Twitter Takeover Math finally starts working in favor of Elon Musk as Tesla CEO reportedly taps old pals for funding

Shares of Tesla (NASDAQ:TSLA) have been hammered in the past two days as the specter of a real stock sell-off by Elon Musk to fund his takeover of Twitter (NYSE:TWTR) has made waves. havoc, with the electric vehicle giant’s share price falling more than 12% between April 25 and 29. Since then, however, Tesla’s share price has partially recouped recent losses, spurred by something of a rally of relief in the broader market amid heightened certainty about the future path of the rate hike. of the Federal Reserve.

Now, however, the calculations surrounding Musk’s $44 billion Twitter bet are finally getting more favorable, according to recent reports from the NY Post.

Market loses faith in Tesla CEO’s ability to close Twitter takeover deal

As we detailed in a post last week, the Tesla CEO has arranged $46.5 billion in funding for his move to Twitter, where Musk is to shell out around $21 billion from his own resources, and the Residual $22 billion expected to materialize in the form of bank funding loans, including a $12.5 billion margin loan with a 20% loan-to-value ratio.

The conditions surrounding margin lending are particularly onerous, as we reported last week. For example, the loan requires Musk to post unencumbered collateral worth at least $62.5 billion, excluding Musk’s large stake in Tesla in the form of options.

Following the recent liquidation of his Tesla stake, which saw Musk sell $8.5 billion worth of shares, the Tesla CEO now owns 162.963 million shares worth $155.241 billion, based on from yesterday’s closing price. However, according to Bloomberg’s calculation, more than half of Musk’s total stake in Tesla is already pledged to secure existing personal loans. This means that if Tesla’s stock price fell below $837, Musk would not be able to provide sufficient collateral for the margin loan facility.

Of course, there remained the possibility that Musk would choose to use his recent cash benchmark to reduce existing debt, freeing a large majority of his Tesla stake from any encumbrances or pledge-based obligations.

However, the Tesla CEO now seems to have taken another route. The New York Post has now come out with reports that Musk is tapping the financial resources of his former backers to bolster his offering on Twitter.

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“Sources close to the situation say Musk could be close to raising $10 billion in cash from co-equity investors — mostly venture capitalists who have backed his other companies, including Space X. A source close to the talks declined to name the companies. , but Musk’s former investors have included Sequoia Capital, D1 Capital Partners and Valor Equity Partners.

Another possibility is that the Tesla CEO is partnering with private equity firm Thoma Bravo. Keep in mind that the company expressed interest in taking over Twitter a few weeks ago.

The impetus behind these potential collaborations stems from Musk’s desire to limit his exposure to the Twitter deal to around $15 billion, including his current 9.2% stake in Twitter, worth around $3. $4 billion.

Update: $12.5 Margin Loan Tesla CEO Acquired to Fund Twitter Takeover Deal Has Now Been Reduced to $6.25 Billion

According to the latest SEC filing, Musk’s margin loan exposure has decreased to $6.25 billion. This means the Tesla CEO will now have to post security for just $31.25 billion instead of the original $62.5 billion.

This was made possible as Musk has now secured $7.1 billion in new funding from Larry Ellison, Binance and Sequoia, increasing equity commitments in the Twitter deal to $27.25 billion from the 21 original billion dollars.

Maria D. Ervin