Musk recently offered to buy Twitter for $41 billion in cash, but he currently has only about $3 billion in cash or other liquid assets, and more than half of Tesla, Inc. 's shares have been pledged. How will the world's richest man raise money to buy Twitter?
Elon Musk, the world's richest man, recently offered to buy Twitter for $41 billion in cash, accounting for about 1/6 of his personal wealth.
As we all know, most of Musk's wealth is on Tesla, Inc., so some market participants speculate that he may reduce his stake in Tesla, Inc. and buy Twitter.
After spending $2.6 billion on a 9.1% stake in Twitter in recent months, Bloomberg calculatesMusk currently has about $3 billion in cash or other liquid assets.
Musk wants to raise an extra $36 billion in cash to buy the rest of Twitter in two ways:
One isSell about 36.5 million Tesla, Inc. shares, or more than 1/5 of his shares. This may have a big impact on Tesla, Inc. 's share price.
Another option is to pledge the loan with his shares in Tesla, Inc. and space exploration company SpaceX.
Neil Campling, director of TMT research at Mirabaud Equity Research, a market research firm, said: "this hostile takeover offer will cost a lot of cash.He will have to sell a considerable number of Tesla, Inc. shares to finance it, or use shares as collateral for huge loans."
But even for the richest man in the world, there are limits to borrowing. The Bloomberg Index estimates that Musk has borrowed about $20 billion from stock.In theory, he could borrow about $35 billion more on a share mortgage..
'Musk 's $43 billion non-binding offer has many conditions, including the completion of financing, and we think the chances of success are low, 'Bloomberg industry research senior credit analyst Robert Schiffman said in a report on Thursday.
According to Tesla, Inc. 's recent power of attorney, Mr Musk had pledged 52 per cent of Tesla, Inc. 's shares as of June 30. According to Tesla, Inc. 's policyPledged shares can borrow up to 25% of their value..
Since then, Musk has increased his holdings by exercising options. His 172.6 million shares are worth $170 billion, which means he can theoretically borrow $42.5 billion through a full pledge.
Mr Musk said in December that he had also pledged some of his shares in SpaceX. According to a financing round in October 2021, his 47 per cent stake is worth about $47.5 billion. If according to the ratio of the highest loan value similar to Tesla, Inc.He can raise about $12 billion by fully pledging his SpaceX position.However, due to a lack of liquidity, banks tend to be more cautious in financing privately held positions.
In additionMusk also has $54.1 billion worth of Tesla, Inc. options.He may be able to use these options to make loans.
It is understood that Bank of America Corporation, Goldman Sachs Group Group and Morgan Stanley are the three banks that provide personal loans to Musk. At present, Musk has hired Morgan Stanley to advise on the Twitter bid.
Speaking at a TED event in Vancouver on Thursday, Mr Musk said he might seek to retain as many as 2000 existing Twitter investors, thereby reducing the cash he needed to privatize it.
In any case, the acquisition of Twitter is Musk's first major diversification outside of Tesla, Inc. and SpaceX.
Are cattle friends optimistic about Musk's acquisition of Twitter?
Will he realize the acquisition by reducing his stake in Tesla, Inc.?
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Edit / lydia