Elon Musk secures $7.14B in new equity commitments for Twitter acquisition

Elon Musk secures $7.14B in new equity commitments for Twitter acquisition

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Elon Musk has secured $7.14 billion in equity commitments from more than a dozen investors to help finance his acquisition of Twitter Inc., the Tesla Inc. Chief Executive disclosed today.

Musk last month made an offer to acquire Twitter for $43 billion. A few weeks later, the social network’s board accepted the offer at a higher price of $44 billion. The increased acquisition price values Twitter at $52.4 per share, a 38% premium to Twitter’s last unaffected stock price.

Musk’s $44 buyout billion offer comprises $21 billion in equity financing that he will provide personally, as well as $25.5 billion in debt financing. The debt financing component of the deal includes $12.5 billion in margin loans that Musk has taken on his Tesla shares. The $7.13 billion in new equity commitments that the Tesla CEO disclosed today will be used to reduce the margin loans to $6.25 billion.

The equity commitments are being provided by a group of 19 investors. 

The biggest contributor is Saudi Prince Al Waleed bin Talal, who has agreed to retain a $1.9 billion stake in Twitter. Oracle executive chairman Larry Ellison has pledged $1 billion. Cryptocurrency exchange Binance is contributing $500 million, while venture capital firms Sequoia Capital and Andreessen Horowitz have committed $800 million and $400 million, respectively.

More than a dozen other institutional investors are participating as well. According to CNBC, the number of investors taking part could potentially increase down the road. Musk has reportedly stated that he is in talks with multiple Twitter shareholders, including Twitter co-founder Jack Dorsey, about having them roll their stakes into the acquisition instead of selling their shares.

To help finance the acquisition, Musk sold about $8.5 billion worth of Tesla shares last week, reducing his stake in the automaker to 16%. Shortly after the move was disclosed, Musk stated that “no further sales” of Tesla stock are planned.

The acquisition of Twitter is expected to close in 2022. CNBC reported today that Musk is expected to become temporary CEO of Twitter for a few months after the deal completes. According to CNBC’s sources, Musk has told investors that he believes Twitter’s earnings before interest, taxes, depreciation and amortization margin is too and pledged to make the company a “magnet for talent.” Twitter declined to comment on the report.

Earlier this week, the Wall Street Journal reported that Musk also told investors he could take Twitter public a few years after the acquisition. The stock market listing is expected to take place as soon as three years after the deal completes. 

Shares of Twitter climbed more than 3% in trading today to about $50.7. The increase is believed to be a sign of increased investor confidence that the deal will complete. However, the social network is still trading below the $52.4 per share that Elon Musk has agreed to pay as part of the acquisition. 

Twitter’s shares previously jumped 5.9% on April 25, the day the board accepted Musk’s acquisition offer.

Photo: NASA/Wikimedia Commons

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