How Elon Musk financed his $44bn Twitter takeover
New York, US – In looking for
ways to pay for his takeover of Twitter, Elon Musk has offered up money sourced from his own personal assets, investment funds and bank loans, among others.
Here are the financing details for the deal, which was fi
nalised Thursday.
Musk's own money
At first, the Tesla head had hoped to avoid contributing any more than Us$15bn of his personal money to the Us$44bn deal.
A large part of that, around Us$12.5bn, was set to have come from loans backed by his shares in the electric car company – meaning he would not have had to sell those shares.
Ultimately, Musk abandoned the loan idea and put up more funding in cash. The 51-yearold ended up selling around Us$15.5bn worth of Tesla shares in two waves, in April and in August.
In the end, the South African-born billionaire will personally cough up a little
more than Us$27bn in cash in the transaction.
And importantly, Musk, who Forbes magazine says is worth around Us$220bn, already owns 9.6 per cent of Twitter in
market shares.
Investment funds
The total sum of the deal also includes Us$5.2bn from investment groups and other large funds, including from
Larry Ellison, the co-founder of software company Oracle, who wrote a Us$1bn check as part of the arrangement.
Qatar Holding, which is controlled by Qatar's sovereign
wealth fund, the Qatar Investment Authority, has also tossed capital into the pot.
And Prince Alwaleed bin Talal of Saudi Arabia transferred to Musk the nearly 35mn shares he already owned.
In exchange for their investments, the contributors will be
come Twitter shareholders.
Loans
The rest of the money – about Us$13bn worth – is backed by bank loans, including from Morgan Stanley, Bank of America, Japanese banks Mitsubishi
UFJ Financial Group and Mizuho, Barclays and the French banks Societe Generale and BNP Paribas.
According to documents filed with the US Securities and Exchange Commission, Morgan Stanley's contribution alone is about Us$3.5bn.
These loans are guaranteed by Twitter, and it is the company, not Musk himself, which will assume the financial responsibility to pay them back.
The California company has so far struggled to generate profit and has worked at an operating loss over the first half of 2022, meaning the debt generated in the takeover could add even more financial pressure to the social media platform's already shaky position.
After finalising the takeover, one of Musk's first decisions was to sack Twitter chief executive Parag Agrawal, chief fi
nancial officer Ned Segal and head of legal affairs Vijaya Gadde, according to several US media outlets. The billionaire entrepreneur will have to find replacements for them.
A major challenge for Musk is to improve the financial health of Twitter, which faces slow growth, even recording a net loss in the second quarter.
In April, Musk mentioned options to generate more revenue: boosting paid subscriptions, monetising the dissemination of popular tweets or paying content creators.