Elon Musk is dropping his plans to partially fund the acquisition of Twitter with margin loans tied to his Tesla Inc. shareholding stake and increasing the equity component of the deal to $33.5 billion.
More on the revised plan
As per Bloomberg News, Musk will provide $6.25 billion additionally for equity finance in the $44 billion purchase of Twitter in a regulatory file on Wednesday. This is enough to eliminate the need for a margin loan of the same amount, which was already reduced earlier this month.
The financing structure for the Twitter deal will reduce the risk for both Musk and his lenders, considering the recent slide in Tesla’s share price. The EV maker’s stock price had sunk by 40% since April when Musk announced his stake in Twitter. A further slump will raise the risk of Musk not having enough unpledged shares to cover the margin loan.
Musk, the Co-Founder of Tesla, is still on track for his complete equity component of $33.5 billion. However, he can ask for help from others.
Musk is looking for additional finance commitments from investors, including discussions with Jack Dorsey, Twitter Co-founder, about continuing their equity in Twitter into the new private company after its takeover.
Earlier this month, Musk announced that he had secured $7.1 billion of equity commitments from investors, including Sequoia Capital, Binance, and billionaire Larry Ellison.
Bloomberg News, earlier this month, had reported Musk receiving a $1 billion commitment inequity in the initial round, and his advisors were scouting for another $6 billion preferred equity financing from potential investors.
Elon Musk, 50, is the co-founder of Tesla Inc. with a large stake that has contributed to his personal $200 billion fortune, making him the world’s richest man per the Bloomberg Billionaires index.
The Twitter share price closed at $37.16 on Wednesday, much below the offer price of Musk at $54.20. After-hours trading at 6.48 p.m. in New York saw this share increase by 6.8%. Tesla shares have fallen by 1.4%.
