Elon Musk checks his pockets for Twitter deal

One problem with Elon Musk’s offer to buy Twitter Inc for about $40 billion is that he does not have $40 billion. Of course he is very rich — the richest person in the world, worth $260 billion by Bloomberg’s estimate — but most of that money is tied up in the stock of Tesla Inc, SpaceX, the Boring Co, etc, and it is not obvious that he would want to sell enough of those things to buy a new thing. Nor is it obvious that anyone else would want to give him $40 billion to buy Twitter, given that he sees Twitter as “not a way to make money” and does not “care about the economics at all.”
Another problem with Musk’s offer to buy Twitter is that, if you ask him where the money is coming from, he says things like “I have sufficient assets” and “I am not sure that I will actually be able to acquire it,” which do not inspire confidence that he has actually thought about raising the money.
A third problem with Musk’s offer to buy Twitter is that in 2018 he mused about taking Tesla Inc private for about $70 billion. “Funding secured,” he said, in an infamous tweet. So the answer to the question “might Elon Musk have made an offer to take a large public company private, at a cost of tens of billions of dollars, without giving any real thought to where the money would come from?” is “absolutely yes, and he’s done it before.”
All of these problems mean that, if you are a Twitter shareholder and Musk says “I am going to buy Twitter for $54.20 per share,” you might not believe him.
“Show me the money,” you might reasonably say. And in fact, when Musk did publicly announce his bid, the stock price dropped, closing at $45.08 on the day his bid became public. Musk’s proposal was contingent on “completion of anticipated financing,” and that is a big if.
Similarly, if you are Twitter’s board, you might not believe him. When Musk comes to you offering $54.20 per share, your first reaction might be — and I think Twitter’s board’s was — “that is not enough money.”
But your second reaction would probably be “wait, do you even have $54.20 per share?” And if you asked Elon Musk that question directly, he would probably give you an impish grin and say noncommittal things like “maybe!” or “well I am very rich.” This would be a frustrating negotiating dynamic. You can’t negotiate a deal and then show up at closing and Elon Musk turns out his pockets and is like “well I have like 69 bucks plus some Dogecoin.” You need to know if he can get the money!
The response by Twitter’s board to Musk’s offer was to put in place a poison pill to prevent Musk from buying too much more stock. We discussed the mechanics and justification of the pill. The basic mechanic is that if anyone (viz, Musk) buys more than 15% of Twitter’s stock, that person’s stock goes poof, though it is technically more complicated than that. The basic justification is that, if someone is going to acquire Twitter, the board would like it to be at a high price, paid to all shareholders, in an organised process, and the pill allows the board to regulate the process.
This leaves Musk two main options. One is to negotiate with Twitter’s board and try to strike a friendly deal.

—Bloomberg