×

We've got news for you.

Register on BusinessLIVE at no cost to receive newsletters, read exclusive articles & more.
Register now
Elon Musk. Picture: REUTERS/PATRICK PLEUL
Elon Musk. Picture: REUTERS/PATRICK PLEUL

Elon Musk is dropping plans to partially fund his purchase of Twitter with a margin loan tied to his Tesla stake and increasing the size of the deal’s equity component to $33.5bn. 

Musk will provide an additional $6.25bn in equity financing for the $44bn buyout, according to a regulatory filing on Wednesday. That is enough to eliminate the margin loan of the same size, which had already been reduced earlier this month.

The new structure could reduce the risk of the deal for both Musk and his lenders, particularly given the recent slide in Tesla’s stock price. The electric carmaker has sunk about 40% since Musk first announced his stake in Twitter in early April. An extended slump raised the prospect that he would not have enough unpledged shares to cover the margin loan.

Shares of Twitter gained about 5.1% to $39.06 during pre-market trading in New York on Thursday. The stock closed Wednesday at $37.16, well below Musk’s offering price of $54.20.

Musk, Tesla’s co-founder, is still on the hook for coming up with the full $33.5bn equity component. But he can turn to others for help. 

Musk is seeking additional financing commitments, including having discussions with Twitter co-founder Jack Dorsey and other investors about rolling their equity into the private company, according to the latest filing. He already announced earlier in May that he secured $7.1bn of equity commitments from investors including billionaire Larry Ellison, Sequoia Capital and Binance.

Bloomberg reported earlier this month that Musk had received commitments for another $1bn in equity since that initial round, and his advisers were soliciting interest from potential investors for as much as $6bn in preferred equity financing.

Musk is the world’s richest person, with a personal fortune of $200bn, according to the Bloomberg billionaires’ index. That is largely due to his stake in Tesla.

He already disposed of $8.5bn of Tesla shares to help raise cash for his Twitter deal, tweeting at the time that he had no further sales planned. 

Bloomberg News. For more articles like this please visit Bloomberg.com

subscribe

Would you like to comment on this article or view other readers' comments?
Register (it’s quick and free) or sign in now.

Speech Bubbles

Please read our Comment Policy before commenting.