Elon Musk to acquire Twitter for $44 billion. All you want to know

by 5paisa Research Team Last Updated: Dec 15, 2022 - 10:35 am 30.3k Views
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Billionaire Elon Musk, the world’s richest man, has sealed a deal to buy Twitter for $44 billion, just weeks after his revelation of buying a stake in the microblogging platform earlier this month.

Twitter said on Monday its board of directors unanimously approved the transaction. The 11-member board includes Twitter co-founder and former CEO Jack Dorsey, who plans to step down from the board in May.

Twitter also said it expects the deal to close sometime this year, subject to the approval of its shareholders and regulators.

Didn’t Twitter initially oppose the deal? Why did its board change their mind?

Indeed, Twitter had initially sought to reject Musk’s unsolicited offer. It had even enacted an anti-takeover measure known as a poison pill that could make an acquisition attempt expensive. However, its board decided to negotiate after Musk updated his proposal last week and said he had secured financing, according to The Wall Street Journal.

So, how much will Musk pay for Twitter?

Musk had on April 14 made an offer to buy Twitter for $54.20 per share. Shares of Twitter rose 5.7% Monday to $51.70 apiece. Musk has previously said he won’t revise the deal price. While his initial disclosure valued his offer at $43 billion, Twitter’s announcement on Monday shows he will have to shell out $44 billion based on the company’s outstanding shares.

Still, at $54.20 apiece, Musk will be paying far less than what he would have last year when the Twitter stock was trading around $77 per share in February 2021.

But $44 billion is a huge amount. How will Musk arrange it?

Well, Musk shouldn’t have any problem. After all, he is the world’s wealthiest man with a net worth of almost $270 billion, according to Forbes. However, most of his wealth is tied up in the stock of the two companies he founded—electric carmaker Tesla and space exploration company SpaceX.

Musk revealed last week that he has secured $25.5 billion in debt and margin loan financing from a dozen banks such as Morgan Stanley to support his takeover bid. Some of this debt will be secured against his stake in Tesla. It’s unclear how much cash Musk has on hand, but he has also said that he has about $21 billion in equity commitments.

While there is no clarity on who made this equity commitment, there have been reports that some private equity firms could join hands with Musk. And this is more likely now that Twitter board has accepted his proposal.

Who will own Twitter once the deal is completed?

Twitter will become a privately held company after the deal is completed. Essentially, this means Musk will acquire 100% of Twitter and delist the company from stock exchanges.

While as of now, Twitter has agreed to sell itself to an entity wholly owned by Musk, there is a possibility some co-investors with substantial stake will join later.

So, will Musk take over as Twitter CEO and replace the incumbent Parag Agrawal?

As of now, Twitter CEO Parag Agrawal and Chairman Bret Taylor remain in their roles. But Musk has repeatedly expressed his dissatisfaction with Twitter’s board and how the company is run.

Moreover, it’s not uncommon for a buyer to change the leadership team of the company after a takeover. Still, since Musk is already CEO of Tesla and SpaceX, his ability to take on another full-time executive role could be limited. A board reshuffle is highly likely though.

What are Musk’s plans for Twitter?

Musk has previously talked about turning Twitter’s headquarters into a homeless shelter, and revealed that he doesn’t himself own any home. Whether those comments were made in jest or in all seriousness, Musk has said he wanted to buy Twitter because it’s not living up to its potential as a platform for free speech.

He has promised to relax Twitter’s content restrictions — such as the rules that banned former US President Donald Trump. He also wants to remove fake and automated spam bot accounts, and shifting the company away from its advertising-based revenue model. He also wants to open up Twitter’s algorithms to the public to increase trust.

“Free speech is the bedrock of a functioning democracy, and Twitter is the digital town square where matters vital to the future of humanity are debated,” he said.

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