Elon Musk, who has struck a $44 billion deal to take Twitter private, has reportedly told potential investors that he plans to take the company public again within a few years, likely to fuel the interest of potential investors.
Musk said he could arrange an initial public offering (IPO) of Twitter in as little as three years of buying it, The Wall Street Journal reported, citing people familiar with the matter.
Twitter on 25 April, finally agreed to sell itself to Tesla CEO Elon Musk for $54.20, putting an end to weeks of uncertainty. The deal will likely close sometime this year, subject to conditions including regulatory approval and a nod from shareholders.
Trying To Get Investors Interested
Twitter isn't very good at generating profits. In the past nine years of being publicly traded, it has only made profit in 2018 and 2019.
Yet, Musk is going to great lengths to acquire the social media platform, purportedly in the name of free speech and the "future of civilisation."
To finance the deal, he plans to borrow $25.5 billion from banks and financial institutions and come up with around $21 billion himself. However, most of his wealth is tied up in Tesla and he only has about $3 billion in cash and relatively liquid assets, according to Bloomberg.
To this end, Musk has already sold around 4.4 million shares of Tesla, worth roughly $4 billion, amounting to 2.6 percent of his stake in the company.
Now Musk is reportedly looking at private equity firms to share some of the financial burden. Silver Lake, a private equity firm which owns a stake in Twitter, previously partnered with Musk when he attempted to take Tesla private in 2018.
However, according to The New York Times, such firms usually invest in companies with steady cash flow so that they can safely take out large debts. Twitter had a negative cash flow of $370 million in 2021.
Musk's plan of taking Twitter public again in a few years will make this deal more palatable to such firms since it will give them an opportunity to disinvest and reap the rewards from an IPO.
Private equity firms have been known to take companies private, fix them up, and take them public again "within five years or so," according to WSJ. A firm called Apollo Global Management is already considering participating, according to the publication.
Musk 'Wings It'
It doesn't take an expert to realise that Musk's takeover of Twitter, peppered with sudden announcements and loaded tweets, was different from how corporate takeovers usually function.
Billionaire investors usually follow the playbook and draw up long term plans with a team of advisors and lawyers.
The Tesla CEO appears to function differently. Instead of consulting a large team of experts, he mostly relies on his small inner circle which includes Jared Birchall, who runs his family office, and Alex Spiro, his lawyer, The New York Times reported.
Musk takes decisions impulsively, has full confidence in his intuition, and often "wings it" in his biggest moments, employees and investors who have worked with him told the publication.
His impulsiveness has often landed him into trouble.
In 2018, he tweeted that he was considering taking Tesla private at $420 a share. He only had a rudimentary plan in place, according to reports, and the deal fell through.
The SEC then accused him of deceiving investors and he had to strike a deal with the regulator to pay $40 million fines, step down as Tesla Chairman and not tweet anything about Tesla without the approval of other company executives.
(With inputs from The Wall Street Journal, The New York Times, and Bloomberg)