Obviously I’ll miss this but at least it is going to go exactly as long as possible:
Elon Musk yesterday pledged to close the acquisition of Twitter Inc. by Friday in a video conference call with bankers helping fund the deal, according to people with knowledge of the matter, Bloomberg News reports.
The banks, which are providing $13 billion of debt financing, have finished putting together the final credit agreement and are in the process of signing the documentation, one of the last steps before actually sending the cash to Musk, said the people.
The Wall Street lenders, led by Morgan Stanley, had already been preparing in recent weeks to fund the debt, Bloomberg previously reported. But nothing is ever certain with Musk, the mercurial billionaire who only weeks ago was seeking to back out of the deal. These latest developments suggest he is in the final stages of closing the transaction by a court-issued Oct. 28 deadline.
The banks are expected to receive one of the last formalities — a borrowing notice — on Tuesday, and the cash is expected to be held in escrow on Thursday, the people said.
Is this deal going to close on Thursday? Oh no, no no no. He’s got until 5 p.m. on Friday. A plausible time to close would be 4:45 on Friday, possibly 4:20. Really 5:30 is not entirely off the table; if they are all doing good amicable closing stuff at 4:59 Twitter is not going to go running to the judge to complain about it being a few minutes late. Why close on Thursday and take all the suspense out of it?
Though, really, the suspense is pretty much out of it. The key sentence here is not “Elon Musk yesterday pledged to close the acquisition of Twitter Inc. by Friday” but rather “The banks … are in the process of signing the documentation.” The main source of suspense, since Musk said he planned to close, is whether his banks would fund their $13 billion commitments. I figured they would, but people had doubts, and Musk’s lawyers were a little bit coy about it. Could the banks have said something like “the deal has been terminated” or “there was a material adverse effect” or “wait Twitter has bots” and refused to fund? I mean, no, not really, but if they were going to do that it would have been before drafting and signing the credit agreements. The banks are in now.
On the call, Musk also promised to help the banks market the debt to money managers after the deal closes, the people said.
I am very much looking forward to reading those marketing documents. “Sure Twitter was a huge fraud, but now it’s great, so give me my money.”
Still, there’s some ancillary suspense, like who else will kick in some money to pay part of Musk’s equity check. Here’s one guy who’s a maybe:
Binance Holdings Ltd.’s chief executive officer said he thinks he will stick with Elon Musk’s proposed $44 billion buyout of Twitter Inc. amid potential concerns from Washington about foreign investors backing the bid.
“I think so,” Changpeng Zhao said when asked if he will stand by his financial commitment to Musk. Zhao spoke in Riyadh, Saudi Arabia, where he was attending the kingdom’s Future Investment Initiative conference on Tuesday.
And here’s a yes:
Roelof Botha, the head of Sequoia Capital, said he thinks there are large improvements to be made for Twitter Inc.’s current business and that Elon Musk’s takeover bid for the social-media company will be a success.
Mr. Botha, speaking at The Wall Street Journal’s Tech Live conference, said he thought Twitter could find better ways to make money beyond advertising and improve its product. Sequoia has committed $800 million for the deal. The funding is set to come from Sequoia’s main venture funds, its wealth management business called Heritage, and its crossover fund Sequoia Capital Global Equities. …
“Elon has succeeded in many different industries,” Mr. Botha said. “He’s an incredible first-principles thinker.”
Mr. Botha said Sequoia ran financial models and spoke to current and former employees when examining the potential of the Twitter deal. He said he had spoken to Mr. Musk about potential changes to the Twitter business, including around payments integration, and believed that Mr. Musk could address issues around account verification, such as abuse and spam, and introduce new monetization strategies such as using subscriptions.
The approach of some investors in evaluating the deal has drawn significant attention. Marc Andreessen, the co-founder of venture firm Andreessen Horowitz, wrote to Mr. Musk in April that he was willing to commit $250 million for the Twitter deal, with “no additional work required,” according to documents made public in the recent Twitter-Musk lawsuit. Andreessen agreed to ultimately invest $400 million.
This is the difference between investing your own money and investing as a fiduciary for your fund’s limited partners. Elon Musk, when he announced his plans to buy Twitter, said things like “this is not a way to sort of make money” and “you don’t care about the economics at all”; more recently he said that he is “obviously overpaying.” That’s fine! He’s rich, he’s using his own money, and if he wants to overpay for Twitter because he enjoys tweeting or thinks it’s good for free speech or whatever, that’s his business.
But Roelof Botha can’t go to his LPs and say “oh we’re not in this deal to make money, we don’t care about the economics at all.” It’s their money! He has to say things like “we ran financial models.” Did they? Sure, probably. I have previously defended Musk’s co-investors’ somewhat lackadaisical approach to due diligence on this deal.
It is … common in, like, venture-capitalist and tech-investor circles for people to think “man, if Elon Musk ran Twitter, he could do a much better job.” This is not the sort of belief that starts with a detailed financial model. It starts with the basic popular intuition that Twitter is very valuable and important, and very poorly run and poorly monetized, and with another popular intuition that the world’s richest person, who builds electric cars and sends rockets into space, is unusually talented at running disparate businesses. “If you gave this very popular important product to a guy who is world-historically good at business, he could make it a good business,” is the general idea. It seems reasonable!
Well, I still think that, but I just write on the internet. As a fiduciary you owe your investors a duty of care, and it is helpful if you can say things like “I’m pretty sure we’ve got a spreadsheet somewhere” and “I talked to Elon a bit about his plans and he has some.” It is fine for me to say things like “the way finance works now is that things are valuable not based on their cash flows but on their proximity to Elon Musk,” but that is not in the textbooks yet, and if you chuck $800 million of your clients’ money into that thesis you had better have some backup arguments.