Exclusive: Arbitration expert Julian Klymochko breaks down Twitter acquisition and Elon Musk’s options

Tesla Inc News TSLA CEO Elon Musk Acquires Social Media Platform Twitter Inc TWTR was one of the investment world’s biggest topics in 2022.

Musk offered to buy Twitter shares for $54.20 each, but the shares are trading around the $49 level. Benzinga recently spoke with Julian KlymochkoCEO and Chief Investment Officer of Accelerate, a company that offers ETFs and alternative investments.

Klymochko has a history of analyzing mergers and often invests in the arbitrage opportunity of deals, or the amount that can be earned if the deal closes. Klymochko recently estimated that he has invested/analyzed in over 2,500 mergers in the past 15 years.

Twitter Premium: Musk offered to buy Twitter shares for $54.20 and shares are trading below price. Here’s what Klymochko had to say about the difference.

“Musk’s $44 billion leveraged buyout from Twitter is the largest LBO of all time (by longshot). The financing package includes an exceptional amount of leverage, including $25.5 billion debt commitments and margin lending,” Klymochko told Benzinga .

Klymochko said the market is pricing in a roughly 70% chance of closing the deal. Klymochko points to the risks of falling credit markets or falling Tesla stock prices, with margin lending dependent on Tesla’s stock value.

Musk agreed to draft a $21 billion check. This is an astronomical amount, even for the world’s richest person. He has divested TSLA stock and sought partners to help fund this commitment.”

Musk recently announced an application to new investors in the buyout, including Larry Ellison, Binance, a16z and others.

Related link: Why is Twitter’s stock price so far from Musk’s takeover price?

Can Elon Musk walk away from deal?: A hot topic being raised on social media is whether Musk can decide to walk away from the planned takeover.

“Musk has signed a definitive agreement, a legally binding agreement, to acquire Twitter for $54.20 a share. He cannot walk away from the deal,” Klymochko said.

If Musk pulls out of the deal, Klymochko said Twitter could sue and push for a court order to force him to close the deal. If Musk is unable to secure the appropriate financing, he would have to pay a $1 billion reverse break fee. A judge could award monetary damages in excess of $1 billion, depending on several scenarios, Klymochko added.

“Other things that could lead to the merger agreement being terminated include shareholders voting against it (unlikely) and regulators blocking it (also unlikely).”

Twitter deal summary: The previous record for a leveraged buyout was when KKR & Co KKR and TPG Inc acquired TPG energy company TXU for $12 billion. TXU went bankrupt after the leveraged buyout.

The Twitter acquisition deal terms carry some risk with Tesla’s funding methods and peg.

Klymochko estimated that if the deal to take over Twitter doesn’t go through, the social media platform’s share could drop to mid-$30.

This post Exclusive: Arbitration expert Julian Klymochko breaks down Twitter acquisition and Elon Musk’s options was original published at “https://www.benzinga.com/m-a/22/05/27062933/exclusive-arbitrage-expert-julian-klymochko-breaks-down-twitter-acquisition-and-elon-musks-options-w”

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