Fri. Dec 9th, 2022
Twitter

Tesla CEO says he has increased his personal funding to $33.5bn and secured another $6.25bn in equity financing to buy the app

Wed 25 May 2022 19.11 BST

Elon Musk has secured additional funding to purchase Twitter, according to financial filings made public on Wednesday, moving the billionaire closer to completing the high-profile deal.

The Tesla CEO said in the regulatory filings he has increased his personal funding of the purchase from $27.3bn to $33.5bn and secured an additional $6.25bn in equity financing, reducing the amount of debt the entrepreneur would take on in the $44bn purchase.

The world’s richest man is also in talks with shareholders, including former Twitter CEO Jack Dorsey, for additional financing commitments to fund the deal, he said in the filing.

Musk originally took a $12.5bn margin loan against stock of his electric car maker company Tesla to help fund his purchase of Twitter. But he reduced it to $6.25bn earlier this month after bringing in co-investors.

The latest filing comes after Musk said last week his offer to buy Twitter would not move forward until the company shows proof that spam bots account for less than 5% of the platform’s total users, a move analysts suggest is meant to pressure Twitter to accept a lower sale price.

The details of Musk’s financing plans were made public on the day that Twitter shareholders gathered for their regularly scheduled meeting.

A vote on Musk’s plan to buy the social media platform was not on the agenda, but will take will take place at a yet-undetermined date in the future.

Still, the shareholders raising proposals for a vote frequently invoked the Tesla CEO’s name.

Investors at the meeting preliminarily approved a proposal by the New York state common retirement fund that called for a report on Twitter’s policies and procedures around political contributions using corporate funds.

Two proposals brought by conservative-leaning groups failed to garner enough votes to pass. One called for an audit of the company’s “impacts on civil rights and non-discrimination” and referred to “‘anti-racism’ programs that seek to establish ‘racial/social equity’” as “themselves deeply racist”. The other sought more disclosure on the company’s lobbying activities.

Several proposals spoke to the deep existential conflict that’s been playing out among Twitter’s users, employees and shareholders.

Twitter co-founder Jack Dorsey’s term as a board member expired on Wednesday. Investors re-elected Patrick Pichette, a general partner at Inovia Capital, to the board.

Investors also blocked the re-election of a Musk ally to the board, voting against Egon Durban, the co-head of private equity firm Silver Lake, who partnered with Musk on his abandoned bid to take the electric carmaker private.

“The Twitter board has not embraced Elon Musk and his vision for Twitter. So the fact that his ally has been removed from the board is not surprising,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.

The vote on Durban’s role could indicate skepticism among shareholders of Musk’s plan or his willingness to pay what he offered, but investors are expected to overwhelmingly approve the deal.

Twitter’s board initially voted to adopt a “poison pill” that limited Musk’s ability to raise his stake in the company, but later voted unanimously to accept his buyout offer.

Musk in April reached a deal to buy Twitter at $54.20 a share. But the Tesla CEO said in May the deal cannot progress until the platform proves that fewer than 5% of its users are fake or spam accounts.

The sharp turnaround makes little sense except as a tactic to scuttle or renegotiate a deal that is becoming increasingly costly for him, experts said last week. That the discussions are playing out publicly, on Twitter no less, only adds to the chaos.

Experts say Musk cannot unilaterally place the deal on hold. If Musks walks away, he could be on the hook for a $1bn breakup fee. Alternatively, Twitter could sue Musk to force him to proceed with the deal, although experts think that is highly unlikely.

Even if shareholders approve proposals, it will be non-binding, said Donna Hitscherich, a professor of finance at Columbia Business School.

Twitter shares jumped around 6% to $39.15 in extended trading.

Musk could not be immediately reached for comment on details of the regulatory finding.

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