Tesla CEO Elon Musk on Wednesday revised the funding plan for his $ 44 billion Twitter purchase proposal, raising investors’ hopes that the unpredictable billionaire still intends to reach an agreement . The news comes as Twitter has been hit by market turmoil and Musk’s not entirely explainable concerns about the number of fake Twitter accounts.
The funding update overshadowed Twitter’s regularly scheduled annual shareholders ’meeting early Wednesday. Shareholders did not directly address the Musk agreement: this vote will be scheduled for an as yet undetermined future date, should the agreement continue. Twitter shares rose 5.5% to $ 39.22 in the aftermarket, based on a 3.9% increase during regular trading.
Shares of Twitter rose more than 4.5% Thursday morning to around $ 38.90.
The funding changes described in a regulatory filing would save $ 6.25 billion from the loan package Musk had previously lined up for the Twitter purchase. This means that Musk will have to raise that amount in stock commitments instead of debt. That would bring the share-based share of the deal to $ 33.5 billion, more than the $ 27.25 billion Musk revealed three weeks ago.
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The presentation to the Stock Exchange Commission did not go into much detail about where Musk will get the extra capital, but he stressed that he is still trying to persuade his friend and former Twitter CEO Jack Dorsey, a supporter of the purchase. , to launch its stock in the financing package.
Elon Musk says the Twitter deal is “pending” over spam accounts
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Dorsey, also a co-founder of Twitter, currently has a 2.4% stake worth about $ 700 million, according to the closing price of the company’s shares on Wednesday, according to FactSet Research. Musk owns a nearly 9.6% stake worth $ 2.7 billion.
Wednesday was also Dorsey’s last day as a Twitter board member, a date set when he resigned as CEO last November.
The nuts and bolts in the financing package were not as important to investors as the news that it looks like Musk still plans to complete his Twitter purchase.
There are serious doubts about Musk’s determination of the deal since he announced it was putting it “on hold”—Something experts say he can’t really do unilaterally — until Twitter provides public evidence to support his claims that less than 5% of his accounts are fake-powered spam bots.
“The elephant in the room stays”
Even assuming the stock price rise continues with the usual trading on Thursday, Twitter is still changing hands well below the $ 54.20 per share that Musk agreed to pay just a month ago.
Wall Street analysts believe it Musk is looking for a lower price on the deal, as stock markets and their personal wealth have dropped substantially since it first bid in April.
Wedbush Securities analyst Dan Ives said the persistent gap between Musk’s bid price and Twitter’s share price indicates that most investors still believe the billionaire will move away from the agreement unless the company accepts a lower price. The Twitter board has so far insisted it will not.
Earlier this week, Ives estimated that there was a 60% chance that Musk would cancel the Twitter deal and pay a $ 1 billion breakout fee, with the risk of a possible lawsuit by of the company. With Musk now trying to secure a new funding package, Ives believes there is a 50-50 chance the deal will pass, but only if the Twitter board is willing to sell for much less than the agreed price. “Musk is covered his bets here, but the big elephant in the room stays,” Ives said.
Headache worsened by privacy breach agreement
Twitter faced another potential headache Wednesday in accepting Penalty of $ 150 million to resolve allegations that it violated the privacy of its users to help sell advertising from 2013 to 2019 in a case filed by the U.S. Department of Justice and the Federal Trade Commission.
Prior to the shareholders’ meeting, CEO Parag Agrawal stated in advance that executives would not answer any questions about Musk’s offer. Even a question from a shareholder asking what would happen to their shares if someone buys Twitter and takes it privately was removed. (If this happensthe shareholder would receive the agreed purchase price for each share and the shares would be withdrawn from trading).
Musk’s presence was felt but not seen
Musk did not join the meeting, although he could have done so, being one of Twitter’s largest shareholders.
But the drama surrounding his offer, almost entirely created by Musk himself, threatened to spill over into Wednesday’s events. Shareholders proposing voting proposals often invoked his name. A proposal from the New York State Commonwealth Retirement Fund called for a report on Twitter’s policies and procedures around corporate-funded political contributions. It was approved in a preliminary vote.
Two proposals submitted by conservative groups were not approved. One called for an audit of the company’s “impacts on civil rights and non-discrimination” and referred to diversity, equity and inclusion programs as “immoral, illegal and … contrary to the interests of shareholders “. The other asked for more information about the company’s pressure activities.
Several proposals spoke of the deep existential conflict that is taking place between users, employees, shareholders and Twitter employees. While shareholders on the one hand criticized the company for what they see as too liberal a policy and a bias against conservatives, others said the company does not protect users from harassment, abuse and misinformation.
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- Elon Musk
- Economy
- Jack Dorsey
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