In the current case study, I will talk about the Private Equity Fund who exited its stake in a

company. The PE fund can exit its stake in a company either by selling them to another
company, to another PE Fund, to the founder of the company or through an IPO which is
Initial
Public Offering. IPO is the stage in which the company becomes public for the first time and
listed on the national stock market where the other people in the market can also trade with
the
stocks or shares of the company. Also, the price and the value of share is decided by the
market
or by the people in the market and not by the company like in during the fund raising.
To understand this in more detail and accurately I have chosen a real-life example as a case
study. In this case study the PE fund exited its stake in a company by selling the stakes in
the
form of IPO. In IPO PE fund sell its stakes of the company at the market price of the share at
that time. After months of controversy and negotiation, it’s official: Elon Musk of Tesla and
Starlink fame now owns Twitter. The deal, valued at $44 billion, represents the biggest
social media buyout since Facebook acquired WhatsApp in 2014. As a public-facing social
network, however, many speculate that Twitter could undergo some drastic changes under
Musk’s ownership. Before Elon Musk bought it, Twitter was a public company listed on the
New York Stock Exchange.

Since the company went public in 2013, individuals and institutional investors could buy
shares of the company on the open market. In fact, Musk already bought a 9.2% stake in
Twitter before he made an offer to buy the whole company and take it private.However, the
sub-10% stake wasn’t enough to make decisions at Twitter and Musk would have to
convince other members of the board to side with him. Twitter also prevented him from
acquiring over 14.9% of the company for the duration of his board term, until 2024. Likely
because of these two factors, Musk declined the board seat and presented the board with an
offer to buy out the entire company.In April 2022, Musk offered to purchase Twitter outright in
exchange for $44 billion in cash.

That worked out to $54.20 per share, a significant premium over the stock’s price at the time.
In other words, existing investors would receive a 38% higher cash payout if Musk’s offer
went through versus selling the shares on the open market. After some initial hesitation over
Musk’s ability to secure funding, Twitter’s board accepted the buyout offer. The company
said, “The proposed transaction will deliver a substantial cash premium, and we believe it is
the best path forward for Twitter’s stockholders.”As for funding, Reuters reports that Musk
used a mix of equity and debt financing to close the $44 billion deal. He also sold over $15.5
billion worth of Tesla shares since April, giving him enough capital to pay over $27 billion
from his personal assets. Musk then approached banks for another $13 billion in loans, with
Morgan Stanley contributing roughly $3.5 billion to the cause. The final $5.2 billion came
from various investment groups.Under his ownership of Twitter, Elon Musk wants to
increase revenue, eliminate spam accounts, and enable more diverse discourse on
the platform.