The role of wealth managers in decision-making: Twitter deal with Elon Musk – London Business News

Elon Musk’s Twitter deal has received a ton of media coverage in recent weeks as his “on and off” status has changed frequently, drawing the attention of more than

Since Elon made a formal offer which was accepted by Twitter’s board on April 25, there hasn’t been a dull day regarding the deal as it has gone from cancellation to prosecution. , according to different media or officials. announcements from the parties themselves.

In this article, we will give a quick overview of the main developments and role of wealth managers in the case.

Who is helping Elon Musk in this offer? Well, the main investment bank is Morgan Stanley, which leads a consortium of 12 banks providing loans to Elon to buy Twitter.

Elon Musk, who as recently as May 2022 was the richest man in the world with a net worth over $200 billion, is notoriously cash-poor. Although a slice of Tesla’s stock sales earlier in the year freed up cash that it could use for the deal, the bulk of the financing was expected to come from risk takers such as venture capital funds. private equity or banks.

Here’s an overview of the key timeline events so far:

April 14 – Elon Musk offers a formal offer to buy Twitter for $41.39bn (£33.76bn).

April 15 – Twitter management passes a “poison pill” amendment that would make it virtually impossible for Elon to acquire Twitter through a hostile takeover (i.e. buying stock on the open market without the explicit consent from the administration board).

April 25 – Twitter’s board of directors accepts the deal and duly approves the transaction with shareholders.

June 6 – Elon is publicly threatening to withdraw from the Twitter deal in response to Twitter allegedly failing to provide sufficient information regarding the volume of fake accounts on the platform. He said the “denial” of his demands would give him grounds to end the acquisition deal. Twitter, for its part, used statements to insist that Elon will be held to the original terms of the deal, at the original price.

What is the state of Elon’s relationship with his wealth managers?

The initial deal reached with the Twitter Board on April 25 was backed by funding, which was to be provided by the banking consortium in an unprecedented financing from a private client. However, these $6.25 billion in margin loans contained a term that expired May 25which means that Musk will now have to set up new funding or raise more cash through the sale of shares to be able to buy Twitter directly.

Raising funds by selling his existing stock holdings isn’t his only option. In May, Elon raised private capital from risk-seekers such as private equity firms and entrepreneurs. Elon could revert to this option to leverage more capital. He has also reportedly been in talks with major current shareholders to ask them to stay invested in the business after completion, reducing the size of the stake Elon would have to acquire to gain control of the business.

Either way, Elon should stay in constant contact with his advisors at Morgan Stanley and other wealth managers to keep all options open. A lot of relationships are needed to close a deal of this size, especially when the acquirer wants to limit the amount of equity they need to invest, as seems to be the case with Musk.

Dolores W. Simon