Elon Musk Drops Margin Loan Commitments, Looks To Finance Twitter Acquisition With Equity Financing
Tesla (Nasdaq: TSLA) CEO Elon Musk has finally dropped his plans to partly finance his planned Twitter (NYSE: TWTR) buyout through margin loans. An SEC filing disclosed that Musk allowed “the remainder of the margin loan commitments” to expire on Monday.
This effectively increases the equity component of the purchase consideration to US$33.5 billion, which Musk now has to come up with.
Musk’s offer to acquire 100% ownership of the social media giant stands at US$54.20 per share for a total of US$44 billion. The Tesla chief previously announced a US$12.5 billion margin loan commitment from Morgan Stanley Senior Funding as part of the initial US$46.5 billion worth of commitments secured for the acquisition.
The remaining US$13 billion still comes from a debt commitment from Morgan Stanley Senior Funding in the form of term and bridge loans.
The expired margin loan commitment was tied to a 20% loan to value ratio applied to Musk’s Tesla shares, which had recently made him US$12.4 billion poorer. The automaker’s shares had a sharp decline following its removal from S&P 500 Environmental, Social, and Corporate Governance Index.
This is the second time Musk allowed the portion of the margin loan commitment to expire. On May 4, the amount was cut down in half to US$6.25 billion after the first portion expired. This came after Musk was able to secure an additional US$7.1 billion in equity commitments from investors like Lawrence J. Ellison Revocable Trust and Binance.
The SEC filing also mentioned that Musk is still in discussions with existing Twitter shareholders, including co-founder and former CEO Jack Dorsey, to satisfy the equity financing component of the acquisition.
Twitter last traded at US$37.16 on the NYSE. Tesla last traded at US$658.80 on the Nasdaq.
Information for this briefing was found via Edgar and the companies mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
