Elon Musk, Tesla CEO.  (Source = AP Alliance)

In the end, borrowing money to acquire… Musk finances half of Twitter acquisition with Tesla stake collateral

Elon Musk, Tesla CEO. (Source = AP Alliance)

Tesla CEO Elon Musk has agreed to get a bank loan using his stake in Tesla as collateral to finance the acquisition of Twitter, a social media site.

According to foreign media reports such as Bloomberg on April 21 (local time), Musk reported to the U.S. Securities and Exchange Commission (SEC) a plan to finance the acquisition of Twitter worth $46.5 billion (57.567 trillion won). According to the report, Musk agreed to finance $25.5 billion of the acquisition money with bank debt, of which $12.5 billion (15.475 trillion won), or about half, is a Tesla stock-backed loan.

Financial institutions that provide loans using Musk’s Tesla stake as collateral include Morgan Stanley and Bank of America (BoA) in the United States, Barclays in the United Kingdom, Societe Generale and BNF Paribas in France, and Mitsubishi UFG Financial Group (MUFG) and Mizuho Bank in Japan. .

Musk said in a report on the same day that he was trying to negotiate an acquisition with Twitter, and said that he was also considering a tender offer (Tender Offer), which is a hostile merger and acquisition (M&A). Musk’s tender offer would allow him to contact other shareholders and buy their shares directly in order to gain control of Twitter. Earlier, on April 16 (local time), Musk tweeted “Love Me Tender,” the title of singer Elvis Presley’s hit song, on his Twitter, and the market is asking whether Musk hinted at Twitter’s tender offer. speculation has been made.

In addition to the loans for the acquisition, Musk announced that it would secure an additional $21 billion in the name of ‘equity financing’, which means raising equity capital. However, no specific plans, such as the source or purpose of the funds, have been disclosed yet. According to Bloomberg News, Musk could sell his stake other than the Tesla stock-backed loan or secure a partner to join the Twitter acquisition. Reuters also reported that Apollo Global Management, a private equity fund that is currently considering participating in the Twitter takeover fight, is considering working with Musk.

Musk previously offered Twitter a $43 billion takeover deal last week, but Twitter’s board has decided to implement a “poison pill” strategy to defend his takeover. The poison pill gives existing shareholders the right to buy stock at a much lower price than the market price, and is used as a means of defending the company’s management rights in response to hostile M&A. However, since the stock is purchased at a price lower than the market price, it is necessary to take the risk of diluting the value of the stake. It’s like swallowing a poison pill to protect yourself from the outside.

“We have received a new offer from Musk, which we will consider carefully to determine a course of action that is in the best interest of the company and all shareholders,” Twitter tweeted on Tuesday. Meanwhile, Reuters reported that Twitter shares rose less than 1% shortly after Musk’s financing announcement, and that the market remains skeptical that Twitter will turn down Musk’s takeover bid. On the New York Stock Exchange on that day, Twitter closed at $47.08, up 0.77% from the previous trading day.

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