Elon Musk has secured a $47 billion war chest to fund his takeover bid for Twitter as the billionaire prepares for one of the biggest hostile takeovers in history.
Mr Musk, the world’s richest man, has secured funding from banks run by Morgan Stanley – in part by using shares he owns in Tesla as collateral. He will also pump $21bn (£16bn) of his own money into the deal.
On Thursday night, he hinted that Twitter would force users to prove they are real people in a bid to crack down on fake accounts. Mr Musk vowed in a tweet to “defeat spambots or die trying” and “authenticate all real humans”.
Tesla’s chief executive said earlier today that he was ready to start negotiations with Twitter “immediately” in a move that throws down the gauntlet to his boss Parag Agrawal. If that fails, he will go straight to shareholders with a takeover bid that bypasses the board completely.
The proposal is a rebuke to critics who suggested Mr Musk was not serious when he announced his intention to make Twitter private last week.
It has come to light just hours after it emerged that Mr Musk was in line for a record $23 billion bonus from Tesla because he had achieved a series of lofty goals that skeptics had once called “laughably impossible”.
Dan Ives, an analyst at Wall Street brokerage Wedbush, said: “The Street doubted Twitter’s offer was a real offer – but it puts the money where the mouth is.
“This is a high stakes poker game and the back of Twitter’s board is now against the wall.”
About $13 billion of Mr. Musk’s funding will come from Wall Street banking giant Morgan Stanley and others including Barclays, Bank of America, Societe Generale, Mizuho Bank, BNP Paribas and MUFG.
Mr. Musk, 50, will then provide the remaining $33.5 billion, partly by borrowing against his holdings in Tesla and partly through $21 billion in equity financing.
A Delaware-based company called X Holdings 1 was created specifically to “acquire, directly or indirectly, all outstanding interests” in Twitter, according to another document.
It is the billionaire’s latest move to up the ante and comes just 17 days after it was first revealed he was a Twitter shareholder.
Analysts said the proposals would put pressure on Mr Agrawal and the rest of Twitter’s board to find a rival “white knight” bidder or come to the negotiating table.
Mr Musk, who currently owns 9% of Twitter, was originally set to join the company’s board but suddenly offered a $43 billion takeover after his nomination was abruptly rescinded.
Since then, he has repeatedly hinted in cryptic tweets that he’s considering a takeover bid for all shareholders, which Twitter’s board won’t be able to stop. That plan was confirmed in stock market filings Thursday.
In response to the threat, Twitter dusted off ‘poison pill’ backup plans to flood the market with new shares if the billionaire tries to acquire more than 14% of the company. This will dilute Mr. Musk’s stake, making it harder for him to gain control.
Mr. Musk’s filing with the Securities and Exchange Commission indicates that Twitter has yet to formally respond to his bid.
In a statement Thursday, the company confirmed that it had received Musk’s updated proposal and “new information on potential funding.”
The company’s board of directors is “committed to conducting a careful, complete and deliberate review to determine the course of action that it believes is in the best interests of the company and all Twitter shareholders,” it said. he added.
Analysts have previously predicted the board will reject Mr. Musk’s $54.20 per share offer, which is even lower than the $65.40 the stock was trading at just six months ago .
Mr. Ives, of Wedbush, said that strategy is unlikely to survive if Mr. Musk launches a takeover bid that gets support from other shareholders.
He added: “I think they will probably reject the bid within the next 48 hours. The ‘poison pill’ will then buy time to look for another bidder.
“But if they don’t find a white knight, it could become a tornado-like situation for the Twitter board.”
It came as Mr Musk was also revealed to be on the verge of pocketing a $23 billion bonus from Tesla, believed to be the biggest in the company’s history.
The 50-year-old, who does not receive a salary, is due to collect payment under a compensation scheme unveiled by the company just four years ago.
This set targets for Tesla’s sales, earnings and market capitalization, providing that 12 bonuses worth a combined $55.8 billion would be paid when certain conditions were met.
At the time, the company was valued at just $59 billion and The New York Times said experts had described the prospect of hitting the targets as “laughably impossible”.
But Tesla’s market capitalization has since soared to more than $1.1 trillion, after the electric carmaker ramped up sales and production to become the world’s biggest seller of electric cars.
And on Wednesday, the company’s latest quarterly results suggested Mr Musk had now met the sales and profit targets needed to unlock the final tranches of the bonus system as well.
Tesla reported revenue of $18.8 billion for the first three months of 2022 and adjusted profit of $5 billion.
That would represent revenue of $75 billion and profits of $20.1 billion when annualized – enough to release the final three tranches of the bonus program for which he is not already eligible.
Each tranche unlocks 8.4 million shares, which Mr. Musk can buy at a steep discount of $70 each. With Tesla shares trading at around $977 on Thursday, that would put it in line for a windfall of nearly $23 billion.
The total number of shares paid out by the plan is 100.8 million, which would represent $98 billion at today’s prices.
Earlier, another of Mr Musk’s ventures – The Boring Company, which seeks to revolutionize transport by building huge tunnels under cities – announced it was worth $5.7 billion following a funding cycle.