The focus is once again shifting back to the financing components that support this entire arrangement now that Elon Musk and Twitter appear to have returned to their respective positions from early summer, with the CEO of Tesla finally giving up efforts to renegotiate on a contractually enforceable acquisition agreement and Twitter asserting on having secured a sizable valuation premium. A few hours ago, Gary Black, managing partner at The Future Fund LLC, wrote an informative tweet that looked at the remaining debt financing that Elon Musk still needs to complete for the acquisition of Twitter.
— Gary Black (@garyblack00) October 4, 2022 There are 765.246 million shares of Twitter still outstanding. Elon Musk already owns 73.115 million shares of these, which are valued at $3.963 billion at the $54.20 per share recommended offer price. Accordingly, the Tesla CEO will require $37.5 billion in total to buy the remaining outstanding Twitter shares. It goes without saying that the debt component of the suggested financing arrangement now works out to be roughly $13 billion. The part for equity financing is now $24.51 billion. Elon Musk sold around $8.5 billion worth of Tesla shares in April and May to pay for his stock obligations under the first Twitter takeover agreement. The Tesla CEO then sold shares for $6.9 billion back in August. This indicates that he has already raised $15.4 billion from the sale of a piece of his enormous Tesla investment. Furthermore, Elon Musk was able to secure $7.1 billion in equity commitments from investors like Larry Ellison, Binance, Sequoia, the Saudi Prince Al Waleed, and others back in May, completely eliminating the $12.5 billion margin loan from the suggested mode of financing for the Twitter acquisition deal. Elon Musk presently has $22.5 billion in equity finance, including $15.4 billion in cash and $7.1 billion in stock obligations. The CEO of Tesla, however, requires $24.51 billion in equity financing, as mentioned above, to complete the Twitter acquisition agreement, leaving a $2 billion cash gap. But here’s when the calculation becomes tricky. At the current planned $54.20 per share offer price, Twitter’s 63 million RSUs are valued at $3.4 billion. When this factor is taken into consideration, the entire financing gap rises to $5.4 billion. Based on yesterday’s closing price of $249.44 for Tesla shares, this implies that Elon Musk will need to sell an extra 21.6 million shares of Tesla. As a result of the stock’s proximity to the approaching Q3 2022 results, Tesla is presently in the blackout period. Normally, Elon Musk wouldn’t be able to sell more Tesla shares because of this. There is, however, a blackout window reserved for urgent financial obligations. We have to wait and see how Elon acts to complete the acquisition deal.
