Social media platform Twitter is nearing a deal to sell itself to Tesla CEO Elon Musk for $54.20 per share, Reuters reported, citing people familiar with the matter. The deal may be announced in a matter of days, the report suggested.
Musk met with executives from Twitter on Sunday, as the company's board took a fresh look at his $43 billion buyout offer. The company is "more open" to a deal than it had previously been, sources told Bloomberg.
Though there are issues to resolve, the two parties are "making progress" in hashing out a deal, which could be finalised within the week, the Wall Street Journal reported, citing anonymous sources.
According to filings, Musk has also formed three new holding companies to facilitate the purchase.
Initially, Twitter was cold towards Elon's $54.20 per-share offer. It even put a "poison pill" strategy in place that would dilute his shares and make it difficult for him to acquire more than 15 percent of the company.
Musk hasn't budged on the price, according to WSJ.
So, what changed?
A $46.5 Billion Financing Package
In a letter delivered to Twitter on 13 April, Musk offered to buy all of its stock at $54.20 per share. The deal, which represents a premium of 38 percent over the closing price on 1 April, values the company at roughly $43 billion.
Musk currently owns a 9.2 percent stake worth around $3.3 billion. To buy the rest of Twitter at his offered price, he will have to pay $40 billion.
However, when he offered to buy Twitter, Elon didn't provide any details on how he would come up with the rest of the money, which is likely why Twitter's board wasn't too enthusiastic.
Then, on 21 April, Musk unveiled a fairly detailed $46.5 billion financing package, wooing shareholders who pressured the board to commence negotiations with the Tesla CEO, Reuters reported.
Most of Elon Musk's wealth is tied up in Tesla; he owns about one-fifth of the electric car manufacturing company that he is the co-founder and CEO of.
After spending $2.6 billion on Twitter, he currently has about $3 billion in cash or other relatively liquid assets, according to Bloomberg calculations.
In a filing with the Securities and Exchange Commission (SEC), Musk revealed that he plans to get the money in three ways:
Morgan Stanley and several other financial institutions have “committed to provide $13 billion in financing” to Musk through various types of loans.
He also plans to borrow $12.5 billion by pledging his own shares as collateral – again with the help of Morgan Stanley and others.
Musk has also committed to pay around $21 billion himself, presumably by selling some of his shares in Tesla and SpaceX.
'X Holdings'
As part of his plan to acquire Twitter, Elon Musk has formed a trio of holding companies, SEC filings revealed.
If the acquisition bid succeeds, X Holdings would be the parent company, X Holdings II would purchase and merge with Twitter and X Holdings III would help finance the buyout.
Back in 2020, Musk had responded to a suggestion to bring Tesla, SpaceX, Neuralink and Boring Company under a single holding company called "X". He had called it a "good idea".
It is unclear whether Musk plans to bring Tesla and the other companies under the umbrella of the newly formed X Holdings.
During a TED conference on 14 April, Musk indicated that creating such a holding company would be tricky since Tesla is publicly traded and the investor base of each of the other companies is different.
Elon Musk, who has described himself as a free speech absolutist, said that his proposed acquisition of Twitter is not about money but about free speech and “the future of civilisation.” He believes that the the current management is limiting the platform's potential.
"Twitter has extraordinary potential. I will unlock it," he wrote in his offer letter.
Elon insisted that he has “sufficient assets” to acquire Twitter, should its board approve. He also said that he has a "Plan B" if the offer is rejected.
He had earlier indicated that he could sell all of his stake in Twitter if the deal doesn't go through.
(With inputs from WSJ and Bloomberg.)
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