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Who has funded Elon Musk's Twitter takeover?

Elon Musk, who is chief executive at Tesla and SpaceX, has acquired Twitter through a mix of equity and debt financing.

October 28, 2022 / 02:44 PM IST
(Illustration by Suneesh K.)

(Illustration by Suneesh K.)

Billionaire Elon Musk on October 28 completed the acquisition of the microblogging site Twitter for $46.5 billion, which includes the $44 billion acquisition bill and the closing costs of the deal.

As part of the agreement, the world’s richest man will pay $54.20 per share to common shareholders and will consequently operate the social media giant as a private entity henceforth.

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Musk, who is chief executive at Tesla and SpaceX, has acquired Twitter through a mix of equity and debt financing.

The debt part

A group of banks consisting of Bank of America, Barclays, BNP Paribas, Mizuho, Morgan Stanley, MUFG, and Societe Generale, have committed $13bn in loans of which Morgan Stanley alone has contributed about $3.5 billion for the deal.

According to a Wall Street Journal report, Twitter will have to shell out more than $1 billion for annual interest payments post-takeover, as against $51 million in 2021.

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The social platform has posted annual earnings before interest, taxes, depreciation, and amortization of about $700 million over the past five years.

The equity part

Elon Musk had committed to offer $33 billion of equity financing in total.

The 51-year-old billionaire himself will spend around $27 billion in cash in the transaction. Musk has about $20 billion of cash after selling down part of his Tesla stake through multiple transactions in November and December last year and April and August this year, according to Reuters.

Musk also owns 9.6 percent worth over $4 billion of Twitter shares. The shortfall of around $2 bn is expected to be bridged by the stake sale in Tesla, or SpaceX, or a loan from banks against the stocks.

The rest of the money - around $6bn - will be arranged from investors including Oracle co-founder Larry Ellison, cryptocurrency platform Binance and asset management groups Fidelity, Brookfield, and Sequoia Capital.

Larry Ellison has written a $1 billion check as part of the arrangement. Prince Alwaleed bin Talal of Saudi Arabia transferred to Elon Musk the nearly 35 million shares (worth $1.89 billion) he already owned.

Sequoia Capital Fund and VyCapital - both investors in Musk-promoted tunnel construction firm The Boring Company -have offered $800 million and $700 million respectively for a stake in Twitter.

As per the deal, Binance will invest half a billion dollars for the stake.

“We aim to play a role in bringing social media and Web3 together in order to broaden the use and adoption of crypto and blockchain technology,” Binance said in a statement.

Ravi Prakash Kumar
Ravi Prakash Kumar is a Senior Sub-Editor at Moneycontrol. He has over five years of experience as a business journalist and has worked with leading financial dailies including ET, Mint, and Business Standard.
first published: Oct 28, 2022 01:35 pm