Elon Musk races to secure financing for Twitter bid

NEW YORK (NYTIMES) - Mr Elon Musk is racing to secure funding for his US$43 billion (S$58.8 billion) bid to buy Twitter.

Morgan Stanley, the investment bank working with Mr Musk on the potential deal, has been calling banks and other potential investors to shore up financing for the offer, four people with knowledge of the situation said. Mr Musk is first focused on raising debt and has not yet begun to seek equity financing for his bid, one of the people said.

The 50-year-old is evaluating various packages of debt, including more senior debt known as preferred debt and a loan against his shares of Tesla, the electric carmaker that he runs, two of the people said.

Apollo Global Management, a private equity firm, is among the parties considering offering debt financing in a bid for Twitter.

Mr Musk is aiming to pull together a fully funded offer as soon as this week, one of the people said, although that timeline is far from certain.

It is unclear if his efforts will be successful, but they go towards addressing a key question about his Twitter bid. Last week, Mr Musk, the world's wealthiest man, made an unsolicited offer for the social media company, saying that he wanted to take it private and that he wanted people to be able to speak more freely on the service.

But his offer was regarded sceptically by Wall Street because he did not include details on how he would come up with the money for the deal.

While Twitter's board has not rejected Mr Musk's offer, it responded days later with a "poison pill", a defensive tactic that would effectively prevent Mr Musk from owning more than 15 per cent of Twitter's shares. Mr Musk had been building up a stake in the company and owns more than 9 per cent of Twitter, making him its single-biggest individual shareholder.

Mr Musk, whose net worth has been reported at US$255 billion, did not respond to a request for comment. On Tuesday, in what appeared to be a veiled allusion to Twitter, he tweeted his thoughts about social networks and their policies: "A social media platform's policies are good if the most extreme 10 per cent on left and right are equally unhappy".

It is unclear how Tesla's shareholders will regard Mr Musk's move to potentially take out a loan against shares of the company; some of its largest shareholders declined to comment. The automaker will report quarterly earnings on Wednesday (April 20). Mr Musk often speaks during Tesla's earnings call with investors.

A deal for Twitter, if structured as a traditional leveraged buyout, would potentially be the largest such deal in at least the last two decades and would be difficult to finance for any buyer. That is because Twitter does not have the financial profile that is typical of debt-fuelled acquisitions.

In most leveraged buyout deals, companies have large and steady cash flows. But Twitter's business has been inconsistent, with revenue growth slowing. Its earnings excluding costs such as interest total only about US$1 billion a year, and financiers are generally loath to pile on too much debt with companies that generate earnings of that size.

There are also obstacles particular to Mr Musk. In 2018, Mr Musk tried to take Tesla private and tweeted "funding secured", propelling Tesla shares higher. He did not have financing prepared for such a deal. The Securities and Exchange Commission later filed a securities fraud lawsuit against him, accusing him of misleading investors. Mr Musk paid a US$20 million fine and agreed to step aside as Tesla's chair for three years.

Some investors are wary of getting involved in financing Mr Musk's Twitter bid, concerned about the risks of teaming up with the mercurial billionaire and a company as politically contentious as Twitter, one person with knowledge of the situation said. For banks, offering a loan against Tesla stock is also risky, given the stock's volatility.

Mr Musk has not publicly articulated his business plan for Twitter, although he has spoken about reversing Twitter's moderation policies and providing additional transparency about how its algorithms work. He has made clear that profit is not his focus, potentially complicating efforts to invest with traditional Wall Street financiers.

Twitter, which has brought on advisers from Goldman Sachs and JPMorgan Chase, has also been weighing whether to invite bids from other potential buyers, two people close to the company said. At least one interested party, private equity firm Thoma Bravo, has emerged, although it is unclear whether it will ultimately submit an offer.