Twitter Takeover Deal: How Will Elon Musk Pay The $44 Billion For Twitter By Oct 28

Elon Musk has managed to buy himself some time to work towards his decision to make a u-turn and go ahead with the Twitter takeover. The billionaire's request to halt the Twitter lawsuit was accepted yesterday, which gives him more time to close his proposed $44 billion buyout of the social media company by October 28th.

But now comes the big question: how is the worldĄ¯s richest person planning to pay for it?

Elon Musk had said earlier this week that he would buy Twitter for $54.20 per share, the price that was agreed upon six months ago in April, but he included a condition that the closing of the deal be contingent on debt financing for the transaction coming through, as per a Reuters report.

Reuters

The Financing Plan

Tesla CEO Elon Musk has pledged to provide $46.5 billion in equity and debt financing for the acquisition, which covers the $44 billion price tag and closing costs. Banks, including Morgan Stanley and Bank of America Corp, have committed to providing $13 billion of debt financing to support the deal.

Twitter yesterday reportedly cited one of the banks as saying that Musk had not communicated to them that he intended to close the transaction. Musk said that banks were "working cooperatively to fund the close" on or around October 28th, 2022.

Also, Musk's $33.5 billion equity commitment would include his over 9% Twitter stake, which is worth $4 billion, and the $7.1 billion he secured from equity investors, including Oracle Corp co-founder Larry Ellison and Saudi Prince Alwaleed bin Talal.

That leaves Elon Musk needing to secure an additional $22.4 billion of funds to cover the equity financing portion of the deal, as per the report.

How Much Cash Does He Have?

51 year old Elon Musk has a net worth of $230 billion according to Forbes' real time rich list (at the time of writing this report), but a large portion of his fortune is tied to his stakes in Tesla and Space X.

According to a calculation by Reuters, Elon Musk has about $20 billion in cash after selling down part of his Tesla stake through multiple transactions in November and December last year and April and August this year. This means he would need to raise an additional $2 billion to $3 billion, even if the other equity and debt commitments are honored.

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Also Read: Twitter Board Recommends $44 Billion Sale To Elon Musk

Options To Meet The Equity Shortfall

Musk can either choose to sell more of his stake in Tesla or his stake in SpaceX. Other options include obtaining a loan from banks against the stocks, or getting more investors to contribute equity, as per the report.

In August 2022, Musk had said that he does not plan to sell down his stake in Tesla any further, but the latest U-turn from Musk has revived concerns over whether he will sell more of the electric-vehicle maker's stock to fund the deal.

Musk owned 465 million Tesla shares worth $111 billion following its 3-for-1 stock split, according to Reuters' calculation. He has already borrowed heavily against a big portion of his Tesla stake, as per the report.

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