Elon Musk agreed to buy Twitter Inc for $44 billion, ending speculation this month after taking a stake in the social media platform.
Monday’s announcement confirmed several details that had already been reported – or tweeted – about the transaction. It also left many unanswered questions. Here’s what we know so far, what needs to be clarified, and what could happen next.
what do we know
Price: Musk said in his original quote Twitter That it won’t budge from the $54.20 per share price. He stuck to that promise, announcing an all-cash deal for the exact same amount. Although his initial filing offered $43 billion based on the company’s outstanding stock, Monday’s confirmation raised that figure to $44 billion. This is probably a quirk of the number of shares counted rather than an adjustment in prices.
The Financing (Part One): This is a huge leveraged buyout. As Musk revealed last week, he has raised $25.5 billion of fully committed debt and margin debt financing from a dozen banks in a bid to make a difference. Upon completion of the deal, Twitter will become a privately held company.
Who will own Twitter: This may sound obvious, but Twitter has agreed to sell itself to a “wholly owned” entity of Musk. The statement did not name any co-investors (more on that below) and the wording implies that no one involved would amount to more than minority stakeholders.
Who is advising: We already knew that Goldman Sachs Group Inc. and JPMorgan Chase & Co were working with Twitter. In grabbing a coveted spot among Wall Street giants for a boutique bank, Allen & Co. joins that camp, according to a Monday statement. On Musk’s side, Bank of America Corp and Barclays plc lined up with Morgan Stanley, his principal advisor.
Breakup fee: Monday’s statement did not reveal whether both parties agreed to pay a termination fee if the transaction parted ways, but Bloomberg News reported that if the deal breaks down or if it walks away. If so, Musk will be on the hook. Break fees on a deal of this size could run into billions of dollars, giving him a huge financial incentive to look at it.
what we don’t
The Financing (Part Two): Although the announcement reiterated that Musk was “providing an equity commitment of approximately $21 billion,” there were no further details about where that money would come from. Now that the deal has turned favourable, private equity firms — which generally shy away from hostile transactions — may be more likely to come on board and write him a check. For a commitment of this size, four or five different firms may be involved in what is commonly known as a syndicated, or club, deal. Some existing shareholders may also decide to roll over their Twitter stake into a private company. This means Musk himself may not be on the hook for much money, which could be a relief to Tesla Inc. shareholders, who are ‘worried he might be selling his stake in the electric carmaker to fund Twitter. Will give
Who will run Twitter: Chief executive officer Parag Agarwal and chairman Brett Taylor were both cited in the statement, so they are still in their roles. Dissatisfaction with Twitter’s board and how the company is run over the past few weeks, and changes in management when the company was bought, are common. But Musk is already the CEO of both Tesla and SpaceX, so his ability to take on a leadership role with another hand may be limited.
How Twitter will run: Musk has spoken openly about his plans to make the platform an online paradise for absolutist speech, and has complained that the service is too heavy-handed when it comes to moderating user tweets. Hours before the deal was announced, he tweeted that “I hope even my worst critics stay on Twitter, because that’s what free speech means.” He has also considered turning the company’s headquarters into a homeless shelter, removing ads from paid users. And adding to the platform’s authentication check.
what will happen next
Filing: Many of these details must be cleared up in a filing that Twitter needs to make with the Securities and Exchange Commission, known as a Form 8-K. Companies typically have four business days to file this type of filing, so we should have the latest information by the end of the week.
Twitter’s first quarter results: Amidst all this, Twitter is about to announce its latest earnings before the market opens on Thursday. The company doesn’t plan to hold a conference call to go into the details of the deal — or financial results — but they will give investors a glimpse into the state of the business that Musk is buying.
Shareholder vote: Musk’s deal for Twitter is subject to a shareholder vote. The date of the vote has not been disclosed yet.
This story has been published without modification in text from a wire agency feed. Only the title has been changed.