Billionaire entrepreneur, Elon Musk might need to sell a huge number of his Tesla shares or might need to take a loan against his Tesla holdings to take over Twitter.
On Thursday, Tesla chief offered to purchase the social media company for $43 billion in cash. Musk offered $54.20 per share to buy out Twitter, in a US SEC filing.
On Wednesday, shares of Tesla Inc. closed 3.66 per cent down at $985 per. While, on the other hand, Twitter closed 1.68 per cent lower at $45.08.
Vinay Bharathwaj, co-founder and co-CEO, Stockal commented on the update and available funding options for Musk. He said that from the recent developments, it can be safely surmised that Elon is looking for control and influence more than ownership as an investor in Twitter.
He added that he might pledge his Tesla shares or Twitter shareholding itself to gain full ownership of the company. While, on the other hand, it is also possible that he would raise capital from some of his friends in the investor fraternity.
Musk, in a letter to Bret Taylor, chairman of Twitter said that he has invested in Twitter as he believes in its potential to be the platform for free speech around the globe, and also he believes that free speech is a societal imperative for a functioning democracy.
Musk added that since making his investment, he has now realised that the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company.
He further added that he has offered to buy 100 per cent of Twitter for $54.20 per share in cash, a 54 per cent premium over the day before he began investing in Twitter and a 38 per cent premium over the day before his investment was announced, publically.
Musk said that his offer is his best and final offer and if it is not accepted, he would need to reconsider his position as a shareholder.
Market watcher, Ghanisht Nagpal, who is a trustee at the Delhi Investors Association, said that Elon Musk may offload a big chunk of his holding in Tesla shares to buy Twitter. Also, it is popular in the US that he will take a loan against his Tesla holdings and use that to make a leveraged buyout.
Nagpal said that this is being a hostile takeover that he will not get his desired rate. Also, the market is discounting the move with Twitter shares moving close to his offer price.
