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London Tech Week

Why Binance, Ellison and Sequoia are backing Elon Musk’s $44B Twitter bid?

Elon Musk
Elon Musk

A consortium of almost two dozen investors including Sequoia Capital, Andreessen Horowitz, crypto exchange Binance and asset management firm Fidelity has invested more than $7.1B to back the Tesla and SpaceX chief executive Elon Musk’s $44B attempt to acquire Twitter.

The funds come from companies and individuals with whom Musk has previously collaborated, including Oracle co-founder Larry Ellison.

With a $1B check, Ellison led the pack, followed by Sequoia with $800M, Vy Capital with $700M, crypto exchange Binance with $500M, and Andreessen Horowitz with $400M.

Musk getting the much needed help

In a tweet, Ben Horowitz, co-founder and general partner at Andreessen Horowitz, said, “Elon is the one person we know, and possibly the only person in the world, who has the courage, genius, and talents to repair all of these and construct the public square that we all hoped for and deserve.”

“We invested because we believe in Ev and Jack’s vision to connect the world, and we believe in Elon’s intellect to ultimately bring it to life.” While Twitter has immense potential as a public forum, it is plagued by a slew of problems, from bots to abuse to censorship. All of these are exacerbated by being a public firm completely reliant on an advertising business model,” he continued.

Qatar, which, as you may recall, has a horrible track record with free expression, is one of the backers of Musk’s new funding.

According to the announcement, Saudi Arabia’s prince Al Waleed bin Talal Al Saud, who had previously opposed the Twitter buyout, has agreed to provide approximately 35M shares in the firm to keep a stake following Musk’s takeover.

The idea behind Binance participating in Elon Musk’s takeover of Twitter is that it could further increase digital currency evangelists hopes to make the microblogging platform a more crypto friendly social media platform.

Binance’s billionaire CEO and creator, Changpeng Zhao, is a firm believer in the crypto community’s concept of a new type of internet known as Web3. Web3 as a notion relates to new web experiences based around blockchain, the technology that underpins numerous cryptocurrencies. It’s an ill-defined word.

Musk said he’s talking to a few more existing shareholders, including Twitter co-founder and former CEO Jack Dorsey, to see if they want to roll their shares over.

Musk’s leveraged loan of $12.5B from banks like Morgan Stanley has been cut to $6.25B as a result of this fresh financing. He upped his entire stock investment to $27.25B from $21B previously.

The market appears to be coming around to the concept that the acquisition will close as the funding picture becomes clearer. The difference between Twitter’s stock price and Musk’s bid of $54.20 a share is narrowing to its smallest since April 26. As the market opened in New York, Twitter shares climbed 2.9 percent to $50.49. The agreement is expected to finalise later this year, with each party agreeing to pay a $1B breakup fee if it falls through.

On April 25, the world’s wealthiest person secured an agreement to buy Twitter with a financing scheme that has some Tesla investors concerned. Musk promised to raise $21 billion in equity in addition to committing tens of billions of dollars in Tesla stock to support margin loans. According to the filing, that figure has climbed to $27.25B. To fund the acquisition, Musk has sold more than $8.5B in Tesla stock.

The flagbearer of free speech

Musk is one of Twitter’s most influential and opinionated users, with more than 90 million followers. He’s notorious for his cryptic or confusing tweets about everything from cryptocurrency to space travel to whether Twitter should have an edit button, which he sends out at all hours of the day.

He has stated that his primary goal for purchasing Twitter is to turn it into a safe haven for free speech, which he believes is “vital to a functioning democracy.”

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