Takeover of Twitter: Can Elon Musk afford his ambitions?

The Tesla boss has offered a cash payment at a price of $54.20 per share, which would value the social network at just over $43 billion.

However, Mr. Musk would not have to pay such a sum since he has already acquired 9.2% of the capital of Twitter.

According to the calculations of the rating agency Moody’s, its expenses should rather be around 36 billion dollars.

Sell ​​or borrow

While acknowledging that he was not sure of achieving his goals, Mr. Musk assured Thursday that he had “sufficient funds” to afford the blue bird network without giving more details.

His personal fortune is estimated at nearly $265 billion by Forbes magazine. But much of that wealth comes from the shares he owns in Tesla and SpaceX, two companies he runs.

An option for Mr. Musk would therefore be to sell some of his 173 million Tesla shares. He also committed at the end of 2021 to offload 10% of his shares in the company after surveying his followers on Twitter.

From the beginning of November to the end of December, the entrepreneur thus sold nearly 16 million shares of the manufacturer of electric vehicles while exercising over this same period his right to buy back nearly 23 million stock options.

The direct sale of a large number of shares would, however, involve heavy capital gains tax. It would also risk driving down Tesla’s stock market price.

Another possibility for Mr. Musk would be to use his Tesla shares as financial collateral to take out a bank loan.

As of June 30, 2021, the manager was already using more than 88 million of his Tesla shares as collateral for personal loans.

Third scenario for the boss of South African origin: to ally with private investment funds to benefit from external financing.

The details of how Mr. Musk intends to finance the transaction will determine the consequences it will have for Twitter.“, advanced Neil Begley of Moody’s in a note published Thursday.

“Poison Pill”

Beyond the strictly financial aspect, there is the question of the leeway of the board of directors of Twitter in the face of Mr. Musk.

In a statement released Thursday, the company acknowledged receipt of the “unsolicited and non-binding” offer and promised to “consider it carefully”.

To protect itself from a hostile offer, the board of directors of Twitter has the possibility of setting up a “poison pill”, namely an arsenal of measures aimed at preventing the takeover of the boss of Tesla.

However, notes Kevin Kaiser, assistant professor of finance at the Wharton School at the University of Pennsylvania, if he rejects the proposal, the Board could expose itself to the backlash of shareholders who could sue it “for failing in his fiduciary duty to act in the best interests of the company“.

The CA would then have to prove that the real value of Twitter is greater than that advanced by Mr. Musk.

The Tesla boss could also seek to bypass Twitter’s governing body and defer directly to shareholders, in which case”he could achieve his goals without needing the support or approval of the board“by launching a hostile public takeover bid (OPA), underlines Mr. Kaiser.

Mr. Musk hinted that he was exploring this avenue when he launched a poll of nearly 82 million Twitter followers on Thursday with the following title: “Removing Twitter from the Bouse at a price of $54.20 should be decided by the shareholders, not by the Board

More than 80% of some 2.5 million voters voted in favour.

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