk says he has arranged $US46.5 billion ($63.6 billion) in financing to purchase Twitter, coming down on the organization’s board to negotiate a deal.

Last week, Mr. Elon Musk declared an offer to purchase the social media platform for $US54.20 per share, or about $US43 billion.

At the time, he didn’t say how he would finance the acquisition.

Where is the money coming from?

The Tesla CEO said on Thursday in documents filed with US securities regulators that the cash would come from Morgan Stanley and different banks, some of it got from his tremendous stake in the electric car producer.

Twitter still can’t seem to officially respond to Mr. Elon Musk’s offer, yet the organization has instituted an anti-takeover measure known as a poison pill that could make a takeover attempt restrictively costly.

The organization said in a statement on Thursday that it got Mr. Musk’s updated proposal and “new information on potential financing” and said its board is “committed to conducting a careful, comprehensive and deliberate review”.

Mr. Elon Musk, who owns around 9% of Twitter shares, demonstrated his investigation is known as a delicate proposal in which he would attempt to get different shareholders to promise their stock to him at a specific cost on a specific date, bypassing the board.

Assuming an adequate number of shareholders agree, Mr. Elon Musk could involve that as an influence to get the board to drop its “poison pill” defense against his offer of $US54.20 per share.

In any case, Mr. Elon Musk has not decided yet whether to do that.

The poison pill could altogether raise the costs of a takeover.

What is a poison pill?

Assuming somebody gains a 15 percent stake in the organization, it would trigger a tremendous payout to shareholders that could bankrupt Twitter.

Different banks engaged with Mr. Elon Musk’s financing incorporate Barclays, Bank of America, Societe Generale, Mizuho Bank, BNP Paribas, and MUFG.

Morgan Stanley is perhaps Twitter’s greatest shareholder, behind Vanguard Group and Mr. Musk.

Mr. Musk’s documents say that $US13 billion in financing came from Morgan Stanley and different banks.

However much $US12.5 billion would be loans secured by Mr. Musk’s Tesla stock and he additionally dedicated $US21 billion in direct or indirect equity, even though he didn’t uncover the source of those funds.

The filing says the equity commitment could be diminished by contributions from others or extra debt taken on.

Mr. Elon Musk is the world’s wealthiest person, as per Forbes, with an almost $279 billion fortune.

In any case, quite a bit of his cash is tied up in Tesla stock — he possesses around 17% of the organization, which is valued at more than $1 trillion — and SpaceX, his privately held space organization.

It is unclear the amount of money Mr. Musk possesses.

Tesla permits executive officers to involve shares as collateral for loans, however, restricts the acquisition to 25 percent of the value of the pledged shares.

Mr. Elon Musk possesses 172.6 million shares worth $US176.47 billion.

A little more than 51% of his stake as of now is vowed as a guarantee, as indicated by a Tesla proxy statement. That implies Musk could use the leftover stake to borrow about $US21.5 billion.

Seriousness of purpose

Elon Musk’s most recent move shows him “ratcheting up the seriousness of purpose” by arranging conspicuous banks that could finance his bid, said Donna Hitscherich, a finance professor at Columbia University.

“These are the usual suspects if you’d get financing,” she said.

“But certainly it’s pointing to the direction that he could make good on his thoughts were he to proceed in launching the tender offer.”

Shares of Twitter rose somewhat to $US47.04 in Thursday trading after the financing became public.

The shares are trading at $US7.16 below Mr. Musk’s offer.

“The market is waiting for this to come to a head” and for competing bidders to come forward, said Olaf Groth, a business professor at the University of California, Berkeley.

The disclosure of Mr. Musk’s noticeable financial backers was “mildly surprising” to Professor Groth because “a lot of his wealth is tied to Tesla performance and Tesla has been on the volatile side of stock performance”.

Then again, Tesla detailed strong quarterly results this week, and Mr. Musk is “viewed as coming through on things. That may be part of it,” Professor Groth said.

Mr. Elon Musk “is seeking to negotiate a definitive agreement for the acquisition of Twitter … and is prepared to begin such negotiations immediately,” the documents filed with securities regulators say.

Mr. Musk in recent weeks has voiced various proposed policy changes at Twitter, from loosening up its content limitations —, for example, the standards that suspended former president Donald Trump’s account — to rid the platform of its concerns with fake and automated accounts.

“If our Twitter bid succeeds, we will defeat the spam bots or die trying!” he tweeted on Thursday.

Once contending offers surface, Twitter’s board can look at the financial terms as well as what specific plans Mr. Musk or his competitors have for reshaping the social media business.

That is when Mr. Musk’s ideas – a significant number of which he has attached to free speech standards – could become an integral factor.

“That could be ground for rejecting the offer,” Professor Groth said of the business plans.

“Some of that will be [about] money and some of that will be a beauty contest. Some of the board members will also talk about what’s in the public interest.”

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