Elon Musk will need to find more cash to finance the $44 billion purchase of Twitter. The tycoon, who initially said that he would contribute 21,000 million dollars of the offer with his own funds -from his pocket or from third parties-, informed the US Securities Market Commission (SEC) last night that he will raise that figure to 33,500 million . The rest will be covered by a loan guaranteed by the assets of the social network itself.
With this maneuver, Musk eliminates the section of the financing of the operation that had his own Tesla shares as collateral and that had acted as a drag on the evolution of the automobile company on the Stock Market.
Financing the transaction without debt linked to its Tesla shares will ease pressure on the automaker’s shares, which lost $125 billion in value a day after the Twitter purchase deal was announced. Tesla shares have fallen 25% since the acquisition was agreed. “This will remove some leverage from the deal,” said Dan Ivest of Wedbush Securities, who sees only a 50% chance of the Musk deal going through. “The high-stakes poker game continues,” he stressed.
Following the announcement, which was welcomed by Twitter investors, shares of the social network rose more than 5% in the after-hours market to $39.20.
Musk’s initial plan called for buying Twitter with $21 billion of equity and debt: $13 billion guaranteed by Twitter’s assets and $12.5 billion with a bank loan backed by his own Tesla securities. Weeks ago he already cut this loan in half, having raised $7.14 billion from a list of co-investors, including Larry Ellison, the billionaire founder of Oracle, Sequoia Capital, Brookfield, Qatar Holding, Binance and VyCapital. Now Musk completely eliminates this loan.
Musk is trying to raise additional cash by negotiating with major Twitter shareholders, including founder Jack Dorsey, to redeem their securities before the deal, in which he plans to take the company public, is completed so that retain a stake in the social network. Doing so will reduce the amount of cash you would need to put out of pocket.
The founder of Tesla thus reactivates the operation weeks after he questioned the takeover bid. For this he used the calculations of the company itself on the number of false accounts in the social network. Musk demanded that the company clarify the number of bots on Twitter, and suggested that if this figure was higher than the 5% that the company says, it could lower the price offered for the takeover bid, $54.2 per share.
The tycoon, who does not stop sowing doubts about the operation (he has also questioned the algorithm of feed of Twitter, which according to him was designed to manipulate users), you will have to pay 1,000 million dollars if you do not fulfill your agreement. Additionally, Musk could face a breach of contract lawsuit from Twitter. The controversy surrounding the operation has been rising as Musk has been unraveling some actions that he will carry out if he finally closes the purchase, such as allowing former US President Donald Trump to return to the social network and that he will review the content moderation policies.
Fine of 150 million for violating privacy
This same Wednesday it was learned that Dorsey has left the board of directors of Twitter and that the social platform has agreed to pay 150 million dollars to settle the accusations of the US Federal Trade Commission (FTC) of improper use of private information of the users, such as their phone numbers and email addresses, to better target their advertisers. The agreement reached also requires the social platform to improve its security and privacy practices.
According to the lawsuit filed against the company, it violated a 2011 agreement with the FTC in which it promised to better protect the personal data of its users. Likewise, the social network would have lied when saying that it complied with the privacy regulations within the framework of the data transfer agreements between the EU and the US and between Switzerland and the US.
“If Twitter was not truthful here, what else is not true? This is very concerning news,” Musk said in a tweet after the news broke. The billionaire has also criticized the social network’s advertising-based business model and has promised to diversify its sources of income.
Twitter’s settlement comes after years of controversy over the privacy practices of tech companies. Facebook and Google have also been sanctioned by the FTC for similar reasons.
