Social media giant Twitter (NYSE:TWTR) made headlines on Monday when the company agreed to a deal with Tesla’s (NASDAQ:TSLA) Elon Musk to buy out the company and take it private. After much deliberation, Twitter accepted Musk’s offer to takeover the company with a $44 billion dollar all-cash deal. That valued TWTR stock at $54.20 per share.
Earlier in April, Elon Musk had already become one of Twitter’s largest shareholders by acquiring a 9% stake in the company for $2.89 billion. Shortly after declining an offer to be on Twitter’s board, Musk and Twitter hammered out the details of what is reportedly the biggest leveraged buyout deal in at least two decades.
So far, the deal has brought about mixed feelings from investors and the public. After all, Elon Musk is the world’s richest man, so some have reservations about him buying a platform like Twitter. Others support the deal, hoping Musk is able to clean up the issues that have plagued Twitter for years now.
At the very least, Musk has one supporter in Jack Dorsey, Twitter’s co-founder and former CEO. He said:
“I love Twitter. Twitter is the closest thing we have to a global consciousness. The idea and service is all that matters to me, and I will do whatever it takes to protect both. Twitter as a company has always been my sole issue and my biggest regret. It has been owned by Wall Street and the ad model. Taking it back from Wall Street is the correct first step. In principle, I don’t believe anyone should own or run Twitter. It wants to be a public good at a protocol level, not a company. Solving for the problem of it being a company however, Elon is the singular solution I trust. I trust his mission to extend the light of consciousness.”
Some wondered whether Musk could afford the deal, despite his immense wealth. Most of his money is tied up in Tesla stock, but he can borrow against those holdings to finance the deal. Further, he just unlocked another $23 billion in stock options due to his performance-based compensation package. Although those holdings cannot be sold for five years, it still gives his net worth a healthy bump at a much-needed time.
As for TWTR stock, there’s not much for investors to do. The stock buyout offer of $54.20 will either go through — leaving about 8.5% in potential upside — or it won’t and the stock will tumble lower, potentially into the mid-$40s. That’s where it traded when doubt loomed over the deal.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.