WASHINGTON – Elon Musk bought himself some time on Thursday when a judge granted his request to halt a Twitter lawsuit for him to complete his proposed $44 billion buyout of the social media company by October 28.
The big question now is, how will he pay for it?
Musk announced earlier this week that he would buy Twitter for $54.20 per share, the price agreed upon in April, but with the caveat that the transaction’s completion is contingent on debt financing.
What is his financial strategy?
Musk has pledged $46.5 billion in equity and debt financing for the acquisition, covering the $44 billion purchase price and closing costs. Banks such as Morgan Stanley and Bank of America Corp have committed to providing $13 billion in debt financing to support the transaction.
According to one of the banks, Musk has not informed them that he intends to close the transaction, according to a tweet on Thursday. Musk stated that banks were “collaboratively working to fund the close” on or around October 28.
Musk’s $33.5 billion equity commitment would include his $4 billion Twitter stake and the $7.1 billion he secured from equity investors such as Oracle co-founder Larry Ellison and Saudi Prince Alwaleed bin Talal.
Musk will need to raise an additional $22.4 billion to cover the equity financing portion of the transaction.
What is his financial situation?
According to Forbes, Musk, 51, is the world’s richest person, with a net worth of $219 billion, but a large portion of his fortune is tied to his stakes in Tesla and Space X.
According to Reuters, Musk has approximately $20 billion in cash after selling a portion of his Tesla stake in multiple transactions in November and December of last year, as well as April and August of this year. Even if the other equity and debt commitments are honored, he would need to raise an additional $2 billion to $3 billion.
How will he make up the equity gap?
He has the option of selling more of his Tesla stock or his SpaceX stock. Other options include obtaining a bank loan against the stocks or recruiting additional investors to contribute equity.
Musk stated in August that he has no plans to sell any more Tesla stock, but the latest U-turn by Musk has raised questions about whether he will sell more of the electric-vehicle maker’s stock to fund the deal.
According to Reuters, Musk owned 465 million Tesla shares worth $111 billion after the company’s 3-for-1 stock split. He has already borrowed heavily against a significant portion of his Tesla holdings.
Does he have a sufficient number of equity investors?
On April 20, Oracle founder Larry Ellison stated his interest in participating in the deal as a Twitter investor.
Ellison is one of a group of investors who have pledged to contribute $7.1 billion to the deal’s financing. So far, no investors have publicly stated that they will back out of their commitments.
