Business Maverick

Business Maverick

Musk’s Twitter Financing Plan Raises Questions About Tesla Stake

Elon Musk, chief executive officer of Tesla Inc., arrives at court during the SolarCity trial in Wilmington, Delaware, U.S., on Tuesday, July 13, 2021. Musk was cool but combative as he testified in a Delaware courtroom that Tesla's more than $2 billion acquisition of SolarCity in 2016 wasn't a bailout of the struggling solar provider.

Elon Musk says he’s secured $46.5 billion in funding for a takeover of Twitter Inc. But more than two-thirds of that is either coming from his own pocket or borrowing against his Tesla shares.

Musk’s filing with the U.S. Securities and Exchange Commission on Thursday details $25.5 billion in debt financing from Morgan Stanley and other financial institutions, including margin loans backed by his equity stake in Tesla Inc. It also includes $21 billion in equity financing to be provided by Musk himself.

Read More: Elon Musk Considering Tender Offer for Twitter, Says $46.5 Billion Lined Up

Musk currently has about $3 billion in cash or other somewhat liquid assets after spending $2.6 billion buying a 9.1% stake in Twitter in recent months, according to Bloomberg estimates. His other holdings are tied up in Tesla stock — about $184 billion worth — and his ownership of closely held Space Exploration Technologies Corp.

The big question is whether Musk would consider selling part of his stake in one of his prized companies to acquire Twitter.

Musk would need to pledge about 58.7 million Tesla shares to secure the $12.5 billion margin loan facility included in the debt financing. That would bring the total percentage of shares he’s pledged to about 85% of his holdings. The margin loan facility documents do allow Musk to sell his unpledged Tesla shares.

The unpledged shares are worth more than $25 billion, so if he sold almost all of them, it’d be enough to cover the $21 billion in equity financing, after taxes, coupled with the cash he has now.

Alternately, Musk could find partners to contribute to his equity financing. But one thing’s for sure: The mystery over how Musk will fund his bid was only partially solved today.

Musk and Jared Birchall, the managing director of Musk’s family office, didn’t immediately respond to a request for comment on how Musk plans to finance the $21 billion. Shares of Tesla pared early gains of as much as 12%, trading up 8.2% to $1,057.14 as of 10:24 a.m. in New York.

–With assistance from Dana Hull and Shannon D. Harrington.


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