Elon Musk’s plans to take control of Twitter seem to be moving forward. And it is that if at first he made public the offer to buy him for 43,000 million dollars, he has now taken a further step, by presenting before the SEC, the regular American of the markets, documentation showing that you have the necessary financing to carry out the purchase. As we can see in said documentation, Musk has provided letters of commitment worth 46.5oo million dollars to buy all the outstanding common shares of Twitter and take control.
Twitter’s board of directors has confirmed to have received this offer and to be studying itand states that «I knowcompromise to conduct a careful, thorough and deliberate review to determine the course of action that you believe is in the best interest of the Company and all of Twitter’s shareholders.” A very adequate and correct answer that, however, does not give us per se no clue as to which decision they will ultimately make.
That response, as I said, does not give signs one way or the other, but as we told you yesterday, the Twitter board has already activated the famous poison pillwhich does invite us to think that, at least in the first instance, managers prefer that the operation not be carried out. Whether because they do not agree with Musk’s vision, because he has threatened to reduce their salaries to zero, because the figure of the billionaire does not inspire confidence or because of a mixture of all of the above, we can think that they are rather reluctant.
At this point, however, it is important to note that Musk does not need a yes from the board of directors to carry out the purchase of the shares. However, the CEO of Tesla must try to play the trick of the friendly purchase, to avoid that in the face of a hostile action the managers decide to use the poisonous pill and generate new actions that dilute Musk’s participation in Twitter’s shareholding.
But beyond that, a very interesting aspect of the documentation submitted by Musk to the SEC shows that some of the capital for the purchase would come out of his own pocket, but that the rest would originate from a combination of debt and lines of credit thatobviously, will generate significant interest, to the point that could reach $1 billion a year.
To this we must add that if the Twitter board finally decides to issue a large volume of new shares, the value of the titles will undoubtedly fall. Y that would force Musk to provide more guarantees to maintain lines of credit and loans, which in turn would raise the cost of the operation and the interest it would have to pay.
Thus, it seems that the only reasonably safe option for Musk to carry out this operation happens to do it in a friendly way with the current Twitter board, because they are the only ones that can prevent the operation from becoming more and more onerous over time. However, they do not seem to be very up to the job, and some of the statements made by Musk do not help in this regard either.
With information from Yahoo! Finance and Business Insider
