Elon Musk's Twitter bid: Market watchers say this is how he may fund the deal

Billionaire entrepreneur Elon Musk may need to sell a huge number of his Tesla shares or take a loan against his Tesla holdings to take over Twitter, according to market watchers.  

Tesla chief on Thursday offered to purchase the social media company for $43 billion in cash. In a US SEC filing, Musk offered $54.20 per share to buy out Twitter.

Shares of Tesla Inc. closed 3.66 per cent down at $985 per share on Wednesday. On the other hand, Twitter closed 1.68 per cent lower at $45.08.

Commenting on the update and available funding options for Musk, Vinay Bharathwaj, co-founder and co-CEO, Stockal said, "From the recent developments, it can be safely surmised that Elon is looking for control and influence more than ownership as an investor in Twitter. He might pledge his Tesla shares or for that matter Twitter shareholding itself to gain full ownership of the company. On the other hand, it is possible that he would raise capital from some of his friends in the investor fraternity."

In a letter to Bret Taylor, chairman, Twitter, Musk said, "I invested in Twitter as I believe in its potential to be the platform for free speech around the globe, and I believe free speech is a societal imperative for a functioning democracy."

"However, since making my investment I now realise the company will neither thrive nor serve this societal imperative in its current form. Twitter needs to be transformed as a private company," Musk added.

He further added that he is offering to buy 100 per cent of Twitter for $54.20 per share in cash, a 54 per cent premium over the day before he began investing in Twitter and a 38 per cent premium over the day before his investment was publicly announced.

"My offer is my best and final offer and if it is not accepted, I would need to reconsider my position as a shareholder," Musk said.

Market watcher Ghanisht Nagpal, who is a trustee at the Delhi Investors Association, said, "Elon Musk may offload a big chunk of his holding in Tesla shares to buy Twitter. Or as it is popular in the US, he will take a loan against his Tesla holdings and use that to make a leveraged buyout."

"This being a hostile takeover he will not get his desired rate. The market is discounting the move with Twitter shares moving close to his offer price," Nagpal said.

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