Exactly one week ago Elon Musk kicked the board with the officialization of the purchase of Twitter for 44,000 million dollars. Since then, there has been a lot of talk about this agreement, as well as everything that still to be solved before it is complete. And in this last point, the most notorious goes through the economic plane.
According to Reuters, Elon Musk has already contacted potential investors as he discusses how to close the financing needed to buy Twitter. The intention of the tycoon of South African origin would be expose a minor part of your personal fortune in this deal and, at the same time, cut one of the bank loans you have agreed to.
The aforementioned medium indicates that the talks would involve large investment firms and “individuals with high purchasing power” – other billionaires, after all. In this sense, names of companies such as Apollo Global Management Y Ares Management Corp..
If negotiations go ahead, investors could provide preferred capital for Elon Musk to successfully close the acquisition of the social network. In the event that this option is finally adopted, the parties that provide the necessary financing would later receive a fixed income from Twitter.
Another option for the businessman would be to try to get the most important shareholders that Twitter currently has to keep their money in the company. If Musk convinces the “big fish” to reinvest what they would receive for their shares (at a rate of $54.20 each), the liquidity margin to be covered would shrink.
The search for potential investors does not necessarily imply that Elon Musk has already made a decision about it. The report of Reuters indicates that the CEO of Tesla and SpaceX doesn’t plan to take on more debt to close Twitter dealbut it is evident that it is analyzing all the tools at its disposal.
Elon Musk has yet to define where some of the money to buy Twitter will come from
The greatest uncertainty goes through the $21 billion that the tycoon has committed out of his own pocket. As we have mentioned before, Musk would not have enough liquidity to face said commitment with cash. It is estimated that the recent sale of 9.6 million shares of Tesla, valued at $8.4 billion, would relate to that search for fresh bills. However, divesting himself of that stake will force him to pay hefty taxes for the second year in a row.
In addition, Tesla shares suffered a significant drop in their price in the 24 hours after the announcement of the agreement. This caused the electric car manufacturer lost 128 billion dollars in its valuation, and sparked criticism from those who felt that Twitter had become a distraction for its CEO. Therefore, the possibility of attracting foreign investment would be more than valid in this context.
And the conversations with companies and individuals that could add their “grain of sand” to the purchase of Twitter would also try to reduce part of the bank debt to which Elon Musk has committed. Specifically, the $12.5 billion loan that he has backed with a portion of his Tesla stock valued at $62.5 billion.
Let’s not forget that to this we must add a debt of 13,000 million dollars against the assets of the social network, which would cost up to $1,000 million a year. It’s all part of the $46.5 billion financing package led by Morgan Stanley that the tycoon filed with the SEC.
It is still unknown when Elon Musk will decide if potential investors will accompany him in the purchase of Twitter. In principle, it was said that the businessman would rule it out outright because it was not a conventional leveraged buyout. However, the landscape would seem to have changed out of necessity (or convenience).