(Bloomberg) — Elon Musk agreed to buy Twitter Inc. for $44 billion, ending weeks of speculation after he took a stake in the social media platform this month.
The announcement Monday confirmed many of the details that had already been reported — or tweeted — about the transaction. It also left many unanswered questions. Here’s what we know so far, what still needs to be clarified, and what might happen next.
What we know
The Price: Musk said in his original bid for Twitter that he wouldn’t budge from the price of $54.20 per share. He stuck to that promise, announcing the all-cash deal for exactly that amount. Though his initial filing valued the offer at $43 billion based on the company’s outstanding stock, Monday’s confirmation bumped that figure to $44 billion. That’s likely a quirk of the numbers of shares being counted, rather than any adjustment to the price.
The Financing (part one): This is a giant leveraged buyout. As Musk revealed last week, he’s raised $25.5 billion of fully committed debt and margin loan financing from a dozen banks to back the bid. When the deal is completed, Twitter will become a privately held company.
Who Will Own Twitter: This might sound obvious, but Twitter has agreed to sell itself to an entity “wholly owned” by Musk. No co-investors were named in the statement (more on that below) and the wording implies any that do join will amount to no more than minority stakeholders.
Who’s Advising: We already knew that Goldman Sachs Group Inc. and JPMorgan Chase & Co. were working with Twitter. Allen & Co. joined that camp, according to Monday’s statement, grabbing a coveted spot for a boutique bank among the Wall Street giants. On Musk’s side, Bank of America Corp. and Barclays Plc lined up alongside his lead adviser Morgan Stanley.
Breakup Fee: Monday’s statement didn’t reveal whether either side has agreed to pay a termination fee if the transaction falls apart, but Bloomberg News reported that Musk will be on the hook if the deal falls apart or if he walks away. Break fees on a deal this size can run to billions of dollars, giving him a big financial incentive to see it through.
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What we don’t
The Financing (part two): Though the announcement reiterated that Musk is “providing an approximately $21 billion equity commitment,” there were no further details about where that money would come from. Now that the deal has turned friendly, private equity firms — who typically shy away from hostile transactions — might be more likely to come on board and write him a check. For a commitment this size, upwards of four or five different firms could be involved in what’s commonly known as a syndicated, or club, deal. Some existing shareholders could also decide to roll their Twitter stakes into the private company. All of that means that Musk might not be on the hook for much of the money himself, which could be a relief to shareholders of Tesla Inc., who’ve been worried he’d sell his stake in the electric carmaker to fund Twitter.
Who Will Run Twitter: Both Chief Executive Officer Parag Agrawal and Chairman Bret Taylor were quoted in the statement, so they’re still in their roles, for now. Over the past couple of weeks Musk has repeatedly tweeted his dissatisfaction with Twitter’s board and how the company has been run, and management changes are common when a company gets bought. But Musk is already CEO of both Tesla and SpaceX, so his capacity to take on another hands-on leadership role could be limited.
How Twitter Will Be Run: Musk has spoken openly about his plans to make the platform a haven for unfettered speech online, and complained that the service is too heavy-handed when it comes to moderating user tweets. Hours before the deal was announced, he tweeted that “I hope that even my worst critics remain on Twitter, because that is what free speech means.” He’s also floated ideas about turning the company’s headquarters into a homeless shelter, removing ads for paid users and adding to the platform’s authentication checks.
What’s next
The Filing: Many of these details should be cleared up in a filing that Twitter is required to make with the Securities and Exchanges Commission, known as a Form 8-K. Companies generally have four business days to make this type of filing, so we should know more by the end of the week, at the latest.
Twitter’s First-Quarter Results: Amid all of this, Twitter is scheduled to announce its latest earnings on Thursday, before the market opens. The company isn’t planning to hold a conference call to go into the details of the deal — or the financial results — but they’ll give investors a glimpse into the state of the business that Musk is buying.
The shareholder vote: Musk’s deal for Twitter is subject to a shareholder vote. A date for the vote hasn’t yet been revealed.
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