With $7bn from investors, this is how Elon Musk is funding his $44bn Twitter bid

Omoleye Omoruyi
*The remainder of the Elon Musk purchase price will be paid with debt raised from global banks
Elon Musk
Elon Musk

One week after Twitter’s board agreed to sell for $44 billion, the world’s known richest man, Elon Musk, worth $245 billion, started working to secure outside funding for the acquisition that would tie up less of his fortune.

The outspoken regular Twitter user and CEO, SpaceX, disclosed last week that he had sold $8.5 billion worth of stock following his agreement to buy Twitter.

The Tesla CEO has now committed $27.25 billion, from $21 billion – including the new $7.14 billion funding announced on Thursday.

To secure more funding, Musk is in talks with investment firms and financially-capable individuals.

The banks

Elon Musk told banks that agreed to help fund the acquisition that he could eliminate executive and board pay to slash costs and would develop new ways to monetise tweets.

Before that, Musk has tweeted about eliminating the salaries of Twitter’s board directors, which he said could result in about $3 million in cost savings.

Twitter’s total stock-based compensation in 2021 was $630 million, a 33% increase from the year before, filings show, compared with Meta’s $9.16 billion, Alphabet’s $10.89 billion and Snap’s $1.09 billion.

But, Musk convinced the banks that the “townhall” platform produced enough cash flow to service the debt he sought.

At the end, he clinched $13 billion in loans secured against Twitter and a $12.5-billion margin loan tied to his Tesla stock.

He said he was going to pay the remainder of the consideration with his own cash.

Bloomberg News reported that Musk specifically mentioned job cuts as part of his pitch to the banks.

Musk told the banks he also plans to develop features to grow business revenue, including new ways to make money out of tweets that contain important information or go viral, reports say.

Ideas he presented to the banks included charging a fee when a third-party website wants to quote or embed a tweet from verified individuals or organisations.

The investors

Elon Musk and his Twitter $44 billion bid

It was reported on Thursday that Elon Musk secured more than $7 billion in funding from a group of investors including the tech tycoon Larry Ellison, the Qatar state investment fund and the world’s biggest cryptocurrency exchange, Binance.

The Saudi Arabian investor, Prince Alwaleed bin Talal, who had initially opposed the buyout, also agreed to roll his $1.9 billion stake into the deal rather than cashing out, according to a filing with the US financial watchdog.

A filing published Thursday revealed a margin loan taken out by Musk to finance the deal – secured against his 15.7% stake in Tesla – would be reduced from $12.5 billion to $6.25 billion.

Musk will continue to hold talks with existing shareholders of Twitter, including the company’s co-founder Jack Dorsey, who has the second-largest individual stake in the company, to contribute shares to the proposed acquisition, the filing showed.

Key figures – the Elon Musk bid:

  • Saudi Prince, Alwaleed bin Talal bin Abdulaziz al Saud – $1.9 billion
  • Larry Ellison, co-founder, Oracle Corporation – $1 billion
  • Sequoia Capital, US venture capital fund – $800 million
  • Dubai-based Vy Capital – $700 million
  • Binance, cryptocurrency trading platform, – $500 million
  • AH Capital Management VC firm founded by Marc Andreessen and Ben Horowitz, – $400 million
  • Qatar Holding, part of the Qatar Investment Authority – $375 million
  • Aliya Capital Partners – $360 million
  • Fidelity Management & Research Company – $316 million
  • Brookfield – $250 million
  • Strauss Capital LLC – $150 million
  • DFJ Growth IV Partners – $100 million
  • Witkoff Capital – $100 million
  • A.M. Management & Consulting – $25 million
  • Litani Ventures – $25 million
  • Tresser Blvd 402 LLC (Cartenna) – $8.5 million
  • Honeycomb Asset Management – $5 million
  • Key Wealth Advisors – $30 million

With the new financing commitments, Musk will cut the margin loan he has taken with a group of lenders by half to $6.25 billion and increase the equity portion to $27.25 billion. The remainder of the purchase price will be paid with debt raised from global banks.

Meanwhile, the terms of the deal include a $1 billion termination fee, which either Musk or Twitter would have to pay each other if they pull out of the deal for specific reasons.

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