Elon Musk will put up $33.5 billion of his own pocket to acquire Twitter

Elon Musk seeks to leverage Twitter’s hostile buyout with an investment fund 70% hedged with his own money.


The possible acquisition of Twitter continues to be the central theme of the week, and businessman Elon Musk has bared his teeth with this new bet to finance the purchase of the social network and, faced with several doubts from the banking sector, has decided to invest 33.5 billion dollars of his own fortune to cover this operation, a tremendous bet that could complicate the finances of the CEO of SpaceX and Tesla.

According to Reuters , this is the largest funding process proposed with a personal budget in history. More than two-thirds of the total $46.5 billion prize pool for the purchase of Twitter would come from Musk’s assets, while the rest of the amount would be covered by bank loans to debt from assets of the social network.

According to the report, several banks that support Musk’s proposal refused to cover larger amounts , considering that Twitter does not have the ability to monetize or, at least, have a cash flow to pay off the interest rate. Even sources told Reuters that some financiers could get into trouble with regulators if they decide to increase their contribution.

Musk and the opposite path

Unlike other operations, Elon Musk is betting on the opposite path. In general, these acquisitions are financed, to a large extent, by banking entities and with risk conditions assumed based on the return obtained with the purchase: monetization, cash flow, shares, positions on the board of directors, among others. In this case, Musk assumes two-thirds of the total debt, a risky move for any investor.

According to analysts, Twitter should increase its current value by 1.4 times to make the operation profitable and for their personal finances to remain stable. Had he only covered a third of it, he would have needed an increase above 70%.

Musk’s money for this acquisition comes, in large part, from a loan against shares of Tesla, the autonomous vehicle firm he runs, and which has already allowed him to obtain $88 billion in previous applications.

By obtaining the money through a loan against the company’s shares for the purchase of Twitter, the amount withdrawn amounts to 150 billion dollars, according to regulatory documents, which leaves Musk a minimum margin of indebtedness due to a regulatory imposition. that prohibits loans above 25% of the value of pledged shares.

Musk doesn’t email just after Twitter

Companies such as SoftBank have indicated that they do not consider participating in this acquisition and competing against Musk. However, the report rescues the position of Thoma Bravo LP, a private equity firm with more than 100 billion dollars in assets under management, which would be analyzing a rival proposal from Elon Musk for this acquisition, after having held meetings with the South African businessman to integrate this financing.

This April 28, Twitter would be responding negatively to Musk’s offer for considering it “too low”, a statement that has had the Saudi prince Al Waleed Bin Talal as spokesman for a faction of the board of directors that considers the 54.30 dollars per share, an amount less than the 70 that, in history, Twitter obtained per share a little over a year ago.