Elon Musk Races to Secure Financing for Twitter Bid

A deal for Twitter, if structured as a traditional leveraged buyout, would potentially be the largest such deal in at least the last two decades and would be difficult to finance for any buyer. That’s because Twitter does not have the financial profile that is typical of debt-fueled acquisitions.

In most leveraged buyout deals, companies have large and steady cash flows. But Twitter’s business has been inconsistent, with revenue growth slowing. Its earnings excluding costs such as interest total only about $1 billion a year, and financiers are generally loath to pile on too much debt with companies that generate earnings of that size.

There are also obstacles particular to Mr. Musk. In 2018, Mr. Musk tried to take Tesla private and tweeted “funding secured,” propelling Tesla shares higher. He did not have financing prepared for such a deal. The Securities and Exchange Commission later filed a securities fraud lawsuit against him, accusing him of misleading investors. Mr. Musk paid a $20 million fine and agreed to step aside as Tesla’s chairman for three years.

Some investors are wary of getting involved in financing Mr. Musk’s Twitter bid, concerned about the risks of teaming up with the mercurial billionaire and a company as politically contentious as Twitter, one person with knowledge of the situation said. For banks, offering a loan against Tesla stock is also risky, given the stock’s volatility.

Mr. Musk has not publicly articulated his business plan for Twitter, though he has spoken about reversing Twitter’s moderation policies and providing additional transparency about how its algorithms work. He has made clear that profit is not his focus, potentially complicating efforts to invest with traditional Wall Street financiers.

“This is not a way to sort of make money,” Mr. Musk said in an interview at a TED conference last week. “My strong intuitive sense is that having a public platform that is maximally trusted and broadly inclusive is extremely important.”

Mr. Musk’s offer for Twitter stands at $54.20 a share. Several analysts have said the company’s board is likely to accept only an offer of $60 a share or more. Twitter’s stock rose above $70 a share last year when the company announced goals to double its revenue, though its stock has since fallen to around $45 as investors have questioned its ability to meet those targets.

Article source: https://www.nytimes.com/2022/04/19/technology/elon-musk-twitter.html