On Thursday, billionaire Tesla CEO Elon Musk announced he had made an offer to buy Twitter for $43 billion.
Musk made his move not long after Twitter announced it had failed to reach an agreement with him about joining its board. That, in turn, came about after Musk disclosed that he had purchased more than 9 percent of Twitter, making him its largest individual shareholder.
Musk has not been shy about his motives for wanting to buy Twitter. He said he believes it must be less restrictive about moderating speech.
But his willingness to make the deal is now being met with questions about his ability to actually complete it — and Twitter’s willingness to accept it.
How would Musk finance the deal?
The first question is whether Musk is able to follow through with the deal at all.
Right now, according to Bloomberg, Musk has about $3 billion in readily accessible cash. So he would have to finance the rest of the deal some other way, whether that is selling shares of Tesla or borrowing money.
Musk owns about 173 million Tesla shares. However, securities filings show that 88 million of them are being used to back personal loans. Still, he has the option to buy 60 million more shares, the filings show.
In a live interview Thursday in Vancouver for the TED2022 conference, Musk said “I have sufficient assets” when he was asked whether funding had been secured for the potential purchase.
In 2018, in his capacity as CEO of Tesla, Musk claimed he was considering taking the electric car company private and that he had secured funding — a claim for which the U.S. Securities and Exchange Commission penalized Musk and Tesla after an investigation.
If Musk were to use Tesla shares, Twitter could still reject his offer on the grounds that the financing he had secured was not reliable, said Kevin Kaiser, an adjunct full professor of finance who is the senior director of the Harris Family Alternative Investments Program at the Wharton School of the University of Pennsylvania.
Twitter “would have to make a judgment of the currency of what was being offered if it is not cash,” Kaiser said.
Could Twitter’s board reject the bid