(CN) — In a filing with the SEC, Tesla CEO Elon Musk laid out how he would secure the financing to purchase Twitter for $46.5 billion.
Musk told regulators with the Securities and Exchange Commission on Thursday that Morgan Stanley would provide about $25 billion in loans and Musk would put up the remaining $21 billion, using his personal wealth and through the selling of certain Tesla shares. Musk already owns a 9.2% stake in Twitter worth roughly $2.9 billion, after he began accumulating shares this January and announcing his stake earlier this month.
The identification of a financing partner is a notable development in Musk’s bid to take over Twitter, as speculation has been rampant that Musk doesn’t have the cash flow necessary to effect a takeover. Musk is worth more than $200 billion and rates as one of the richest people on the planet, but most of his wealth is tied up in Tesla stock. He could take a loan out against his positions, but those issues complicate the potential purchase of Twitter.
However, lining up Morgan Stanley and other equity partners means Musk’s efforts to buy Twitter could materialize in coming weeks.
Thursday’s filing with the SEC also makes clear Twitter has yet to formally respond to Musk’s offer to buy Twitter.
“The reporting person is seeking to negotiate a definitive agreement for the acquisition of Twitter by the reporting person and is prepared to begin such negotiations immediately,” the filing reads.
Twitter released a statement Thursday saying it will continue to negotiate in good faith and act in accordance with the best wishes of shareholders that own the publicly traded company.
“We are in receipt of the updated, nonbinding proposal from Elon Musk, which provides additional information regarding the original proposal and new information on potential financing,” the company said in a statement. “As previously announced and communicated to Mr. Musk directly, the board is committed to conducting a careful, comprehensive and deliberate review to determine the course of action that it believes is in the best interest of the company and all Twitter stockholders.”
Twitter has enacted a poison pill strategy, which stipulates that if any one person buys more than a 15% stake in the company, Twitter can flood the market with additional shares aimed at reducing the power of individual stakes.
Market analysts are divided about whether Musk’s offer to buy the company at $54.20 per share is good value for the company and its shareholders.
Some argue the price is well above what the stock is trading at — around $47 per share as of press time — and that Twitter’s history of failing to return adequate value to shareholders means board members have no choice but to sell given their fiduciary duties. Others argue Twitter was once worth $73 a share not too long ago and that Musk's offer underestimates the overall value of a company that continues to play an outsized role in the public discourse.
Musk's filing comes a day after Tesla reported blowout earnings and record profits, bolstering Musk’s case that he can replicate the success he found at PayPal and Tesla for Twitter.
But not everyone is sure.
While Tesla stock soared Thursday — up $43 to $1,020 as of press time — Musk has sometimes proved to be erratic, as when he tweeted that he would take Tesla private at $420 and landed in hot water with the SEC and Tesla shareholders.
Shareholders have sued him in federal court, and attorneys representing those plaintiffs attempted to place a gag order on Musk in advance of a trial slated to begin next year.
But U.S. District Court Judge Edward Chen refused to approve the gag order, finding it would trample on Musk’s free speech rights.
A member of the class action suit argued Musk’s tweets will gin up publicity for the trial and unfairly taint potential jurors, but Chen said publicity is more of a concern in just ahead of and during a high-profile trial.
Musk has said he wants to buy Twitter due to concerns over its adherence to free speech principles, not for economic considerations.
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