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The Markets
by Proactive
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The Markets
by Proactive
Proactive UK has moved.
Small-cap coverage continues on .com
Go to Proactive UK

Financial Services

How is Elon Musk financing his takeover of Twitter?

Estimates suggest Musk has a net worth in the region of US$232bn

A saga filled with twists and turns may finally be concluding.

Overnight in the US, Bloomberg broke that Tesla chief executive Elon Musk decided to proceed with his proposed US$44bn takeover of Twitter.

Plans on how Musk would finance the deal were ironed out at the time of the initial proposal in April.

Since then, however, interest rates have soared and Tesla's share price has plummeted.

Here is what we know so far on how Musk plans to stump up the cash for Twitter.

How much is he worth?

Estimates currently suggest Musk has a net worth in the region of US$232bn, comfortably making him the richest man in the world ahead of Amazon boss Jeff Bezos.

However, as the Tesla CEO has said several times himself, most of his money is tied up in stocks and investments, meaning he has little (comparatively speaking) cash readily available.

Much of his wealth is tied up in the companies he set up or has a majority stake in, including Tesla, where he owns roughly 17%, or 175mln shares

Other companies he owns outright or has a large stake in include rocket manufacturer SpaceX and his tunnelling enterprise Boring Company.

How is the deal being paid for?

What we know so far is where at least US$28bn of the total US$44bn offer is coming from.

Several banks, including Barclays, Morgan Stanley (NYSE:MS) and Bank of America agreed to provide US$12.5bn, although they may now be rueing the decision.

Terms would have been agreed upon in April, or even earlier when interest rates were much lower and market conditions much easier to syndicate the debt to ease the risk.

Musk sold US$8.5bn worth of Tesla shares in April to fund the deal when the stock cost roughly US$328 per share.

In May, Musk said he secured US$7bn in private funding from a group of investors, which included tech tycoon Larry Ellison, Binance and the Qatar state investment fund.

In August, Musk sold a further US$6.9bn worth of Tesla stock although at the time he said this cash may have been needed if he lost the legal battle with Twitter.

It is unclear whether these funds will be relocated towards the acquisition but if they are that means US$34.9bn of the cost is accounted for, leaving an additional US$9.1bn to find.

Musk’s options

One option on the table for Musk would be turning to his gang of private investors and requesting extra cash for the deal.

Musk could fall back onto his own cash reserves, although it’s anybody’s guess how much free cash is lying about in Musk’s manor.

The more likely outcome, however, is Musk sells more shares in Tesla to fund the deal.

However, Tesla’s share price is down nearly 30% since April, meaning he will have to sell more shares, decreasing his own stake.

That won’t be good news for Tesla investors, as selling the shares to buy Twitter continues to devalue the stock of the electric vehicle manufacturer.

What we don’t know

Crucial and unclear is how much of his Tesla stake Musk has put up as collateral for the loans, with several conflicting reports on the matter.

However, the saga that has rumbled looks to heading towards a conclusion though when Musk is involved, no one can say for certain.

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