Logo of Phnom Penh Post newspaper Phnom Penh Post - Elon Musk’s move to buy Twitter in $43B takeover bid faces roadblocks

Elon Musk’s move to buy Twitter in $43B takeover bid faces roadblocks

Content image - Phnom Penh Post
Elon Musk’s fortune does not mean it will be easy for him to buy Twitter. AFP

Elon Musk’s move to buy Twitter in $43B takeover bid faces roadblocks

Even for the richest person on the planet, buying Twitter was always going to be a challenge – a highly complex financial transaction now made even trickier by a defensive “poison pill” move from the platform’s board.

Musk’s $43 billion offer lays out the myriad potential pitfalls: possible government approvals, legal as well as regulatory due diligence, negotiations of a final agreement and, of course, how to pay for it all.

Then Twitter’s board on April 15 showed it won’t go quietly, saying any acquisition of over 15 per cent of the firm’s stock without its okay would trigger a plan to flood the market with shares and thus make a buyout much harder.

“Your move @elonmusk,” tweeted Silicon Valley journalist Kara Swisher.

The offer itself, which Musk said was final, values Twitter at $54.20 per share – above the closing price ahead of his bid, but below a high of $77.06 hit in February of last year.

Even with a moderate and inflexible proposal, which could help the board argue for rejection, it’s a fraught moment that could end in lawsuits from just about everyone involved.

To succeed in repelling Musk’s offer, the Twitter board will need to be on solid ground making an argument that the company is worth more, said Wharton School finance professor Kevin Kaiser.

Shareholders who feel that the board is rejecting a profitable deal will be free to file lawsuits against Twitter.

Musk has the option of sidestepping the board and trying to buy shares directly from shareholders on the market, but that could lead to tedious negotiations with some stock owners holding out for more money.

“The Twitter board has limited ability under Delaware law to stop a tender offer made directly to the shareholders, which Elon Musk hasn’t done, but which he could do if he chose to,” Kaiser said.

“If he does this, and if the shareholders elect to tender their shares, then he can succeed without needing board support or approval.”

While the serial entrepreneur’s net worth is estimated at $265 billion by Forbes, his fortune is not sitting in a bank account waiting to be spent.

Musk said at a TED Conference that he had “sufficient funds” to consummate the deal, but financial analysts describe the situation as more complicated.

Much of Musk’s wealth comes from shares of electric car maker Tesla, which he runs.

Musk would need to turn a chunk of his Tesla holding into cash, either by selling shares or taking out loans with stock as collateral.

“The specifics of how Musk would finance the deal will determine the ramifications for Twitter,” Moody’s said in a note to investors.

Moody’s estimated it would cost Musk $39 billion to buy all the outstanding Twitter shares, and that there would be “a strong chance” he would have to repay or refinance the San Francisco-based company’s billions of dollars of existing debt.

That was before the poison pill move by Twitter that ramps up the cost for Musk.

Musk tweeted a poll that hinted he might be thinking of taking his bid directly to shareholders.

He asked whether taking the company private for his offered price should be up to shareholders and not the board.

As the poll neared its close on April 15, more than 2.7 million votes had been cast with nearly 84 per cent of them in favour of the idea.

Selling a massive amount of shares in Tesla to buy Twitter would come with a large tax bill based on capital gains, and could cause shares in the electric car company to sink as the market is flooded with stock for sale.

Musk could keep hold of his shares and get a loan, absorbing the interest payments. Or he could team up with a deep-pocketed partner, but that could come with the strong-willed executive having someone to answer to regarding his decisions at Twitter.

MOST VIEWED

  • Cambodia maintains 'Kun Khmer' stance despite Thailand’s boycott threat

    Cambodia has taken the position that it will use the term "Kun Khmer" to refer to the sport of kickboxing at the upcoming Southeast Asian (SEA) Games, and has removed the term Muay from all references to the sport. Despite strong reactions from the Thai

  • Chinese group tours return to Cambodia starting Feb 6

    Cambodia is among 20 countries selected by Beijing for a pilot programme allowing travel agencies to provide international group tours as well as flight and hotel packages to Chinese citizens, following a three-year ban. As the days tick down until the programme kicks off on February 6,

  • Capital-Poipet express rail project making headway

    The preliminary results of a feasibility study to upgrade the Phnom Penh-Poipet railway into Cambodia’s first express railway indicate that the project would cost more than $4 billion and would take around four years to complete. The study was carried out by China Road and

  • Thai boxers to join SEA Games’ Kun Khmer event

    The Cambodian SEA Games Organising Committee (CAMSOC) – together with the Kun Khmer International Federation (KKIF) and Khmer Boxing Federation – have achieved a “great success” by including Kun Khmer in the upcoming biennial multi-sports event on its home soil for the first time, said a senior

  • Bullets to bracelets: Siem Reap man makes waste from war wearable

    Jewellery is often made from valuable gemstones like emeralds or diamonds and precious metals like gold or silver, or valueless things like animal horns. But a man in Siem Reap has approached the manufacture of delicate pieces from a different angle. His unique form of

  • 61% of 2022 imports came from just 3 markets

    The three largest exporters to Cambodia – mainland China, Vietnam and Thailand – accounted for 60.94 per cent of the Kingdom’s total merchandise imports last year, at $18.245 billion, which was up 11.99 per cent over 2021, according to the General Department of Customs and Excise. Cambodia’s total imports