Musk Reportedly Plans To Take Twitter Public A Few Years After Acquisition

The topline

Elon Musk has told investors he’s wooing to fund his $44 billion deal to take Twitter private that they may be able to cash out in as few as three years through a public stock offering, the Wall Street JournalReport Tuesday, citing unnamed source

Elon Musk attended the 2022 Met Gala at The Metropolitan Museum of Art, May 2, 2022.

Theo Wargo/WireImage

Here are some key facts

Twitter’s board has agreed to an offer from Musk of $54.20 a share to take the company private.

While private-equity firms often spend about five years restructuring a company before taking it public once more, Musk’s tentative three-year timeframe could signal he believes he can rapidly reform Twitter to improve its profitability, the Wall Street Journal said.

Twitter was publicized in 2013. It has made a loss of $1 million annually since 2018. And its growth in the second quarter has fallen short of expectations.

Contra

Musk’s prior track record indicates that a three-year timeframe for taking Twitter public again could be overly optimistic. Musk at Tesla has made it clear that he has not met deadlines. Regarding missed production deadlines for the Tesla Model 3, Musk remarked that he is “dumb at predicting dates.”

Important Background

Musk, who had purchased a 9.2% share of Twitter in April 2004, announced his intention to acquire the whole company for $44B. The company’s board initially balked at the proposal, but accepted after Musk disclosed he had secured $46.5 billion in financing. This includes a $12.5 billion margin loan against Musk’s stake in Tesla and $13 billion in loans against Twitter. Monday, Reuters & the WSJ have reported that Musk is seeking additional partners in order to reduce how much of the remaining $21 billion would come from the Tesla margin loan or out of Musk’s own pocket, with the WSJReports indicate that Apollo Global Management is interested in joining the deal. Musk and Twitter agreed on a cancellation fee of $1 billion.

Tangent

Although publicizing a company may allow it to raise capital, the company must also release its financial statements quarterly to shareholders. This reduces the executive’s flexibility with the company. In 2018, Musk announced that he was considering taking Tesla private, remarking that, as a publicly traded company, Tesla was subject to “wild swings” in stock-price and short-term earnings incentives that distracted from longer-term goals. Three weeks later, Musk announced that Tesla would stay public after receiving feedback from shareholders.

Additional Reading

“Musk Reportedly Seeks More Financing For Twitter Acquisition” (SME)

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