uh-oh:-elon-musk-wants-to-promote-$5.4-billion-value-of-extra-tesla-shares-to-move-forward-with-the-twitter-deal

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Now that Elon Musk and Twitter have apparently reverted to their respective positions in early summer season, with the CEO of Tesla lastly eschewing makes an attempt to wriggle out of a legally binding acquisition settlement, and Twitter cavorting on having secured a considerable valuation premium within the present malaise that affects the worldwide fairness markets, the main target is once more returning to the financing points that underpin this complete association.

Right here, although, Elon Musk has to deal with a big downside: the best way to promote Tesla shares price billions of {dollars} within the ongoing blackout window?

Elon must promote an extra $2B of $TSLA fairness (bought $15.4b fairness and organized $7.1B of 3P fairness financing) to finance this deal. If one consists of the 63M of $TWTR RSUs Elon’s extra fairness wanted is $5.4B. Present TSLA buying and selling window is closed till 3Q earnings. pic.twitter.com/m3ErfjcPuF

— Gary Black (@garyblack00) October 4, 2022

Gary Black, a managing accomplice at The Future Fund LLC, penned a really useful tweet just a few hours again, inspecting the extra fairness financing that Elon Musk nonetheless must undergo with the Twitter takeover deal.

Twitter’s excellent shares quantity to 765.246 million (doesn’t embrace 63 million in RSUs; extra on this in a while). Of those, Elon Musk already owns 73.115 million shares which are price $3.963 billion on the proposed provide value of $54.20 per share. Which means the CEO of Tesla wants $37.5 billion in whole to buy the residual excellent Twitter shares. After all, the debt portion of the proposed financing construction at the moment computes at round $13 billion. This leaves the fairness financing portion at $24.51 billion.

In April-Could, Elon Musk bought round $8.5 billion price of Tesla shares to fund his fairness commitments beneath the unique Twitter takeover deal. Then, again in August, the CEO of Tesla bought $6.9 billion price of Tesla shares. Which means he has to this point gathered $15.4 billion in funding by promoting a portion of his gigantic Tesla stake.

Furthermore, again in Could, Elon Musk was capable of utterly get rid of the $12.5 billion margin mortgage from the Twitter takeover deal’s proposed financing construction by securing $7.1 billion in fairness commitments from the likes of Larry Ellison, Binance, Sequoia, the Saudi Prince Al Waleed, and so forth.

So, with $15.4 billion in hand and $7.1 billion price of fairness commitments, Elon Musk at the moment has $22.5 billion price of fairness financing. Nonetheless, as acknowledged above, the CEO of Tesla wants $24.51 billion in fairness financing to consummate the Twitter takeover deal, leaving a $2 billion funding gap.

However right here is where the maths will get difficult. Twitter at the moment has round 63 million RSUs which are price $3.4 billion on the proposed $54.20 per share provide value. Once we account for this facet, the general funding gap will increase to $5.4 billion. Which means Elon Musk should promote round 21.6 million extra Tesla shares, primarily based on yesterday’s closing value of $249.44.

But, there’s one other complication. Tesla is at the moment within the blackout window, given the inventory’s proximity to the upcoming Q3 2022 earnings. Usually, this could forestall Elon Musk from promoting extra Tesla shares. Nonetheless, there’s a blackout window carve out for pressing monetary commitments. Let’s see if the CEO of Tesla avails this optionality to shut the Twitter takeover deal by subsequent Monday, as reported by CNBC. In the meantime, keep tuned for additional updates on this ongoing saga.