Forbes - Elon Musk’s surreal deal for Twitter

Kevin Dowd and Becca Szkutak

Staff Writers

Well, it happened: Twitter has agreed to sell itself to Elon Musk for about $44 billion. If and when the deal does close, it will be a monumental one, placing the world’s richest man in charge of one of the world’s most popular social media forums and creating a potential maelstrom of controversy, meddling, conflicts of interest and palace intrigue. And tweets. Man, we’re going to have to deal with so many more Musk tweets.

A little more than half of the funding will come from a syndicate of blue-chip investment banks, and the rest will be equity from Musk himself, possibly from selling or leveraging a substantial chunk of his stake in Tesla. It’s the largest acquisition ever lined up by one person. It’s also one of the largest acquisitions we’ve seen from any type of investor since the beginning of the tech-fueled pandemic deal boom.

There’s a new Musk these days around Twitter’s headquarters. ZZ/JOHN NACION/STAR MAX/IPX

Our colleague Abram Brown has the full story of how we got here, recapping a wild past several weeks in which the idea of Musk buying Twitter transformed from a solid meme into a very serious, market-shaking proposal. Or at least, it sure seems serious at this point—as with anything involving Musk, even when a deal has been announced, it’s hard to shake the suspicion that this is all just a setup for his biggest 420 joke yet.

To me, Musk’s acquisition is a Rorschach test. If you’re the sort of Tesla superfan who calls him “Mr. Musk” in casual conversation, this probably sounds fantastic. If you’re the sort who worries about billionaires bending major platforms for political discourse to their will, you might be quite concerned. If you’re a free speech absolutist, Musk’s proposals for the platform might look pretty good. If you’re the sort who thinks Twitter is already bad for democracy, you might think a privatized version of the platform run by Musk would be much worse. If you’re the sort who thinks Twitter is already bad for democracy but is also skeptical of Musk’s ability to manage a social network, maybe you’re excited—will he run it into the ground? If you’ve been dreaming for years of an option to edit your tweets, then congrats. Big day.

Investors are still skeptical that this thing will come to fruition. Twitter shares closed up less than 6% today, at $51.70, still a ways below the $54.20 price of Musk’s offer.

A Musk-run Twitter might look very different. But it won’t guarantee the return of the platform’s most famous former power user. No matter who owns Twitter, Donald Trump says he isn’t coming back. (His advisers aren't so sure.) —K.D.

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Crypto for kids

A growing group of fintech startups has launched in recent years to provide mobile banking services to teenagers and kids to teach them about financial literacy and investing. Now, they’re adding crypto.

Copper, a digital bank focused on teaching teens financial literacy, raised a $29 million Series A round on Tuesday led by Fiat Ventures with participation from Panoramic Ventures, Insight Partners, Invesco Private Capital and existing investors. The platform is also expanding to let its users invest in stocks as well as cryptocurrencies—with parental supervision, of course.

From a strictly business perspective, this makes sense. TikTok is getting children—especially teenagers—increasingly interested in crypto. And there is growing evidence of underage users on Robinhood who lied about their age to invest there.

Copper isn’t the only teen-focused fintech looking to roll out the service. Palo Alto-based Step, which has raised nearly $200 million in venture capital and also offers teen-focused mobile banking, currently has a waiting list for its upcoming crypto investing strategy. Kirkland, Washington-based Stack will focus exclusively on crypto investing for Gen Zers—most of whom are still under 18—and dubs its waitlist-only service the “first and only crypto platform for under-18 investors."

I want to be shocked by this, but in a world where parents are sending their kids to crypto camps, this almost seems like a logical next step. —B.S.

KKR’s bulging bankroll

KKR closed its latest flagship North America fund on Monday with $19 billion, the largest pool of buyout capital the famed firm has ever raised. This is KKR’s 13th fund in the series; its previous effort closed five years ago on $13.9 billion.

Many of the biggest firms in private equity have closed or are currently raising their largest funds ever, a response in large part to the flood of deal activity and soaring valuations that emerged in 2021. Hellman & Friedman raised $24.4 billion, Silver Lake brought in $20 billion, Clayton, Dubilier & Rice landed $16 billion and Genstar Capital bagged $11.8 billion. Blackstone might reach $30 billion for its next fund, per multiple reports.

This isn’t the first time KKR has joined the fundraising fun, either—earlier this month, it closed its latest Asia vehicle with $15 billion in commitments, the biggest private equity fund ever raised in the region. For those souls grinding away on KKR’s fund administration team, it’s probably been a very busy April. —K.D.

IPO potpourri

Wall Street has hosted just four IPOs so far this month, a sharp drop from last year’s deluge of offerings. But the pipeline hasn’t dried up entirely.

Are IPO investors ready to bet big on corrugated steel and concrete? Getty Images

SmartStop Self Storage REIT, which owns and manages more than 13 million square feet of storage space across the U.S. and Canada, filed for a listing on the NYSE. The broader IPO market may have cooled off, but SmartStop’s sector has been red-hot, with occupancy and rental rates reaching all-time highs amid the pandemic. (After all, the junk filling up the rooms that are now our home offices had to go somewhere.) SmartStop, which boasts a 94% occupancy rate—up from 89% in 2020—is betting its business is intriguing enough to win over otherwise skeptical investors.

So too is HilleVax, which is developing and testing vaccines for norovirus-related illnesses. On Monday, it revealed a price range of $16 to $18 for its upcoming IPO on the Nasdaq, scheduled to go off later this week. At a midpoint pricing, HilleVax would raise $175 million and be valued at more than $500 million. The company’s biggest backers are Frazier Life Sciences and Takeda Pharmaceutical. —K.D.

They Said It

“I hope that even my worst critics remain on Twitter, because that is what free speech means."

—Elon Musk, tweeting on Monday. It’s not really what free speech means.

Just The Facts

— For the second time in as many weeks, Blackstone is making a multibillion-dollar bet on real estate. The firm agreed Monday to purchase PS Business Parks for about $7.6 billion, snapping up a property portfolio comprising 27 million square feet of office, industrial and residential assets located mainly in California, South Florida, Texas and Northern Virginia. Last week, Blackstone agreed to buy American Campus Communities for $13 billion.

— Brookfield Asset Management and Simon Property have offered to buy Kohl’s at a valuation of more than $8.6 billion, per a New York Post report. Brookfield and Simon also own JCPenney, having bought the Kohl’s rival out of bankruptcy in 2020. Kohl’s has spent the past several months fending off calls for new management and other major changes—including a potential sale—from activist investor Macellum Capital Management.

— New York-based Left Lane Capital raised $1.4 billion for its second fund to focus on Internet and consumer tech companies. The firm invests at the growth stages and has backed current unicorn companies including edtech GoStudent, fintech Wayflyer and personal finance app M1 Finance.

— Crusoe Energy Systems raised $350 million in Series C equity financing in addition to $155 million of debt. The Denver-based startup uses natural gas waste as fuel to power crypto mining, in a process it says improves on an eco-unfriendly practice. The round was led by G2VP with participation from Valor Equity Partners, Lowercarbon Capital and Polychain Capital, among many others.

— Here comes more money for cricket NFTs. Singapore-based Rario raised $120 million for its NFT platform of cricket highlights, player cards and other digital objects. The round was led by Dream Capital with participation from Alpha Wave Capital, Animoca Brands and Presight Capital. Readers will remember that just a month ago, this newsletter covered a $100 million Series A round raised by FanCraze, another player in the cricket NFT space.

— Blackstone and KKR are among “several” private equity firms that have been exploring a potential bid for Ubisoft Entertainment, a French video game developer with a current market cap of some €4.8 billion ($5.1 billion), according to Bloomberg. Shares of Ubisoft, whose best-known franchises include Assassin’s Creed and Far Cry, have fallen more than 40% over the past calendar year, and game studios have emerged as popular takeover targets—see Microsoft’s $68.7 billion purchase of Activision Blizzard.

— Snack-food giant Mondelez International signed a deal on Monday to pay $1.3 billion for Ricolino, a candy company from Mexico currently owned by Grupo Bimbo. This is Mondelez’s second major acquisition of the year, following the purchase of Greek croissant and snack brand Chipita for nearly $2 billion.

— Next week Ukraine Tech Ventures is launching a $50 million nonprofit venture fund to back Ukrainian-founded startups that have been displaced due to the ongoing war with Russia. The fund is founded by NRG Ventures founder Roman Tyan and serial entrepreneur Sergii Kremeno.

— A battle between retail titans over control of Indian grocery chain Future Retail has come to an end, as Reliance Industries and its CEO, Mukesh Ambani, officially dropped their bid for the business. Our colleague Jonathan Burgos has more on how the move could clear the runway for Amazon.

Charted

When it became clear that equity funding was starting to cool off in March, many in the industry predicted that the pullback could make 2022 a strong year for venture debt. An increase would make sense; the non-dilutive capital has been growing over the last few years and could be a resource for companies looking to extend their runway between equity raises to avoid a down round.

Anecdotally, it does seem like venture debt activity has picked up. Funding announcements from the past few weeks have increasingly mentioned debt financing, and venture debt lender David Spreng recently told Forbes that his firm, Runway Growth Capital, was seeing its output increase. “Companies are coming to us in bigger numbers, our deal flow is stronger than ever, and it's really driven by the fact that folks want to avoid raising equity in a choppy time,” he said. “It’s really been a Q1 phenomenon. It started in January, it's not just the last couple weeks."

But it’s too early to tell if the strategy is widely growing across the industry. Recent data from PitchBook found that more than $5.8 billion was lent to venture-backed companies during the first quarter, indicating muted growth over the first quarter of 2021, when $5.7 billion was deployed. If companies are increasingly turning to venture debt lenders, the proof will be in the Q2 data.

What We're Reading

Bill Ackman has backed a new type of dating app that brings the “Love Is Blind” approach—matching people by personality before letting them see each other—to the metaverse. (Insider)

A troubling investigation into KKR’s ownership of BrightSpring Health Services, an operator of group homes that’s seen complaints of dangerous conditions mount amid the pandemic. (BuzzFeed News)

With the IPO market in the midst of a chill, investors are turning to the private markets to back the next big tech company. And in some cases, they’re finding some very attractive prices. (Institutional Investor)

Archer Aviation says its flying cars will hit the skies in 2024. But the FAA approval process takes seven years on average, and the company’s cars still have yet to fly. (Insider)

Thanks in part to a former bond-trading baron, Michigan might become America’s next big space hub. Michiganders don’t quite know what to think. (New Yorker)

Healthcare data is an unstructured web of information. NexHealth thinks its connected solution creates a more streamlined system and likens itself to Stripe, but for healthcare data. (Forbes)

A deep dive examining the Amazonification of the American workforce. (Vox)

Next month will see the resurrection of LimeWire. But this time, what was once a music-sharing platform will operate as an NFT marketplace. (CNET)

White-collar workers have been changing jobs at record rates amid the pandemic. But not all of them have found the office of their dreams. (Wall Street Journal)

What To Watch For

When activist investor, GameStop chairman and Chewy founder Ryan Cohen identified Bed Bath & Beyond as his next turnaround target, he called for the retailer to sell off its successful Buy Buy Baby line. Is he about to get his way? The Wall Street Journal reported late last week that Cerberus Capital Management and a SPAC led by Casper Sleep CEO Philip Krim are among multiple potential buyers now circling Buy Buy Baby—which, as the name suggests, sells gear and other products people can buy for their babies. Cohen isn’t as noisy as Elon Musk. But both are successful tech CEOs who have pivoted to activism. Or some version of it, anyway.

Kevin Dowd

Staff Writer

I am a staff writer at Forbes. I previously wrote for PitchBook, where I created The Weekend Pitch, a weekly newsletter about the private markets. Before that, I covered high school sports in the Pacific Northwest, and I graduated from the University of Washington with a degree in journalism and creative writing. I live in Seattle, where I read a lot of books and play a lot of golf.

Follow me on Twitter.

Becca Szkutak

Staff Writer

I'm a New York-based reporter covering venture capital, startups and investors. I was previously a reporter at the Venture Capital Journal and Private Debt Investor. I graduated from Emerson College in 2017 with a degree in journalism.

Follow me on Twitter at @rebecca_szkutak or send me an email at rszkutak@forbes.com.

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