Some claim that Elon Musk’s $44 billion deal to acquire Twitter is the largest leveraged buyout in history. It’s a moot point, said The New York Times: Dealogic thinks it’s only the biggest in the last two decades. But that doesn’t take away from the shock and awe. This is indeed “one of the most hectic and unpredictable takeover bids of all time,” it said Bloomberg. A month ago, Musk’s primary connection to the social media platform was that of a “productive user.” In quick succession, he “outed himself as Twitter’s largest shareholder, short-lived potential board member, hostile admirer, and eventually successful dealmaker.” Musk proceeded “at breakneck speed” – he even “waived the chance to see Twitter’s finances beyond what was publicly available.” A major breakthrough was quickly securing funding for the purchase. After bringing in Morgan Stanley as an advisor, Musk “was able to get a dozen banks to issue $25.5 billion. The bankers were impressed. One said that “while Musk likes to shoot from the hip in public, in private he was curious, thoughtful, and open to feedback.”
Tell that to Tesla shareholders, said Nils Pratley The guard – the “forgotten part” of this deal. Shares in Musk’s electric vehicle business plunged 12% “as the market digested the significance of the boss’s latest adventure.” One obvious risk is Musk’s sale of Tesla stock to fund the $21 billion equity stake in the package. “Another is political spillover risks in the US and elsewhere.” Twitter is blocked in China because the platform rightly refuses to bow to Beijing’s censorship laws. “But Musk, wearing his Tesla hat, is a beneficiary of Chinese generosity in the form of financial incentives to build cars in China.” Rich Chinese consumers are big Tesla buyers, and the company sources key elements used in its batteries Vehicles are needed out of the country. “What would happen if Beijing suggested that Twitter wanted to give the Chinese Communist Party easier access in the interest of smoother trade relations for Tesla?” Perhaps this is an extreme case, but the “potential for trouble and expense” is clear.
Investors are already concerned, he said Sky news. And the deal still has to be approved by shareholders. At best, it’s a distraction for them; at worst, it’s a real business risk. Unlike Twitter, which has lost money over the past two fiscal years, Tesla is “beautifully profitable,” posting gross margins of 27% in its most recent quarter, Pete Sweeney said Reuters Breaking Views. “Freedom of speech is a public good worth defending,” but Tesla shareholders could end up paying “a lot of rent” for Musk’s “stains of moral superiority.”
https://www.theweek.co.uk/business/companies/956587/elon-musk-twitter-takeover-trouble-for-tesla Elon Musk’s Twitter takeover: Trouble for Tesla?