Elon Musk says he has £35.6bn in financing ready to buy Twitter

Elon Musk says he has lined up 46.5 billion dollars (£35.6 billion) in financing to buy Twitter and is trying to negotiate an agreement with the company.

Last week, Mr Musk announced an offer to buy the social media company for 54.20 dollars per share, or about 43 billion dollars (£32.9 billion).

At the time, he did not say how he would finance the acquisition.

The Tesla chief executive said on Thursday in documents filed with US securities regulators that he is exploring what is known as a tender offer to buy all of the social media platform’s common stock for 54.20 dollars per share in cash.

Under a tender offer Mr Musk, who owns about 9% of Twitter shares, would take his offer directly to other shareholders, bypassing the board.

But he has not decided yet whether to do that.

The documents filed with the Securities and Exchange Commission say San Francisco-based Twitter has not responded to Mr Musk’s proposal.

Twitter said in a statement on Thursday that it has received Mr Musk’s updated proposal and its “new information on potential financing”.

The company said its 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”.

Last week Twitter’s board adopted a “poison pill” defence that could make a takeover attempt prohibitively expensive.

The filing states that “entities related to (Mr Musk) have received commitment letters committing to provide an aggregate of approximately 46.5 billion dollars”.

The financing would come from Morgan Stanley and other financial institutions.

Other banks involved include Barclays, Bank of America, Societe Generale, Mizuho Bank, BNP Paribas and MUFG.

Morgan Stanley is one of Twitter’s biggest shareholders, behind Vanguard Group and Mr Musk.

Mr Musk said that 13 billion dollars (£10 billion) in financing came from Morgan Stanley and the other banks, as much as 12.5 billion dollars (£9.6 billion) would be loans secured by his Tesla stock, and committed 21 billion dollars (£16 billion) in equity, “directly or indirectly” from him, although he did not say what the source of those funds would be.

The filing says that the equity commitment could be reduced by contributions from others or additional debt taken on.

Mr Musk is the world’s wealthiest man, according to Forbes, with a nearly 279 billion dollar (£214 billion) fortune.

But much of his money is tied up in Tesla stock – he owns about 17% of the company, according to FactSet, which is valued at more than one trillion dollars – and SpaceX, his privately held space company.

It is unclear how much cash Mr Musk has.

Electric car and solar panel maker Tesla allows executive officers to use shares as collateral for loans, but limits the borrowing to 25% of the value of the pledged shares.

Mr Musk owns 172.6 million shares worth 176.47 billion dollars (£135.3 billion).

Just over 51% of his stake is already pledged as collateral, according to a Tesla proxy statement.

That means Mr Musk could use the remaining stake to borrow about 21.5 billion dollars (£16.5 billion).

Getting financing from big banks brings a lot of credibility to Mr Musk’s bid, said Wedbush Securities analyst Daniel Ives.

“This isn’t just Musk antics,” Mr Ives said.

“Banks were going to line up for this deal from the richest person in the world. The fact they they pulled it together this quick shows that Musk isn’t joking around. This is a real bid.”

Mr Ives said the tender offer puts more pressure on Twitter’s board to find a second bidder or go to the negotiating table with Mr Musk.

“It’s a way to get around the poison pill and let shareholders speak,” he said.

A Delaware corporation named X Holdings 1 was formed at the direction of Mr Musk and some affiliates who intend to “acquire, directly or indirectly, all of the outstanding equity interests of, or directly or indirectly merge with Twitter Inc”, according to a financing commitment letter the company submitted.

Shares of Twitter rose just under 1% to 47.05 dollars in Thursday morning trading after the financing became public.

The share price is 7.15 dollars below Mr Musk’s offer.

Mr Musk “is seeking to negotiate a definitive agreement for the acquisition of Twitter … and is prepared to begin such negotiations immediately”, the documents say.

With a tender offer, Mr Musk would try to get other shareholders to pledge their stock to him at a certain price on a certain date.

If enough shareholders agree, Mr Musk could use that as leverage to get the board to drop the poison pill defence.

Mr Musk signalled the possibility of a tender offer several times this week in tweets using the word “tender”.