Elon Musk has revealed how he plans to fund his takeover of Twitter.
On Thursday, he submitted a securities filing that outlines three sources of funding he’s secured in order to spend $46.5 billion on the social media platform:
- Morgan Stanley Senior Funding is supplying $13.5 billion in loans.
- Another $12.5 billion is coming from Morgan Stanley and other unnamed financial institutions through margin loans that’ll use Musk’s investments as collateral.
- Meanwhile, about $21 billion will come from equity financing, which involves raising the capital through the sale of stock shares. So Musk will cover this portion himself.
The filing addresses whether Musk really has the cash to buy Twitter. Musk’s current net worth has been valued at over $260 billion due in large part to his stake in Tesla. However, he already pledged a portion of Tesla shares for other loans, according to The New York Times. So to free up additional funding, Musk has managed to secure a massive $26 billion from investment firms while using his stock holdings as collateral.
Twitter’s board of directors has yet to reject Musk’s acquisition bid. But last week, board members unanimously voted to adopt a “poison pill” plan, which is designed to prevent a hostile takeover through stock buys.
Thursday’s security filing from Musk offers some hints at what he might do in response. The document notes he’s considering floating a tender offer to buy stock from other Twitter investors at $54.20 per share. It also points out Musk could choose to engage in talks with Twitter board members about his acquisition offer or other “strategic alternatives.”
However, Musk has to be careful to avoid triggering Twitter’s poison pill plan. Musk currently owns a 9.1% stake in the company. But if he ends up owning a 15% or higher stake, Twitter can allow existing shareholders to buy additional shares effectively at a discount. Hence, the poison pill could easily dilute Musk’s takeover bid.
To get around this, Musk could try to convince Twitter’s board of the merits of his takeover offer, or he could kick off a “proxy contest,” which would involve soliciting company shareholders to vote out Twitter's current board of directors.
If Musk does successfully acquire Twitter, he plans on prioritizing free speech and reining in some of the content moderation over the social media platform. "I do think that we want to be, just very reluctant to delete things. Just very cautious with permanent bans. You know, time-outs would be better than some permanent bans," he said in a TED talk last week.