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Elon Musk agreed to acquire Twitter Inc. for $44 billion, putting an end to weeks of uncertainty after acquiring a stake in the social media network earlier this month.
The announcement on Monday confirmed many of the specifics that had previously been reported – or tweeted – regarding the purchase. It also left many questions unresolved. Here’s what we know thus far, what has to be clarified, and what might happen next.
What we know
The Price: Musk stated in his original bid for Twitter that he would not move from the $54.20 per share price. He kept his word, announcing an all-cash deal for that sum. Though his initial filing valued the offer at $43 billion based on the company’s outstanding stock, Monday’s confirmation increased that sum to $44 billion. That’s most likely due to an error in the number of shares counted, rather than a change in the price.
The Financing (Part One): This is a massive leveraged buyout. Musk stated last week that he had collected $25.5 billion in fully committed debt and margin loan financing from a dozen institutions to support the bid. When the transaction is completed, Twitter will become a privately held firm.
Who Will Own Twitter: It may seem apparent, but Twitter has agreed to sell itself to an organisation “wholly owned” by Musk. The announcement makes no mention of co-investors (more on that below), and the wording implies that any who do join will be marginal stakeholders at most.
Who’s Advising: We already knew that Goldman Sachs Group Inc. and JPMorgan Chase & Co. were advising Twitter. According to the statement, Allen & Co. has joined that camp, securing a coveted status for a boutique bank amid the Wall Street behemoths. Bank of America Corp. and Barclays Plc joined Musk’s senior adviser Morgan Stanley on his side.
Breakup Fee: While Monday’s announcement did not specify whether either party has agreed to pay a termination fee if the sale fails, Bloomberg News reported that Musk will be on the hook if the deal fails or if he walks away. Break costs on a deal of this size can run into the billions of millions, providing him a significant financial incentive to see it through.
What we don’t have
The Financing (Part Two): While Musk’s announcement stated that he is “making an approximately $21 billion equity investment,” there were no further information regarding where the money would come from. Now that the offer has become friendly, private equity firms, who traditionally avoid hostile mergers, may be more willing to come on board and give him a check. For a commitment of this kind, up to four or five different firms could be involved in what is known as a syndicated, or club, contract. Some existing Twitter shareholders may also elect to transfer their holdings to the private business. All of this suggests that Musk may not be on the line for much of the money personally, which could be a comfort to Tesla Inc. shareholders who were concerned he’d sell his interest in the electric carmaker to fund Twitter.
Who Will Run Twitter: Both Chief Executive Officer Parag Agrawal and Chairman Bret Taylor were quoted in the announcement, thus they remain in their positions for the time being. Musk has often posted his discontent with Twitter’s board and how the company has been governed in recent weeks, and management changes are customary when a company is bought. However, Musk is already CEO of both Tesla and SpaceX, so his ability to take on another hands-on leadership role may be limited.
How Twitter Will Be Managed: Musk has been clear about his aspirations to make the network a refuge for free speech online, and has complained that the site is too heavy-handed when it comes to censoring user tweets. He wrote hours before the contract was announced, “I hope that even my harshest opponents remain on Twitter, because that is what free expression means.” He’s also suggested that the company’s headquarters be converted into a homeless shelter, that adverts for paying users be removed, and that the platform’s authentication checks be strengthened.
What comes next?
The Filing: Many of these data should be known in a Form 8-K filing that Twitter is required to submit with the Securities and Exchange Commission. Companies typically have four business days to file this type of filing, so we should know more by the end of the week at the latest.
Twitter’s First-Quarter Results: In the midst of all of this, Twitter is set to release its most recent earnings report on Thursday, before the market opens. The company does not intend to host a conference call to discuss the intricacies of the purchase – or the financial results – but it will provide investors with an insight into the status of the business that Musk is purchasing.
The shareholder vote: Musk’s acquisition for Twitter is up to a shareholder vote. The date of the election has not yet been announced.
